Did HEG shares really crash 64% in one day? Here’s how the demerger math works

Shares of HEG appeared to have fallen nearly 64% on Monday, but the sharp drop was largely a price adjustment following the company’s demerger into two separately listed entities focused on graphite electrodes and advanced materials.

After closing at Rs 728.25 apiece on Friday, HEG shares opened around 64% lower at Rs 260 apiece on Monday as it adjusted to the demerger on the record date. The stock now trades excluding the value of the graphite electrodes business. The company currently has a market capitalisation of around Rs 5,095 crore.

Earlier last month, HEG fixed September 7 as the record date to determine which shareholders will be eligible for its demerger. The graphite electrodes business will move to HEG Graphite, which is proposed to be later renamed to HEG and run as a pure-play graphite electrodes company. The existing listed company will retain the advanced materials, battery energy solutions and green power businesses. It is proposed to be renamed HEG Advanced Materials after the demerger.

What does this mean for HEG shareholders?

As part of the demerger, HEG shareholders will receive one share with a face value of Rs 2 each in the company being spun off for every share they hold in the existing HEG. This means the demerger ratio has been fixed at 1:1.

For example, an investor who holds 10 shares of HEG as on the record date will, after the demerger takes effect, hold 10 shares of HEG and 10 shares of HEG Advanced Materials. Only shareholders who hold HEG shares in their demat accounts as on the record date will be eligible to receive shares in the new company as part of the demerger.

As part of the same scheme, Bhilwara Energy will be amalgamated into HEG. Under the arrangement, HEG will issue eight equity shares with a face value of Rs 2 each for every seven equity shares with a face value of Rs 10 each held in Bhilwara Energy. It is important to note that Bhilwara Energy is an unlisted company.

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Leadership changes at HEG

Along with the record date for the demerger, HEG last month also announced leadership changes that took effect from September 1. Ravi Jhunjhunwala will continue to lead HEG Graphite as Chairman, Managing Director and Chief Executive Officer. He will also remain on the board of HEG Advanced Materials in a non-executive capacity.

Riju Jhunjhunwala has been elevated as Chairman, Managing Director and Chief Executive Officer of HEG Advanced Materials for a five-year term, subject to shareholder approval.

“Our immediate focus includes scaling synthetic graphite anode material, where we are developing commercial scale manufacturing capability, while continuing to advance graphene and its applications across industries. At the same time, we will continue to invest in research and build the capabilities required to take promising materials from scientific possibility towards industrial scale. Our ambition is to build HEG Advanced Materials into a globally competitive advanced materials company, one known for the depth of its science, the quality of its execution and the responsibility with which it builds for the long term,” said Riju Jhunjhunwala.

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Disclosure: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an investment advisor. Debaroti Adhikary does not hold any financial interest in the company named in the article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.