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Earnings Call Analysis
Q2-2024 Analysis
HEG Ltd
The company boasts a debt-free long-term status, laying a foundation of financial robustness with a substantial treasury of approximately INR 1,010 crores as of September 30, 2023. This solidifies investors' confidence in the company's stability and its ability to fund future expansions or navigate through economic downturns without the burden of interest payments.
There is a wave of enthusiasm about carbon emission control, prompting a surge in electric arc furnace plants, an area where the company directly benefits as a provider of necessary electrodes. This enthusiasm results in expanded opportunity, which is expected to translate into increased demand for the company's products in the coming years. With a strategic foothold in over 30 countries, the company is poised to capitalize on the anticipated global demand spurt.
The company differentiates itself from competitors like GrafTech by maintaining competitive selling prices for electrodes, not undercutting its products. GrafTech's unique position, with its own needle coke plant and long-term raw material agreements, has allowed them to secure a portion of their production at fixed prices, providing them a temporary advantage. However, this is not a typical industry scenario, implying that the company's products are not inherently sold at lower prices than competitors.
India's dominance in graphite production creates favorable conditions for the company's expansion plans, particularly as the government does not extend the same focus on synthetic graphite, which the company specializes in. They emphasize developing synthetic graphite anode, not reliant on mined products, highlighting the company's capability to adapt and focus on its strengths even as competitors like Epsilon consider expanding in regions like the U.S.
In preparing for scalability, the company plans to increase capacity without duplicating cost, which will be at least 10% less than the prototypical double cost for their 20,000-tonne plant. This financial prudence ensures that capital is efficiently utilized, maximizing value for shareholders. The expected competitive electricity pricing in Madhya Pradesh will further enhance operational cost efficiency and strengthen competitiveness against Chinese manufacturers.
The leadership has set a target of roughly 30% EBITDA margin, expecting to achieve this within 5 to 6 years post-expansion. With planned selling prices and turnover, the margin range could comfortably be sustained between 25% to 35%, illustrating the profitability potential of expanding operations and the vigour with which they are pursuing growth opportunities.
Presently, India lacks cell manufacturing, reflecting a lack of local demand. However, projections for 2025 indicate significant demand growth fuelled by new cell manufacturing capacities, which could require around 5,000 megawatts. By 2030, demand is expected to skyrocket to approximately 1.2 lakh tonnes. These projections reinforce the company's decision to scale up, as demand will likely outstrip supply, placing the company in an advantageous position.
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Ladies and gentlemen, good day, and welcome to HEG Limited Q2 FY '24 Earnings Conference Call organized by SKP Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Navin Agarwal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. It is my pleasure to welcome you on behalf of HEG Limited and SKP Securities to this financial results conference call with the leadership team at HEG Limited. We have with us Mr. Ravi Jhunjhunwala, Chairman, Managing Director and CEO; and Mr. Riju Jhunjhunwala, Vice Chairman; along with their colleagues, Mr. Manish Gulati, Executive Director; Mr. Om Prakash Ajmera, Group CFO; and Mr. Gulshan Kumar Sakhuja, CFO. We'll have the opening remarks from Mr. Jhunjhunwala, followed by a Q&A session. Thank you, and over to you, Raviji.
Thank you, Navin. Friends, good afternoon, and welcome to our financial results conference call for the second quarter '23-'24. As per World Steel Association's data, the steel production in the world outside China went down by 3.7% from...
Sir, sorry to interrupt you, but the audio is not coming clear.
Is it possible to call -- Navin, Navin, are you there?
Sir, go ahead, sir. You're audible now.
Yes. Yes, Gulshan.
Navin, it is better to call Ravi Jhunjhunwala's mobile number.
Okay, fine. Friends, apologies for this interruption. We'll just get Raviji on the line.
Participants, please stay connected. Ladies and gentlemen, thank you for your patience. We have line for the management reconnected. Sir, you may go ahead.
Friends, good afternoon, and sorry for this interruption, and welcome to our financial results conference call for the second quarter '23-'24. As per World Steel Association's data, the steel production in the world outside of China went down by about 3.7% between the second and third quarters of this calendar year and by about 2% in the first 9 months of 2023 compared to 2022.
The global economic uncertainties continues to limit steel demand and consequently steel production. However, India has registered a significant surge of about 11.6% in steel production in the first 9 months of current year. Simultaneously, the Middle East and Africa have also witnessed a modest upswing of 1.2%, whereas North American steel production reduced by about 3.3%, Europe and Turkey by about 8.8% and a whopping 10.1%.
Persistent low domestic demand within China has resulted in increased Chinese steel exports outside. This trend is expected to exert ongoing downward pressure on production, particularly in Europe and U.S. and obviously, a little bit elsewhere also.
The World Steel Association has revised their earlier projections downwards for steel demand in 2023 and 2024 in EU by 5% and in U.S. by 4%. In our last call, we talked about steel industry alone accounting for about 7% of the total global carbon emission in the world and around 23% of total industrial carbon emissions.
The Western world, especially the U.S. and the Western Europe are making serious efforts to decarbonize the steel industry in the near future, while some other countries have also started announcing, establishing new electric arc furnace. As we mentioned last time, the steel produced through blast furnace emits about 4x more carbon than the same steel produced through the electric arc furnaces. And this is giving rights to more and more new greenfield electric arc furnaces plants being set up all over the world, mainly in the U.S. and Europe and more recently in Turkey and in the Gulf countries, where a large majority of steel is even currently produced through electric arc furnaces.
We have seen announcements of over 85 million tonnes of such new electric arc furnace capacities in just the last 12 to 15 months' time, which has never been seen in the past. We continue to track and see more and more such announcements practically every month. The world steel production through electric arc furnace minus China, which used to be around 44% in 2015, has now reached 50% in 2022, going up by about 78 million tonnes from 357 million tonnes to about 435 million tonnes currently.
This is expected to further increase by the new announcements and the new plants which are being established, most of which are projected to go into production by 2030, of which 85 million tonnes is already announced, taking the electric arc furnace production from its current level of 435 million tonnes to around 535 million tonnes by 2030. This would mean a substantial increase in the demand of our products all over the world. And since we have been exporting about 2/3 of our production to some 30-plus countries for a long time, we are well set to meet this demand from HEG.
You would have seen by now our announcement with regards to expansion of our plant capacity to 100,000 tonnes being fully completed and implemented under one roof. All the production facilities are fully and satisfactorily operating now. We have taken care to buy some of the latest and most modern equipments and technologies available to graphite industry, making us the -- not only the single largest plant under one roof, but having most of the latest equipments and technologies at one place.
Special focus has been given this time to choose environmental-friendly equipments keeping our sustainability goals and focus. While we remain solidly and firmly upbeat about the continuous growth of electric arc furnace steel production in the coming decade, resulting in the continuous rise in electrode demand, we, at present, are seeing a period of subdued steel production due to several global factors, which are known to everyone, which is likely to continue through the end of 2023 and could be in the first half of 2024, resulting into subdued demand of our products for the next few quarters.
We believe electric arc furnace will henceforth grow at a CAGR of about 3% in the next decade, which would directly translate into a substantial increase in electrode demand. All this sounds very exciting for us at HEG, as no new capacity in the electrode industry have been announced by any other graphite company.
And a word about our new subsidiary, TACC. Due to economies of scale and considering the huge demand expected in the EV sector, the Board has recently approved the decision to start with a 20,000 tonnes graphite anode plant in one go, which initially was inclined to do in two phases of 10,000 tonnes each. The land is already acquired, and the construction is likely to begin fairly soon, and we intend to complete this plant by about mid-2025. We will obviously keep you informed about the progress every quarter.
In conclusion, our second quarter of 2023-'24 has been satisfactory given the tough market. Our second quarter 2023-'24 is going to be a tough quarter given the market conditions. And the next 2, 3 quarters may see margins coming under some pressure, but we are looking at a bright future for HEG, with some of the very large new capacities of electric arc furnaces which are being implemented currently all over the world.
Friends, with this, I'll pass on the floor to our CFO, Gulshan Sakhuja, who will take us through the financial figures. Following that, our Vice Chairman, Riju, and our Executive Director, Manish, along with myself, will be delighted to address any queries and inquiries that you have regarding electrodes and graphite and our businesses. Over to Gulshan.
Thank you, sir. Good afternoon, friends. I will now briefly take you through the company's operating and financial performance for the quarter ended September 30, 2023.
For the quarter ended September 30, 2023, HEG recorded revenue from operations of INR 614 crores as against INR 598 crores in the corresponding quarter of the previous financial year. During the quarter ended September 2023, the company delivered EBITDA of INR 130 crore as against INR 198 crore in the corresponding quarter of the previous year.
The company, on a stand-alone basis, recorded a net profit after tax of INR 62 crore in Q2 FY 2024 as against INR 130 crore in the corresponding quarter of the previous year. And on a consolidated basis, the net profit after tax is INR 96 crores in Q2 FY 2024 as against INR 169 crores in the corresponding quarter of the previous financial year. The company is a long-term debt free and had a treasury size of nearly about INR 1,010 crores as on 30 September 2023.
Now to take more questions from the participants, a detailed presentation has been uploaded on the company's website and on the stock exchange. Now we would like to address any questions or queries you have in your mind. Thank you.
Over to Navin.
[Operator Instructions] The first question is from the line of Vipraw Srivastava from InCred Capital.
Am I audible?
Yes, yes, you are. Please go ahead.
Yes. So just had a question on the European business of HEG. So there is a duty right on import of graphite electrodes in Europe, but the structure is different for HEG -- so I want to understand how does the duty affect you? And Europe is also coming up with this carbon border tax thing, obviously, which will result in a reduction of blast furnaces. But then will the duty hinder your business in Europe? How do you see it? So just some thoughts on that.
No, this antidumping duty in Europe has been around for the last 15, 16 years now. And we have not lost the market share. We took a very, I mean, careful decision long back, that will pay the 7% duty. The duty is 7%. So we keep paying that duty and -- but we have not lost the market share. So we will continue to sell whatever we are selling now and a little more. And -- so that is as far as Europe is concerned, but the major positive that we have seen in our industry in the last 12, 15 months is given this euphoria about carbon emission and control and all that, this has been known to everybody for a very long time that blast furnace emits about 4x the carbon compared to electric arc furnace steel.
So there has been continuous announcements of new electric arc furnace plants by some of the large and some of the best-known names in the steel industry in the world. And as I just mentioned, I mean, we've seen announcements of about 85 million to 90 million tonnes already all in the last 12, 18 months. And we keep seeing a couple of announcements like these every month now.
Until 3 to 6 months ago, all these were happening within U.S. and Europe. But in the last 4, 5 months, 6 months, we have seen many, many announcements on similar lines in the Turkey, Iran and the Gulf countries. And with no one -- nobody else having put any additional capacity on the contrary, because of the COVID, a couple of Western plants have closed down in the last 2 years or so. And while at the same time, we have expanded.
So as soon as some of these electric arc furnace capacities, the new ones start operations, and some of them have already started operations in the last about 12 to 18 months. That will be about 8 million to 10 million tonnes already. In '23 and '24, we expect another 10 million to 15 million tonnes of these new capacities starting to operate.
So -- and we -- as I said, we have been exporting about 2/3 of our production to more than 30 countries. So we are fairly well entrenched in these 30, 35 countries wherever there's a consumption of electrodes. And so we are looking forward to this sudden spurt of demand, which is likely to happen not too far away.
Right. Right. Right. So just a follow-up on this. So your peer in U.S., that's GrafTech, so they disclosed their selling realization prices every quarter. So what I've realized is that the price with seller electrodes, it's very high compared to what HEG and other player sell. So due to this price difference, are we gaining market share in U.S. or Europe? How is this shaping up? Or do this offer something incremental, that's why they're charging a higher price? Just wanted to have some thoughts on that.
Two things. You're right. But if you go back to the history about 5 years ago, GrafTech was -- GrafTech is in a very unique position that they have about 135,000, 140,000 tonnes, which is about 60%, 65% of their graphite capacity. They are the only ones in the graphite industry to have their own needle coke plant. They have captive diesel coke capacity of about 60%, 65% of their requirement.
And with that in their hand and they have done something very smart 5, 7 years ago, they had booked -- they've forward booked their raw material for a fairly long time at a very attractive price. I'm basically talking about the oil. So with that background, they went out and they sold about 60%, 65% of their next 5 years' electrode production at a fixed price.
So having their own captive needle coke and that too hedged for the next 5 years, which is an unique situation. And obviously, they took advantage of that by having a long-term agreement for 5 years.
So a very large majority of that has already been implemented by now. I don't remember the number, but still some maybe 10%, 15% of that is still in the pipeline, actually still going on. So except that, I don't think we are selling cheaper electrodes anywhere else. I mean we are not selling anything cheaper than most of our competitors. So the only difference is this, nothing else.
Yes. Yes. Noted. Noted. But just -- they told that the market share in the U.S. and Europe...
Vipraw, sorry to interrupt you, but we are losing your audio. Can you come in a better reception area, please?
Am I audible?
Yes, yes, you are. Yes.
Yes. Okay. Yes. Just one final question. So with this ban on exports of anodes, graphite anodes by China for lithium-ion batteries, so obviously, our facility is coming up in '25 -- CY '25. So that's a positive development, right? I mean, if China controls the supply chain and we can set up our own facility, we can create domestic demand also. So you will take it as a positive, right?
Yes. Absolutely. Absolutely. Riju, if you want to add anything?
No, I think absolutely correct. I mean...
Riju sir, sorry, but we are losing your audio.
Am I audible now?
Yes, sir. Better.
And as is it the world was looking at being more graphite from outside China. Today, China controls more than 92% of the world graphite. And with this happening, obviously, it added to our confidence of going in for the larger size projects.
[Operator Instructions] Next question is from the line of [ Gaurav Paul from Excellence Financial Service ].
Am I audible?
Yes, you are.
Okay. So I'm really excited about your anode plant and the project that's going on. My first question is -- or the questions around this are what percentage of processes are common between your normal electrode versus your anode plant? I mean, are there any synergies over there?
Not so much. In terms of similarity, it's a totally different product. It's a totally different plant, except that in one of our processes of electrodes, we are handling the temperature of about 2,800 degrees centigrade, which is more or less similar to one of the processes involved in the powder business. So except that there is nothing in common.
Okay. A follow-up question just to that is how much energy is needed to graphitize like 1 tonne of such material to...
In terms of cost? In terms of megawatt?
Megawatt would be good.
It would be the same as graphite electrodes, exactly the same.
And I mean, have you also started with the environment clearances for this new plant?
So we've -- the land we have acquired already and we've got all the state environment clearances ready. And now we are just doing the central environment study, which should be complete by November or December. But that doesn't stop you. Once you get a license to operate, you can start the -- some part of the construction activity already, which we already have over there of leveling, et cetera, and all of that.
Okay. And finally, just a light on this one. So what would be the difference in cost between, say, a natural graphite versus an artificial graphite that you're producing? Any light on that?
No. These are two very, very different products. I mean it's like...
Graphite, over there, you don't need to graphitize that particular product. And then in this particular thing, the additional cost from graphite is there. But I think -- I mean more or less, our focus is on the synthetic graphite. Although -- I mean, if there is some part of natural graphite also to be done, we can probably do that. But costs are more or less the same because cost of natural graphite, purchasing natural graphite covers up for that additional cost of graphitization?
[Operator Instructions] This next question is from the line of Amol Rao from Kitara Capital.
Sir, usually, you always shed light on our operating rates...
Amol, your voice is coming muffled, can you please speak through the handset?
Yes. Is it better? Or is it -- am I still muffled?
Still the same, sir.
One minute. Sir, am I audible now?
Yes, sir.
Yes. Sir, usually, you always shed a light on what's the utilization rate for the quarter and how we are faring on inventory. Sir, any color on that, sir, for this quarter, please?
Manish, would you take that?
Yes, sir, I'll take this question. See, for the Q1, it was close to 90%. For Q2, it's close to 85%. And these 2 quarters, which are expected to be probably the toughest quarters, we should be around 75% of capacity utilization.
All right. And sir, just for the sake of clarification, because we have commissioned our additional 20,000 tonnes also. This is the 75% on the -- including the 20,000 tonnes that have come in, right? So 100,000 tonnes roughly...
Yes. Yes. So let me explain this point once. See, we have started the green shop, which was -- where the electrode starts from. We have commissioned that. It came into commercial production 1st November. That's the date we mentioned in our release also. So -- and it takes, of course, 5 months to make the labels and 2 months to make the electrodes. So effectively, if something is starting on 1st November, we would consider arrival of this 100,000 tonne capacity in Q4. The plant has started, everything is fine. So this 75% is on that basis for Q3 as well as Q4. In the Q4, we will count it as 100,000 tonne capacity.
That is very helpful, sir. And sir, just -- I mean you all have mentioned that there is some bit of tightness in the market regarding demand. Sir, this demand, I mean if you see the World Steel data that is coming out on a monthly basis, so production seems to be picking up quite a bit in our target markets. So I mean, the U.S. has shown an improvement, if I remember correctly, some 3% to 4%. Turkey showed an improvement of almost, I think, 8% or 10%. Korea was around 18%. So I mean, still you expect some amount of tightness in the second half of the year?
No, no. I mean, again, I can offline, of course, send you the World Steel data, but we don't think that there's an improvement. From 9 months to 9 months, it's also decline. There's a decline quarter-to-quarter. I can, of course, send my sheet to you in which we have tabulated all these countries. So just let me repeat the phrase up for you. Other than this China and let's say, exclude Iran which is under sanctions, also Russia where we do not do much. Actually, it's a decline of 2.7%. So I will send you my figures.
Done, sir, done, done. This is most helpful. Sir, last one question. Sir, we were sitting on some amount of inventory of, if I remember correctly, INR 1,400-odd crores 6 months back. The number says that it's around INR 1,300 crores. So you're not running down this inventory? Or we plan -- this is what we plan to sell in the next half of the year?
See, we have, I mean, run down the needle coke inventory to a very large extent. Today, we are just have the normal operating levels. As regards to finished good inventory, we have, let's say, 2.5 months of production. Normally, which would be 1 month of -- worth of production. It is, let's say, close to 2.5. And we don't want to run it down any further because passing -- by passing these 2, 3 quarters and the good things we are hearing from the market with electric arc steel coming up, it is only a matter of time. It can take 2 quarters. It can take 3, but it will turn around. So at that point in time, we are just keeping the extra 1.5 months of inventory for those days when there's an uptick in demand.
Got it, sir. So after around 2 quarters, we should see these levels coming down and the production from the EAF side starts picking?
Yes, yes, absolutely. You see basically you look at the World Steel figures, you will yourself find out when the steel production starts to grow up, and then EAF will be the major beneficiary of that.
[Operator Instructions] Next question is from the line of Ajit from Nirzar Securities.
Congratulations on commissioning of the new expanded capacity. Sir, I just have two questions. First one is, sir, recently, Government of India -- there is news that Government of India is to invite bids for 20 critical minerals, including lithium and graphite. So sir, are you planning to bid for those mines, sir?
See, we are artificial graphite company. We make graphite starting from petroleum coke and process it. What they are talking about minerals, et cetera, that is purely for mining. So that's mining of natural graphite. I believe there are a few places in India where we have natural graphite. So it is for that purpose, not for synthetic graphite which we make. So our anode will be synthetic graphite anode, not a mined product.
Okay. Understood. And the second question is, sir, one of our competitors has entered into synthetic anode who also claim that it is more effective than the graphite one. So I wanted to understand your thoughts on this.
[indiscernible] Australian company, which is into silicon anode. So that is still, I mean, largely an untested technology. Today, more than 90% of all lithium-ion batteries are made out of graphite. And now what has started happening is you are starting to mix 5% or 10% silicon in it. But according to all data, everything which is free at least till 2050, there is no chance that graphite as an anode product for lithium-ion batteries can be 100% -- you'll have certain variety...
[Operator Instructions] Next question is from the line of Gaurav Paul from Excellence Financial.
Am I audible now?
Yes.
Yes, yes, you're audible.
Sir, my second question was regarding the uptick of graphite -- I mean, uptick of battery production -- lithium-ion battery production in India. Are you seeing any interest from the people who are putting up capacity or companies like Ola, Reliance and others and Tata. Are you seeing some interest? Are they taking some portion of your powder to kind of test it out and make their own batteries?
So of course, we are in touch with all these companies, whether you talk about Tata, Exide, Amara Raja, Ola, Reliance, we are in touch with all these companies, also because we already have our pilot plant for this anode reduction, which is 100% ready. So -- and all -- these companies will have their battery production by anywhere middle to end of 2025. And there...
Sorry, but we are losing your audio, once again.
Hello?
Yes. Now it's clear.
Yes. So because of that, we are in touch with these companies and that -- it's over the next period of 2 years, we'll be working even more closely through our pilot plant to try and do the perfect permutation and combination because the idea is to sell as much to the market as possible and then export whatever is left over.
Okay. And do you see any advantage of PLI coming through your way? Because what I understood was the government also wants to kind of help or support the EV producers sort of manufacturing things?
So we were trying very hard this year to get our product also in the whole this thing -- the PLI scheme. So although cell production is covered under PLI, but raw material for cell have -- but next year onwards, we are quite confident that this will start happening. I mean we are trying very hard with the government to confirm for extending the PLI scheme to the raw materials also.
[Operator Instructions] Next follow-up question is from the line of Vipraw Srivastava from InCred Capital.
I just had a follow-up regarding the anode part for lithium-ion battery. So can you tell what is roughly the realization in this space per...
So difficult to say what is because there are different ranges ranging from $5,000 per tonne to going up to $15,000 per tonne, different ways of anode that you make for different applications. The lower grade ones, which are used for your things like [indiscernible] batteries, calculate, et cetera. They are $5,000 to $7,000. But the very high-end thing like producing for companies like, the auto companies like Mercedes, Tesla, et cetera, the batteries that they use, that is closer to between USD 10,000 to USD 15,000 as of today.
You're talking about anode realization, right, this number...
Yes. Yes. Yes. The anode realization, the graphite realization per tonne. This is all data from China. Today, China is controlling 90% of the world's trade. So I mean this is all the -- their selling rates today.
Sure, sure. Noted, noted. I just had one final question. So GrafTech U.S., they in the con call told that they're also looking towards carbon-neutral graphite electrodes, which won't leave any carbon footprint as such. So I mean, maybe not now, but in the future, will HEG look towards that because obviously, we know graphite anode is polluting as far as manufacturing is concerned. So in future, any thoughts on that? Are you looking exploring that field, yes?
I can answer for the graphite anode plant since it's going to be a greenfield plant from the beginning. Our -- all our kind of environment approvals, et cetera, also cover a lot of this thing to try and be carbon neutral, which includes buying green electricity, green belts, et cetera, et cetera. So obviously, our idea May 1 is...
Sorry, we are again losing your audio.
Shall I take this question?
Yes, Manish. Yes, please.
Hello?
Yes, Manish, go ahead.
Yes. Yes. Yes. See, what they are doing, GrafTech, because I was in Europe and I spoke to them also. I mean -- so they -- that would just have green color electrodes. So initially, what they're trying to do is to take all renewable energy wherever possible. See they have plants in Europe. They have plants in U.S. So that is -- that's step number one. And of course, for those other carbon-reduction initiatives, just like we are doing, they'll also be doing the same. I mean, I can also -- that the electrodes, which are made in HEG, HEG also has a hydroelectric power plant, and we use power and also we have solar plants. So I see, every company is trying these initiatives, the sustainability goals, everybody is taking it seriously, and HEG is also taking it very seriously.
So I have seen what you're saying is that they are seeing that maybe they will make a zero carbon this thing. So first, they will start with renewable energy, and then they'll do -- take some other initiatives. But of course, there has to be energy which is consumed to make graphite electrodes. And in turn, graphite electrodes is actually helping the world save on carbon emissions. So I don't know how they'll put it -- put this all together. But eventually, that benefit should also come to graphite people because this is -- because of electrode that carbon emissions dropped by 1/4 between blast furnaces and electric arc furnaces.
Next question is from the line of Deep Mehta from Bank of India Mutual Fund.
I had one question regarding our upcoming anode facility. What is the updated total CapEx requirement which we are planning for this newer capacity? And have we done some work on determining what -- how competitive will be this plant vis-à-vis our Chinese competitor in terms of cost of production?
Yes. So the -- on the CapEx front, we had assumed around INR 1,000 crores for a 10,000 tonne plant. So obviously, when we are looking at doubling the entire plant, we are not going to incur exactly double the cost. We'll be saving a lot of things like our power lines, some processes, et cetera. So the CapEx would be between -- right now, we are still in the final phases of calculating it, but it will definitely be at least 10% lower of -- than INR 2,000 crores if you see proportionality.
And on the operational front, it will be more or less similar as competitive to the Chinese prices because a lot of this price depends on the power price. And power price-wise, we are quite competitive in Madhya Pradesh. We are hopeful to get electricity between INR 5.5 to INR 6 for a period of 20 years. And with that, you become reasonably competitive because the cost of raw material, which is needle coke is the same, manpower cost is more or less the same. So all other costs mainly become quite similar in our 20,000 tonne plant.
That is very helpful. Just one follow-up. What kind of margins or ROC which we are targeting for this capacity?
So we currently are targeting kind of a 30% EBITDA margin. And so based on that -- I mean, one can do the calculation because here kind of CapEx to the turnover ratio will be more or less 1:2 or 1:1.2. And based on that selling prices, whatever we have prevailing in 2025, depending on that, you'll have your EBITDA margin safely between 25% to 35%. So -- should actually not be more than 5 to 6 years.
Next question is from the line of [ Chetan Phalke from Alpha Invesco ].
Sir, recently, this Epsilon Advanced Materials, they have done an MoU with Government of Karnataka. And I think they're going to invest some INR 9,000 crores for this graphite anodes plant only. So are we -- so what is our understanding, sir, they are also going to make the same graphite anode that we are going to make and we are going to compete with them heads on?
Yes, it will be more or less similar because we have been seeing what they are doing. But now I think their plans have changed more to setting up a plant in the U.S.A. And more or less settling for a smaller plant in India or more or less like this thing, your pilot plant in India. But their main plant that they've announced is now in America, with outlay of $650 million over a period of 10 years or something like that. But the product that they'll be making will be very similar to ours. The raw material could be different, but the end product will be more or less the same.
Okay. And sir, I mean, what is your take on this? I mean, why they have shifted to U.S.? Is it more cost efficient? Or is it due to better raw material availability, closeness to customers, what is your assessment?
So it's a mix of everything because U.S. is giving a very good this subsidy -- the Inflation Act that they have in which they give more or less the same kind of subsidy that you would have if you had put the plant in China in order to make it more competitive. So I don't know what really led to their decision of putting the plant over there. But having said that, I mean, raw material would be same, manpower per costs definitely should be higher in the U.S. And so -- but we expect our cost competitive to be, I mean, higher than them to start with at least.
Okay. And do we see, sir -- I mean I just want to understand the demand side more closely. So what is the existing demand of graphite anodes that we are importing into the country? And what kind of opportunity you see opening up over the next 7, 8, 10 years in terms of tonnage, if you can...
So today, it is 0 because there is no cell manufacturing in India. And let's say when you have in 2025, 25 gigawatt hour of electricity that will be requirement of around 5,000 megawatt by 2025. And this is expected to grow to around 1.5 lakh tonne -- 1.2 lakh tonne by 2030. So the requirement-wise really, I mean, which is why we've taken this decision to be of a particular scale. Demand-wise, we don't really see any kind of problem. And technology-wise, also I mean you don't see much of a risk for [ graphite being -- players buying automotive diesel, ] et cetera. So even as early as 2025, we're talking about 35,000 tonnes a month and going up to 1.2 lakh tonnes of demand in India.
And what would be the installed graphite anode capacity in China, any idea, sir?
They talk about -- today, they're talking about 500,000 tonnes of graphite anodes capacity, that is already existing. But we've been there, we've seen everything. The rate of their expansions are in -- we are talking about 20,000 tonnes, they talk about addition of 2 lakh tonne, 3 lakh tonne. So their rate of expansion will be definitely much higher than that of India.
Okay. Okay. And sir, this Chinese ban of certain grades of graphite, I mean -- because China also controls a large part of graphite mining as well. So will it impact the pricing of natural graphite and essentially -- eventually, it will also impact the pricing environment for synthetic graphite?
See, it will definitely be a big plus for us. It will be a big plus for a country like India because then your other battery manufacturers will not be -- cannot afford to be dependent only on China for their imports. So what Chinese people want to do is they want to produce the battery themselves. Instead of exporting the graphite, they want to consume all the graphite within China. But across the world, wherever there are battery companies coming up, they will either need to produce their own graphite, which is not possible in every case or they'll have import graphite from other countries or countries apart from China. So for us -- because we, in any case, we're not planning to import any graphite from China to begin with.
Okay. So our imports of the raw materials would be mainly from which geography, sir?
We will be using Indian raw material. We can also use the needle coke, and we can also use the Chinese pitch coke. So all three raw materials, we have -- plants and all three raw materials give you different kinds of final product.
Okay. Okay. So sir, just last question on this. So apart from HEG, any other player -- apart from HEG and Epsilon, any other players who are planning to enter this field?
Himadri, of course, they've also announced recently their plans to get into anode, but I don't know much about how much capacity, et cetera. So as of now, you see these three companies, which are clearly stated their plans HEG, Epsilon and Himadri.
Okay. Particularly for graphite anode because I think Himadri...
Yes, specifically for graphite anode.
[Operator Instructions] That was the last question in queue. As there are no further questions, I would now like to hand the conference over to Mr. Jhunjhunwala for closing remarks.
Thank you, friends, and thank you for taking so much of interest in communicating with us, and I look forward to talking to you in the next 3 months. Thank you.
Thank you very much. On behalf of SKP Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.