HEG : Transcript of 51st Annual General Meeting dated 31st August, 2023.

HEG LIMITED

Transcript of 51st Annual General Meeting (AGM) held through Video Conferencing/Other Audio Visual Means on Thursday, 31st August 2023 at 11:30 am.

Mr. Vivek Chaudhary, Company Secretary

Good morning, everybody. I, Vivek Chaudhary, Company Secretary of HEG Limited participating from Noida welcome you all in the 51st Annual General Meeting of the Company. Pursuant to MCA and SEBI circulars, this AGM is being held through VC/OAVM facility provided by the NSDL without the physical presence of the members at the venue. The venue of the AGM shall be deemed to be the registered office at Mandideep near Bhopal District Raisen 462046, M.P.

Now I request all the Directors, Group CFO, CFO, Statutory Auditor and Secretarial Auditor to say their name from where they are participating. Over to the Chairman Sir.

Mr. Ravi Jhunjhunwala

Good morning, friends. I am Ravi Jhunjhunwala, Chairman, Managing Director and CEO and member of Stakeholder Relationship Committee and the Chairman of CSR Committee of the Company participating from our office in Noida. Thank you.

Thank you. Over to Riju ji.

Good morning, everyone. I am Riju Jhunjhunwala, Vice Chairman of the Company participating in this meeting from Friends Colony.

Thank you. Over to Kamal Gupta Ji.

Good morning. This is Kamal Dr. Kamal Gupta, Independent Director of the Company and Chairman of Nomination and Remuneration Committee and member of Audit Committee and Stakeholders Relationship Committee and I am joining from Noida.

Thank you. Over to S. C Mehta Ji.

I'm Satish Chand Mehta, Independent Director of the Company. I am also the Chairman of Audit Committee and member of the CSR Committee. I'm joining from Jaipur. Thank you.

Good Morning, this is Shekhar Agarwal, Director & Member of Audit Committee and participating from Delhi NCR.

Thank you. Over to Vinita Ji.

Good morning. This is Vinita Singhania, Director and member of CSR Committee and participating from Delhi. Thank you.

Thank you. Over to Ramni Ji.

I am Ramni Nirula, Independent Director participating from my residence in New Delhi. I'm a member of the Nomination & Remuneration Committee and the Risk Committee. Thank you.

Thank you. Over to Manish Ji.

Good Morning. I am Manish Gulati, Executive Director of the Company and participating from Mandideep. Thank you

I'm Jayant Davar, Independent Director of the company attending this meeting from Chennai. Thank you, Sir.

Ajmera Ji.

Good morning. I am Om Prakash Ajmera, Group CFO participating from Noida office.

Thank you.

Yeah, good morning, everyone. I Gulshan Kumar Sakhuja, CFO participating from Noida.

Thank You. Over to Sanjeev Mohan Ji.

Good morning, everyone. I Sanjeev Mohan representing SCV and Co LLP, Statutory Auditor of the Company and I am participating from Ludhiana.

Thank you. Over to Saket Sharma Ji.

Good morning, everyone. I Saket Sharma, partner of GSK and Associates, Company Secretaries representing Secretarial Auditors of the Company as well as appointed as the Scrutiniser to scrutinise the remote e-voting process and voting at Annual General Meeting in a fair and transparent manner and participating from Kanpur.

Thank you all. Now in compliance of the provisions of the Companies Act 2013, Secretarial Standard 2 and SEBI (LODR) Regulation 2015, the remote e-voting facility was provided by the Company started from a Sunday 27th August 2023 at 9:00 AM IST and ended on Wednesday 30th August 2023 at 5:00 PM IST. The Company is also providing the voting facility during the proceeding of AGM to enable members to cast their vote who have not done through remoting e- voting.

Members may note that all the documents refer to in the accompanying notice and explanatory statement shall be available for inspection during the annual general meeting. The register of Directors and KMP and their shareholding maintained under section 170 of the Act, the register of contract arrangement in which director are interested under section 189 of the act shall be available for inspection during the AGM. Members may note that pursuant to provision of article of association of the company Shri Ravi Ji Chairperson of the Board shall preside as chairperson at every general meeting of the company.

Now, I request our chairman to kindly chair the proceeding of the meeting. Over to Chairman sir.

Mr. Ravi Jhunjhunwala

Thank you, Vivek and good morning, again ladies and gentlemen. Very warm welcome to everyone present today at the 51st Annual General Meeting of your company. I hope you and your loved ones are all safe and well. Since the requisite quorum is present, I declared this meeting as open. I Ravi Jhunjhunwala, Chairman, Managing Director and CEO of the Company being interested in item numbers 3 and 5 of the notice, I would request Dr Kamal Gupta, Independent Director of the Company, to take the chair with the permission of the members present at the appropriate time when these items are taken up.

Shri Davinder Kumar Chugh, Independent Director, has conveyed his inability to attend the meeting due to his engagement and has sent good wishes greetings to all the Directors, KMPs and all the members present.

Friends it is a pleasure to connect with you through this statement, for it provides an opportunity to ink my thoughts. I'm delighted to mention that your company registered good performance in the face of strong headwinds which restrained global progress in the past year, evidence in the de- growth of the steel sector, a critical proxy to economic growth.

Allow me to throw in a few numbers to put our performance into perspective.

The world produced less steel - 1885 mmt in CY 2022 against 1962 mmt in 2021 - a drop of 4%. More pertinently, the steel world, excluding China and Iran, our market place, registered a drop in steel production by 7.5%, resulting in drop in demand for graphite electrodes.

In the face of this dismal global steel landscape, our sales volumes decreased by 13% although revenue from operations grew by 12%. Our capacity utilisation was amongst the highest in the industry at close to 90%.

Furthermore, despite persistent and elevated inflation that prevailed across the globe, our EBITDA went up by 20%, and we reported a Net Profit of ₹456 crore - a jump of 17% over the previous year. We successfully navigated the challenges driven by our commitment to innovation, customer satisfaction and operational efficiency.

Fiscal 2023 holds special significance, as we are on threshold of emerging as the largest graphite electrode facility with a capacity of 100,000 tons under one roof in the Western world. By the end

of the fiscal, we were very close to the completion of the project, with four of the five electrode making processes up and running and the fifth at the final stage of completion. We expect to fully commence operations of our expanded capacity soon. This is a happy milestone for me and the entire HEG team, who have worked tirelessly and with an unwavering dedication to elevating the Company into a new growth orbit despite the gloom and doom period of pandemic all around the Globe.

The expansion showcases our passion for technological innovation, placing us at the forefront of the industry with some of the best and latest equipments and technologies we have put under one roof. It positions HEG in the right place at the right time.

Our tomorrow

Our drive to move against the tide continues in the current year as the prevailing geopolitical current casts a bearish shadow on the global steel industry's prospects. Experts of the steel sector feel that the steel demand will remain impacted by the fear of a global recession. Our industry cannot remain untouched but, rest assured, we will continue to strive hard to sustain profitable business growth in the current year too.

Beyond tomorrow

The medium- to long-term growth in our consumer segment - Electric Arc Furnace Steel production, is clearly very promising. My optimism stems from the de-carbonisation narrative that will continue to play out over the foreseeable future.

Climate change and sustainability have become the pivotal factors in long term business. Embedding sustainability into business strategies and investment blueprints has become a necessary mandate in each and every country around the Globe - rich or poor.

This is particularly relevant for the global steel sector. World Steel Association studies reveal that the global steel sector alone accounts for between 7% to 9% of global carbon emissions.

But this is changing and changing fast. The Blast furnace (BOF) route for steel making is fast giving way to the Electric Arc furnace (EAF) route in a very rapid way, which the world has not seen in decades owing to significantly less emissions by the latter. As per the World Steel Association, Electric Arc Furnace share of steel production (ex- China) has increased from 44% in 2015 to 49% in 2022, and is likely to reach around 55% in a few years.

Global steelmaking is undergoing a structural shift - with 50 to 60 mmt of Greenfield steelmaking capacity being established using the Electric Arc Furnace at an estimated investment of about US$ 50 to 60 billion all over the world . Of this, about 25 mmt is expected to come up in the U.S. alone, which already produces 70% of its steel through EAF. Similar new announcements keep coming from European and other countries large Steel companies all over the world. We have been consistently exporting between 65% to 75% of our production for more than last 10 years. All these will require graphite electrodes for which we are ready with our additional capacity.

From a long-term perspective, we believe that the Electric Arc Furnace route for steelmaking will grow at a 3% CAGR in the next decade - much more than the overall Steel production growth translating into a substantial increase in electrode demand.

While the demand prospects appear promising, barring unforeseen adversities, the supply position appears largely stable. No other Graphite Electrode company has announced any new capacity. Moreover, between 2018 and 2022, due to Covid related slump in demand, about 60,000 tons of graphite electrode capacity around the world has shut down their operations.

Our longstanding presence in international markets coupled with timely expansion of our plant from 80,000 to 100,000 mt per annum strengthens our confidence in HEG's ability to envision opportunities in the electrode industry and to meet future demand all over the world.

We will leverage our extensive global market reach across 35+ countries globally, which we have diligently cultivated over the past 25 years, to capitalise on emerging profitable growth opportunities to create value for our stakeholders.

Building a new opportunity

India is passionate about its e-mobility ambitions as a critical tool in its Net Zero commitment. The Government's encouraging policies have enhanced the positivity around the e-mobility space. This has increased the spotlight on lithium-ion-based energy storage solutions. Currently, cells and battery packs are largely imported into India.

Witnessing the fast-altering mobility ecosystem, we anticipate a huge domestic demand for graphite anode as cell manufacturing shifts to India. We are diversifying into graphite anode for lithium-ion cells, which forms the battery for electric vehicles and energy storage systems.

Given that it's the first such plant coming into our country, we see a huge opportunity here in the long term.

We have incorporated a wholly owned subsidiary of HEG in the name of TACC Limited for this new business. Our Board has approved a budget of ₹1,000 crore for setting up a manufacturing facility of 10,000 tons of anodes per annum in Phase 1.

Our new project is progressing well. We are about to start our pilot plant, which will facilitate trials and tweaks as necessary. The location has been decided. The land acquisition is under process, and we expect to complete the project's first phase by mid-2025.

I am excited about the future of HEG as we have taken definitive steps to better our prospects beyond tomorrow. I am confident that we will achieve good success in our future endeavours. With the support of our experienced leadership team, I am certain that we will maintain our longstanding track record of superior performance, ultimately creating value for all our stakeholders.