HEG Share Price Falls 65% After Demerger: Why Investors Shouldn’t Panic

HEG Ltd witnessed an unusual move in the stock market on Monday, September 7, with its share price appearing to plunge nearly 65% during morning trade. The stock was trading around ₹258, compared with its previous closing price of ₹728.25.

At first glance, the move looked like a severe destruction of shareholder wealth. However, the sharp decline needs to be viewed in the context of HEG’s recently completed demerger. The apparent fall does not represent a corresponding 65% erosion in the overall value belonging to existing shareholders.

The company has separated its graphite electrode operations from its other businesses, resulting in a new corporate structure and a revised market price for the listed entity.

Why did HEG shares fall so sharply?

The key reason behind Monday’s price movement is the demerger adjustment.

Before the restructuring, HEG housed its graphite electrode business along with its advanced materials, battery energy solutions and green power operations. Following the demerger, these businesses have been separated into different entities.

As a result, the Friday closing price of ₹728.25 is not an appropriate benchmark for evaluating Monday’s ₹258 level.

The demerger-adjusted reference price was around ₹260. Compared with this adjusted level, the stock was down only about 0.8% when it traded near ₹258 in early dealings. In other words, most of the headline 65% decline reflects the value of the business that has been carved out rather than a sudden collapse in the value of the remaining company.

Graphite business moves into a separate company

Under the restructuring, the graphite electrode business has been transferred to HEG Graphite Ltd. The company is proposed to be renamed HEG Ltd and is expected to be listed separately.

The existing listed company has been renamed HEG Advanced Materials Ltd. It will continue with businesses including advanced materials, battery energy solutions and green power.

The restructuring also includes the amalgamation of Bhilwara Energy with HEG Advanced Materials. This creates a different business profile for the company whose shares are currently trading on the exchanges.

Existing shareholders will receive shares in the demerged business

The demerger does not mean that investors holding HEG shares simply lose the value represented by the graphite business.

Shareholders eligible on the September 7 record date will receive shares of HEG Graphite in a 1:1 ratio. This means investors will receive one fully paid-up share of the demerged graphite business for every share held in HEG Advanced Materials.

The graphite company's separate listing is expected in the second half of October. Until that listing takes place, the value represented by the new graphite shares will not appear as a separately traded stock in an investor's portfolio.

This is why looking only at the movement in HEG Advanced Materials can create a misleading impression about the investor's total holdings.

Market value is being split between two businesses

The impact becomes clearer when looking at market capitalisation rather than just the quoted share price.

Before the demerger, HEG had a market capitalisation of more than ₹11,500 crore based on Friday's closing price. After the adjustment, the remaining listed entity was valued at more than ₹5,000 crore during Monday morning trade.

The difference largely represents the business that has been separated and will eventually be represented through the independently listed graphite company.

Therefore, investors need to consider the combined economic value of their holdings in both businesses rather than comparing the old HEG price directly with the adjusted price of HEG Advanced Materials.

HEG had outperformed the broader market before the demerger

The stock's performance before the restructuring also provides some context.

Through Friday's close, HEG shares had gained approximately 17% during 2026. Over the same period, the Nifty 50 had declined by roughly 9%, according to the report.

That means HEG had delivered a significantly stronger performance than the broader benchmark before the demerger-related adjustment took effect.

The current price action, therefore, should not automatically be interpreted as a sudden deterioration in the company's underlying business or a conventional 65% stock-market crash.

What investors should watch next

The next important event will be the separate listing of HEG Graphite. Once the new company's shares begin trading, investors will have a market-determined price for the graphite electrode business.

Until then, comparing Monday's HEG Advanced Materials price with Friday's pre-demerger HEG price can give an exaggerated picture of the decline.

The restructuring effectively gives investors exposure to two separately focused businesses: HEG Advanced Materials on one side and the graphite electrode business through HEG Graphite on the other.

For shareholders, the more meaningful measure will ultimately be the combined value of both holdings after the demerged company begins trading independently.

In short, the headline 65% fall in HEG's share price is primarily a consequence of the company's demerger and the removal of the graphite business from the existing listed entity. The adjusted comparison suggests that the actual movement in the remaining business was far smaller than the headline percentage indicates.