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HEG Ltd., a leading manufacturer of graphite electrodes is expecting overall volumes to decline 5-10 percent for the current financial year.

However, shares are trading with gains of as much as 7 percent on Monday after the company's EBITDA margin improved by nearly 250 basis points from last year to 29.9 percent.

For the September quarter, HEG's overall sales increased by 15 percent while net profit was aided by a lower tax rate.

In an interaction with CNBC-TV18, HEG's Executive Director Manish Gulati and Vice-Chairman Riju Jhunjhunwala have warned that the second half of the current financial year may not be as good as the first in terms of margin.

HEG has approved entering into the manufacturing of graphite anodes for lithium-ion cells and its allied and ancillary products business through the incorporation of a subsidiary. The company will spend Rs 1,000 crore in the first phase over the next three years.

In the second phase, the company will double its capacity with a Capex of another Rs 1,000 crore and will cater to a total of 20-22 MWH of cell manufacturing capacity.

Both phases are likely to be completed in the next 5-7 years.

The management is targeting margin worth 30-35 percent from the new products and revenue worth Rs 800 crore to Rs 1,000 crore from the first plant.

Gulati and Jhunjhunwala also spoke of the company's 15 percent revenue growth, which according to them, was impacted due to a pushback in orders from Turkey and other parts of Europe.

With utilisation levels coming down from levels of 90 percent to 70 percent, HEG is witnessing volumes being under pressure in the current quarter as well.

Shares of HEG are trading 6.9 percent higher at Rs 1,071.80.