Left Hand Reduces Holdings, Right Hand Pledges as Collateral: "Silicon Industry Leader" Pursues Self-Rescue with 5.8 Billion Yuan Capital Increase

Author | Tian Si                           Editor | Jiang Bo

On March 6, Hesheng Silicon Industry (SH:603260) announced a private placement, proposing to issue no more than 355 million A-shares to no more than 35 specific investors, raising up to 5.8 billion yuan. Of this, 4.1 billion yuan will be used for the Shanshan Silicon-Based New Materials Industrial Base 8×75MW back-pressure unit project (Phase I) (hereinafter referred to as the “Back-Pressure Unit Project”), with the remaining 1.7 billion yuan allocated for working capital and repayment of bank loans.

The Back-Pressure Unit Project has a total investment of 5.728 billion yuan and is a cogeneration facility. Its core goal is to reduce costs through integrated coal power. Hesheng Silicon Industry states that the electricity, steam, synthesis gas, tar, and other products generated by the project can form an efficient, closed-loop consumption network within the entire industry, maximizing resource value.

This investment decision seems sound, as lower costs mean stronger market competitiveness. However, for Hesheng Silicon Industry, which faces enormous debt pressure and high leverage, continuing to push projects during industry downturns will likely increase future risks.

Notably, about one-third of the funds raised will be used to supplement working capital and repay bank loans, highlighting the significant financial pressure the company faces. Given that the company’s short-term debt crisis has already begun to surface, whether this private placement will be approved by the capital markets and regulators remains uncertain.

Rapid Expansion Leaves a Mess

In an effort to build the “most complete silicon-based full industry chain in the world,” Hesheng Silicon Industry conducted two rounds of private placements from 2021 to 2023, raising a total of 9.5 billion yuan. The company launched 11 expansion projects with a total investment exceeding 80.5 billion yuan, accounting for about 90% of total assets. Among these, investments related to photovoltaic integration reached 63 billion yuan, involving polysilicon, monocrystalline silicon rods, wafers, cells, modules, and auxiliary industries such as welding tapes, frames, adhesive films, and glass.

At that time, the photovoltaic industry was booming, and expansion was sweeping across the sector. Unfortunately, by the time the first photovoltaic production line of the Xinjiang Central Photovoltaic Integration Industrial Park project (including an annual production of 200,000 tons of high-purity polysilicon, 20 GW of photovoltaic modules, and 1.5 million tons of photovoltaic glass) reached mass production in February 2024, the industry had already entered a winter. Silicon wafers, cells, and modules were suffering losses, and polysilicon prices quickly inverted cost advantages.

In the second quarter of 2024, Hesheng Silicon Industry sold only 1,770 tons of polysilicon, generating revenue of just 77.19 million yuan. The company has not disclosed related revenue figures since then, up to the end of 2025. The company explained that the polysilicon produced was shifted from external sales to internal use.

In reality, much of the products from aggressive expansion have become inventory. By the end of 2024, Hesheng Silicon Industry’s inventory reached 9.509 billion yuan, accounting for 10.48% of total assets at that time. The company stated that this was mainly due to the commissioning of some photovoltaic products, leading to increased inventory. The decline in these inventories caused the company to record losses exceeding 1.1 billion yuan in the first three quarters of 2024–2025.

To clear inventory, Hesheng Silicon Industry has repeatedly announced bids for multiple photovoltaic projects in Xinjiang at prices below the industry association’s cost guidance since October 2024. Notably, the China Photovoltaic Industry Association (CPIA) criticized the low-price bidding behavior of the China Power Baying Project. Recently, there were reports that Hesheng Silicon Industry used module products as debt repayment, with module prices as low as 0.53 yuan/W to 0.6 yuan/W.

In 2025, Hesheng Silicon Industry plunged into massive losses. On January 31, it announced a forecasted loss of 2.8 to 3.3 billion yuan for 2025, marking its first annual loss since 2012.

The reasons for the losses include a significant contraction in demand and falling prices in the industrial silicon and organosilicon markets, but mainly stem from issues in the photovoltaic segment. Hesheng Silicon Industry stated: “The polysilicon market is gradually recovering under the combined effects of policies and market forces, but still faces challenges such as short-term demand deficiency and high inventory. Compared to 2024, in 2025, the company’s photovoltaic business was affected by the suspension of polysilicon production lines and low utilization rates of module production lines, resulting in substantial shutdown losses and operational deficits.”

The company also indicated that, based on these major changes in the photovoltaic sector, it conducted impairment tests on related long-term assets and recognized asset impairment provisions of approximately 1.1 to 1.3 billion yuan.

High Debt Risks Exposed

Years of reckless expansion have placed Hesheng Silicon Industry under enormous financial strain.

By 2023, the company’s construction-in-progress reached 38.2 billion yuan, surpassing its fixed assets of about 22.4 billion yuan. As of the third quarter of 2025, fixed assets increased to approximately 31.3 billion yuan, but construction-in-progress remained high at 35.7 billion yuan.

As of the end of the third quarter of 2025, Hesheng Silicon Industry’s asset-liability ratio was 62.89%. During the same period, the company’s short-term non-current liabilities due within one year amounted to 6.649 billion yuan, combined with short-term loans of 4.97 billion yuan and notes payable of 593 million yuan, totaling short-term liabilities of 12.212 billion yuan. Meanwhile, the company’s cash holdings were only 1.142 billion yuan.

According to the mid-year report of 2025, Hesheng Silicon Industry also owed suppliers up to 13.7 billion yuan for engineering equipment.

Faced with enormous debt pressure, the company has begun various self-rescue measures.

In February 2025, Hesheng Silicon Industry announced plans to issue no more than 4 billion yuan of asset-backed securities (ABS) to revitalize existing assets and expand financing channels. However, after approval by shareholders, no further progress has been reported, raising doubts about whether it received approval from the Shanghai Stock Exchange.

Meanwhile, the actual controller Luo Liguo and his children have raised funds through guarantees, equity pledges, and other means. By the end of 2025, the company and its subsidiaries had a total external guarantee balance of 20.51 billion yuan, accounting for 62.43% of the latest audited net assets attributable to shareholders.

As of March 7, 2026, Hesheng Silicon Industry’s controlling shareholders, Hesheng Group and its affiliated persons Luo Liguo, Luo Yi, and Luo Yedong, held a combined 71.86% stake in the company, with 386.585 million shares pledged, representing 45.50% of their holdings and 32.70% of the total share capital.

It is noteworthy that Luo Liguo’s family continues to reduce holdings through Hesheng Group for cashing out.

Hesheng Group is the family enterprise of Luo Liguo. Tianyancha shows that the current Hesheng Group has only three shareholders: Luo Liguo’s sons Luo Yedong, Luo Yi, and daughter Luo Yie, holding 57.5337%, 24.9263%, and 17.72% respectively. Hesheng Group is also the largest shareholder of Hesheng Silicon Industry, previously holding 41.16% before reducing holdings.

According to Hesheng Silicon Industry’s announcement, between February 11 and March 4, 2026, Hesheng Group sold 18.4321 million shares on the secondary market, cashing out over 900 million yuan. The company stated that this reduction was driven by the group’s own funding needs.

Hua Xia Energy Network notes that this is not the first time Hesheng Group has reduced holdings. In August 2025, it transferred 60 million shares (5.08% of total shares) to individual Xiao Xiugen via agreement, cashing out 2.634 billion yuan.

These two sales have netted Hesheng Group a total of 3.534 billion yuan. As of now, Hesheng Group still holds 39.61% of Hesheng Silicon Industry’s shares.