5 Mineral Stocks Poised for Growth with Govt's Critical Mineral Policy

The Indian government has initiated the National Critical Mineral Mission (NCMM) with a budget of Rs 180 billion (bn) in the 2025 budget. In addition, public sector undertakings are projected to invest another Rs 180 bn.

The NCMM will encompass various phases of the value chain, including mineral exploration, mining, and processing. The mission aims to accelerate the exploration of critical minerals both on land and in offshore regions of the country.

NCMM reinforces the goal of making India self-sufficient in minerals, considering their essential role in high-tech industries, clean energy, and sustainable mobility solutions.

This transition opens up new opportunities for lithium, nickel, cobalt, and rare earth mining companies. Their stocks have garnered investor interest, and they are poised for significant growth with favorable policies in place.

This article examines five mineral stocks likely to benefit from India's focus on critical minerals.

#1 Lloyds Metals & Energy

First on the list in Lloyds Metals & Energy (LSIL).

Lloyds Metals specializes in producing and supplying iron and steel products. It oversees the entire value chain, from iron ore mining to producing direct reduced iron (DRI) and sponge iron.

The company benefits from a cost advantage, as it is not required to pay additional government royalties throughout the mine's lifespan.

Coming to its financial performance, LSIL sales have grown at a compounded annual growth rate (CAGR) of 44.9% in the last five years, reaching Rs 6,242 million (m) in FY24.

This growth was spurred by strong sales growth in the last two years. Additionally, profits have surged at 94.4% CAGR to Rs 798 m.

Despite its capital-intensive nature, the business maintains respectable return ratios, with an average return on equity (RoE) and return on capital employed (RoCE) of 9.4% and 13.6%, respectively.

In the third quarter of the current financial year, the company reported a profit growth of 17.4%, even though total income fell by 12% compared to last year.

Lloyds Metals Financial Snapshots (FY20-24)

Particulars	FY20	FY21	FY22	FY23	FY24
Sales Growth (%)	17.1	(-38.8)	(-28.5)	524	99.7
Net Margin (%)	2.2	0.7	11.9	11.8	12.8
Return on Equity (%)	2.2	0.4	5	19.8	19.8
Return on Capital Employed (%)	3.4	1.3	9.5	28.5	25.6

Source: Equitymaster

Looking ahead, the company is actively pursuing expansion. It aims to invest Rs 50 bn by year-end and Rs 60-65 bn annually over the next two years to increase production capacity multifold.

Additionally, it is expanding its mines from 10 metric tons per annum (MTPA) to 55 MTPA. It expects approvals to commence operations by the end of FY25.

Subsequently, LMEL anticipates a substantial boost in operational performance due to increased iron ore sales volumes as it ramp-up its capacity.

Furthermore, it is implementing cost control measures for sustainable profitability and investing in renewable energy projects to achieve 100 megawatts (MW) of captive consumption starting in FY27.

The management believes the multifold capacity expansion and cost control measures will help the company achieve sustainable growth.

For more details, see the Lloyds Metals fact sheet and quarterly results.

#2 NMDC

Next on the list is NMDC.

NMDC, a government-owned Navratna company, is a leading player in India's mining sector and is crucial to its resource management.

NMDC is India's largest iron ore producer, catering to around 20% of the country's demand for the key raw steel-making material.

It also explores and mines diamonds, limestone, and other minerals, supporting the country's steel and infrastructure sectors.

In terms of financial performance, NMDC sales have grown at a CAGR of 11.9% in the last five years, reaching Rs 213,079 m in FY24, driven by strong steel demand. On the other hand, profit has was up a modest 3.7% to Rs 55,722 m.

The company maintains strong return ratios, with an average RoE of 26.5% and RoCE of 37.9%, driven by a debt-free, cash-rich balance sheet.

Moreover, the company's revenue grew 21% in the third quarter, driven by strong steel sales and price hikes. Consequently, its profit rose 29% to Rs 14,697 m.

NMDC Financial Snapshots (FY20-24)

Particulars	FY20	FY21	FY22	FY23	FY24
Sales Growth (%)	(-3.7)	31.4	68.9	(-32.0)	20.6
Net Margin (%)	30.8	40.6	36.4	31.3	26.2
Return on Equity (%)	13	20.9	52.4	24.5	21.7
Return on Capital Employed (%)	22.1	29.3	72.5	34.1	31.3

Source: Equitymaster

Looking ahead, NMDC has set an ambitious goal to raise its iron ore production capacity to 67 MTPA by FY26 and 100 MTPA by FY30 to meet the increasing demand in the Indian steel industry.

The company also intends to diversify into other minerals crucial for supporting the nation's energy security and net-zero targets.

However, NMDC's financials could be significantly affected by retrospective mining tax collections, potentially leading to substantial arrears that would harm its finances.

Additionally, the proposed increase in iron duty in Karnataka from 10% to 20% could raise costs and affect profitability.

Despite these challenges, the company plans to transfer these costs to consumers, which may limit the impact on its financials.

For more details, see the NMDC fact sheet and quarterly results.

#3 Coal India

Next on the list is Coal India.

Coal India, the leading global coal producer, is a public-sector undertaking (PSU) under the Ministry of Coal in the Government of India. It plays a crucial role in fulfilling the nation's energy requirements.

It possesses a near-monopoly in coal mining, controlling 48% of India's total proven coal reserves, representing 78% to 80% of domestic coal production.

The company has demonstrated strong financial performance, with sales and profit growing at a CAGR of 8.4% and 16.4% over the past five years, reaching Rs 783,288 m and Rs 373,691 m, respectively.

Meanwhile, its average RoE and RoCE stand at 44.9% and 59.1%, respectively. The company boasts a solid balance sheet and has a long-standing history of dividend payments.

However, in the latest quarter, its revenue and profit fell 1% and 17%, respectively. Subdued demand and lower e-auction realizations affected its overall performance.

Coal India Financial Snapshots (FY20-24)

Particulars	FY20	FY21	FY22	FY23	FY24
Sales Growth (%)	(-3.4)	(-9.0)	25.5	36	-0.1
Net Margin (%)	33.1	27.7	30.2	40.5	47.7
Return on Equity (%)	51.9	34.8	40.3	52.1	45.2
Return on Capital Employed (%)	72	47.6	52	67.7	56.2

Source: Equitymaster

Looking ahead, the company aims to enhance cost efficiency while creating a more environmentally friendly business environment through a 50 MW solar power project. It has also signed a memorandum of understanding with BPCL to establish a coal-to-synthetic natural gas project.

The company is expanding into other essential minerals too. It has signed a MoU with Indian Rare Earth (IREL) to develop mutually agreed critical mineral assets.

As coal continues to play a significant role in meeting 55% of India's energy needs, the demand for coal will remain robust due to increasing power consumption. This presents a significant growth opportunity for coal India.

Nonetheless, retrospective taxation, as previously mentioned, poses a concern for Coal India. Management anticipates a net financial impact of about Rs 60 bn related to past tax liabilities.

For more details, see the Coal India fact sheet and quarterly results.

#4 MOIL

Next on the list is MOIL.

MOIL primarily mines manganese ore and is the leading producer in India, with a 53% market share. It is also the sole producer of electrolytic manganese dioxide.

Looking at its financial performance, sales have expanded at a CAGR of 7.2%, reaching Rs 14,494 m over the past three years, while profits surged by an impressive 18.4% to Rs 2,933 m.

The company's return ratios are strong, with the average RoE and RoCE at 13.6% and 18.4%, respectively.

In the first quarter, MOIL achieved its highest-ever quarterly revenue, a 30% increase to Rs 49.28 m. This growth was fueled by a 30% rise in manganese ore production. During the same period, profits rose 20% to Rs 500 m.

MOIL Financial Snapshots (FY20-24)

Particulars	FY20	FY21	FY22	FY23	FY24
Sales Growth (%)	(-28.0)	13.4	22	-6.6	8
Net Margin (%)	23.9	15	26.2	18.7	20.2
Return on Equity (%)	9	6.3	17.6	11.2	12
Return on Capital Employed (%)	12.3	8.5	24.5	14.9	15.8

Source: Equitymaster

Moving forward, MOIL management aims to raise the company's market share from 20% to 32% by 2030. Additionally, it plans to expand its operations into other states. For these purposes, it has planned a capital investment of Rs 6.68 bn till FY26.

The company has also entered into a Memorandum of Understanding with the Gujarat Mineral Development Corporation and the Chhattisgarh Mineral Development Corporation to explore and possibly mine resources.

MOIL is strategically positioned to take advantage of India's National Steel Policy, which targets increasing crude steel capacity to 300 MT by 2030-31 and seeks to enhance per capita steel consumption to 160 kg.

To produce 300 MT of steel, 11 MT of manganese ore is required. Given MOIL's dominant position in the manganese ore industry, it is expected to benefit from this growth and is thus looking to increase its production 70% to 3.5 MT by 2030.

For more details, see the MOIL fact sheet and quarterly results.

#5 Hindustan Copper

Last on the list is Hindustan Copper.

Founded in 1967, Hindustan Copper Limited (HCL) stands as India's first public sector undertaking and the sole vertically integrated copper producer.

HCL engages in all stages of copper production, from mining to the final conversion into marketable products. The company controls approximately 55% of India's copper ore reserves and holds mining leases for over 80% of the country's copper reserves.

In terms of finances, sales have declined at a CAGR of -1.1% over the past five years, to Rs 17,170 m in FY24. Conversely, profits increased 15.2%, reaching Rs 2,957 m, primarily due to cost optimization strategies.

The company reports average return ratios, with a RoE of 11.4% and a RoCE of 7.2%.

Additionally, HCL experienced robust revenue growth of 21% in the second quarter, fueled by rising copper prices, which resulted in a profit increase of 67.5%.

Hindustan Copper Financial Snapshots (FY20-24)

Particulars	FY20	FY21	FY22	FY23	FY24
Sales Growth (%)	(-54.2)	114.8	2	(-7.9)2	2.4
Net Margin (%)	-68.4	6.2	20.5	17.6	17.2
Return on Equity (%)	-59.3	10.1	19.6	14.2	12.9
Return on Capital Employed (%)	-29.6	8.4	19.6	19.7	18.1

Source: Equitymaster

Moving forward, the management expects a rise in domestic copper demand, mainly from industrial users. The company plans to allocate Rs 4.5-5 bn annually toward mine expansion.

As part of its growth strategy, it aims to triple iron ore production to 12.2 MTPA by FY29 while exploring new deposits to expand capacity further.

The company has also signed agreements to sell its primary product, copper concentrate, with Kutch Copper Limited and Hindalco to strengthen its business.

HCL is well-positioned to benefit from rising copper demand in India, where per capita consumption remains low at just 0.5 kg, compared to the global average of 3.2 kg.

For more details, see the Hindustan Copper fact sheet and quarterly results.

Conclusion

India's National Critical Mineral Mission marks a significant step toward securing essential raw materials for its high-tech and clean energy ambitions.

With a combined investment of Rs 360 bn from the government and public sector undertakings, the mission will drive the exploration, mining, and processing of critical minerals.

As India strengthens its critical mineral supply chain, companies in this sector are well-positioned to capitalize on emerging opportunities.

The government's strategic focus and investments could pave the way for sustained growth in the industry, making these stocks worth tracking in this growing industry, given increased demand from various sectors including electric vehicles.

However, to make informed decisions, it's crucial to assess the company's fundamentals, including its financial performance, corporate governance practices, and growth prospects, rather than relying solely on the hype.

Happy Investing.

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