India enjoys the advantage of being a well-endowed nation full of lands with minerals and metal resources. The country ranks 4th in the world in mineral production, after countries like the US, China, and Russia. It produces close to 95 different minerals, including metallic, non-metallic, fuel, and minor minerals. These act as raw materials for different industries. Being a crucial economic segment, the mining industry in India is key to the country’s economic growth. One of the leading mine-producing states in the country is Odisha, contributing close to one-fourth of the national output. Here’s a detailed look at the mining industry in India, including some of the top stocks in mining sector.
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About the Indian mining sector
Here are some key statistics on the mining sector:
- India is one of the top producers of iron ore and bauxite. This accounts for close to 2.5% of the country’s GDP.
- The national coal production is said to be 7.6% of the global levels.
- The country also contributes about 10% to global proved coal reserves.
Since India’s mining sector is very diverse, the country’s largest mines are essentially state-owned. Private companies owning mines in the country are market leaders in various manufacturing segments.
The government offers mineral concessions to Indian nationals, and companies incorporated in India. Further, the country allows 100% foreign direct investment in such companies. Coal India, a state-owned company, is known for being the largest employer in the mining sector. It has also been listed among the world’s top ten mining companies, with a primary focus on mining production and operations.
Growth drivers for the mining sector
India has a significant number of opportunities in the mining of iron ore, bauxite and coal. Experts even see possibilities for future sub-surface deposit discoveries. With an increased focus on infrastructure in the country, there are many lucrative business opportunities for the consumption of steel, zinc, and aluminium.
The country’s real estate sector is also a major consumer of iron and steel. As the demand for these is likely to see continued growth, the mining sector will see a significant boost too.
Since mining has been known to cause harm to the country’s environment and impact certain communities, it was restricted to a few companies. Following the COVID-19 pandemic, the Indian government, as part of its revival measures for the mining sector, permitted non-steel and non-power companies to carry out commercial coal mining. This decision was aimed at boosting domestic coal production, minimizing imports, and aiding all other user industries. This move was, however. withdrawn later. This is because the decision triggered a series of debates supporting clean energy.
Key challenges faced by the mining industry
Although the mining sector in India has enjoyed an annual growth rate of 4 to 5% over the last three decades, the industry has seen significant ‘growth at all cost’ over the years. Few of the hurdles in the sector’s growth are:
- Due to growing demand, India’s coal imports are also seen to be constantly rising, despite large coal reserves in the country.
- The industry has also seen workers not being given their legitimate dues. Issues like unscientific mining methods, slaughter mining, and lack of focus on conservation have also marred the industry’s image over the years.
- Some of the other issues in many private collieries include forced labour, musclemen protecting mine owner interests, corruption, inaccurate records, extended hours of work without pay, and lack of proper safety measures.
While many of these areas have been addressed in the last few years, many problems continue to pose a threat to the industry’s growth. Since mining is crucial to the nation’s development, accentuated efforts are required in some of these problem areas.
Top stocks in the Indian mining sector by market capitalization
Coal India Ltd.
Coal India Ltd. is India’s largest and also one of the top global coal-producing companies. Apart from coal mining, it also manufactures non-coking coal and coking coal for use in diverse areas. The company caters to a number of thermal power generation companies, steel manufacturers and cement producers. This state-controlled company contributes to nearly 82% of the country’s coal production. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 1,14,380 crores |
| PE Ratio | 6.59 |
| Return on Equity | 43.58% (July’22) |
| Debt Equity Ratio | 0.08 (July’22) |
| Promotor’s Holdings | 66.13% |
| Share price | Rs. 183.25 (01 July 2022) |
| Dividend Yield | 9.43% |
NMDC Ltd.
NMDC Ltd. is India’s top iron ore producer and exporter, with a focus on two main business segments, including iron ore and other minerals. The company conducts exploration of various minerals like iron ore, copper, gypsum, graphite, limestone, tungsten, dolomite, rock phosphate, tin, bentonite, diamond, magnesite, and beach sands. Incorporated in 1958 as a public ltd company, NMDC continues to remain under the administration of the Ministry of Steel. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 31,710 crores |
| PE Ratio | 3.38 |
| Return on Equity | 28.92 (July’22) |
| Debt Equity Ratio | 0.10 (July’22) |
| Promotor’s Holdings | 60.79% |
| Share price | Rs. 109.65 (01 July 2022) |
| Dividend Yield | 13.62% |
KIOCL Ltd.
KIOCL Limited, formerly Kudremukh Iron Ore Company Limited, is a state-owned company with headquarters in Bangalore. KIOCL Ltd manufactures and exports high-quality iron oxide pellets. It also supplies pig iron to the Indian market. The company’s pelletisation plant is located in Mangalore and its iron ore mine is in Kudremukh. The company is known for its eco-friendly mining approach and socially responsible corporate practice. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 11,432 crores |
| PE Ratio | 36.52 |
| Return on Equity | 15.18% (July’22) |
| Debt Equity Ratio | 0.06 |
| Promotor’s Holdings | 99.03% |
| Share price | Rs. 192.90 (01 July 2022) |
| Dividend Yield | 0.96% |
Gujarat Mineral Development Corporation (GMDC)
Gujarat Mineral Development Corporation Ltd (GDMC) is a mining and mineral processing company. The company offers lignite and fluorspar of two grades, acid and metallurgical. These are used across industries such as steel, foundry flux, hydrochloric acid, aluminium, and welding electrodes. The company also owns bauxite reserves in the country. Apart from mining, the company is also engaged in power projects. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 4,301 crores |
| PE Ratio | 10.62 |
| Return on Equity | 9.17% (July’22) |
| Debt Equity Ratio | – |
| Promotor’s Holdings | 74% |
| Share price | Rs. 131.80 (01 July 2022) |
| Dividend Yield | 0.15% |
MOIL Ltd.
MOIL Ltd is India’s largest manganese ore producer in terms of volume offering high, medium and low-grade varieties. Apart from this, the company also offers manganese dioxide and chemical-grade manganese ore. The company’s mines are strategically located in central India which allows it to leverage a good road and rail infrastructure. The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 2,851 crores |
| PE Ratio | 8.61 |
| Return on Equity | 15.20% (July’22) |
| Debt Equity Ratio | – |
| Promotor’s Holdings | 64.68% |
| Share price | Rs. 141.85 (01 July 2022) |
| Dividend Yield | 5.64% |
Conclusion
The Indian mining industry benefits from its capabilities, low production and conversion cost apart from various export opportunities in the fast-developing Asian markets. As of 2021, the country’s mines stood at an estimated number of 1,229. As infrastructure development continues to rise, combined with higher automotive production, the mining industry is slated to see further growth in the near future. The sector is also seeing growth due to demand from power and cement companies. Investors can therefore consider gaining exposure to this sector for good long-term returns.
FAQs
India is said to have explored only 20% of the country’s available mining areas. Hence, as per experts, there is a lot of potential for growth in the sector as more areas could be covered in the future.
Yes, the Government of India has designed various policy measures to boost growth in the sector. Currently, captive mines enjoy the government’s permission to sell coal in the open market, thereby allowing higher chances of profits for the mining companies.
The mining sector sees a lot of ‘growth at any cost’ issues, including deaths during mining and forced labour. These and various other aspects like untimely payments and illegal mining keep the sector in news.
Yes, the Indian mining sector is labour intensive, requiring both a skilled and unskilled workforce. It is known for offering thousands of unskilled labour jobs.
