Forget Iron and Coal: Why NMDC and Coal India are betting big on EV magnets

Sometimes opportunities arrive like dull signals on the radar. Those who catch them early can carve out a path even before other people take notice. One such signal is blinking rapidly in India today — in the field of rare earth metals. These barely known metals are now at the center of the global shift to clean energy, electric mobility, and advanced electronics. And India is positioning itself to play a much larger role in this essential supply chain with unexplored reserves and strategic focus.

Magnets used in EV motors and countless technologies are made up of these rare earth metals. Demand for rare earth magnets is expected to rise as the use of electricity and renewable energy increases.

Some coastal areas in India are rich with monazite sand deposits. The government is stepping up efforts to explore and process these to reduce import dependence and build domestic capability. This evolving landscape means that investors now have a chance to participate in a space that could become central to the next decade of industrial growth. It also makes it important to look closely at the companies already making early moves in this direction.

The shift is still in its early stages, but it’s gaining momentum. Only a few Indian companies are now exploring reserves, entering partnerships, and growing building capabilities that could one day build domestic rare earth supply chains. Among them, two listed players — NMDC and Coal India — have already taken concrete steps, while others are positioning themselves for future opportunities. That makes this a space investors cannot afford to ignore.

#1 NMDC

NMDC is engaged in exploration and production of iron ore along with diamond, production and sale of sponge iron and generation and sale of wind power.

Taking advantage of more than six decades of mining experience, the company has commenced exploration of high-potential tenements in East Kimberley, Western Australia, a region renowned for geology rich in rare earth elements, tungsten, and base metals. Initial drilling has started, making the way for development of resources and future ventures.

With its subsidiary Legacy Iron Ore, NMDC is following a strategy of diversifying from iron ore to high-demand materials for clean energy technologies. Legacy has joined Hancock Prospecting in the venture to explore lithium and other non-iron minerals, expanding NMDC’s presence in the global critical minerals space.

The company’s focus on rare earths is also tied to India’s objective of developing its domestic supply chains for materials for electric vehicle (EV) motors, wind turbines and high-end electronics products, where rare earths cannot be replaced.

With the government backing, an existing infrastructure network, and decades of experience, NMDC is positioning itself as a strategic player in the rare earths value chain. Its exploration, partnerships, and plans to build out future capacities represent a decisive shift from being a traditional miner to a player in the high-value part of strategic minerals, which is poised to lead NMDC toward being an incubator for India’s rare earth ambitions.

#2 Coal India

Coal India is mainly engaged in mining and production of coal and also operates coal washeries. The major consumers of the company are power and steel sectors. Consumers from other sectors include cement, fertilizers, brick kilns.

Coal India is shifting from its coal-biased historical past to establishing itself in the rare earth and critical minerals value chain. It intends to engage at various levels across the chain — ranging from exploration and mining to midstream processing and even end-product manufacturing — as a part of its plan to harness opportunities in resources such as rare earth elements, lithium, cobalt, and nickel.

An important aspect of this shift is partnership. Coal India has entered into a memorandum of understanding (MoU) with IREL to identify, prospect, and develop rare earth and beach sand mineral resources in India jointly. This is a major move towards establishing domestic capability in magnet metals.

It has also partnered with Curtin University in Australia for research collaborations aimed specifically at the exploration and processing of key minerals, and with the Non-Ferrous Materials Technology Development Centre in Hyderabad for R&D, pilot-scale operations, and commercialisation of rare earth ventures.

On the asset side, the company has come in as the preferred bidder for the Khattali Chotti graphite block in Madhya Pradesh and is considering overseas acquisitions, including a lithium asset in Australia where it has progressed to the second round of negotiations.

Supported by decades of mining experience and large-scale infrastructure, Coal India is now laying the ground to establish itself as a significant player in India’s rare earth and strategic mineral space.

Valuations

Let’s now turn to the valuations of the rare earth–linked companies in focus, using the Enterprise Value to EBITDA multiple as a yardstick.

Valuations of rare earth metal companies in India

Coal India is trading near its long-term median valuation while on the other hand NMDC is trading at a large premium. Perhaps, investors have begun to account for NMDC’s diversification into rare earth and strategic minerals. This re-rating for NMDC also indicates an increasing appreciation of its role in securing India’s mineral future and supporting future industries such as electric vehicles, wind power, and advanced manufacturing.

But this also raises a critical question regarding how much of that potential is already reflected in existing stock prices. Double-digit returns on capital employed sustained over the medium term and demonstrated execution capabilities are the best foundation for sustaining growth over the long term.

But shareholders need to see beyond trailing multiples and determine if future cash flows from rare earth discoveries, new projects, and strategic alliances are completely discounted or if there remains significant upside potential left. The response to that will decide if these stocks continue to be good entry points as India’s rare earth story unfolds from intention to action.

Investment Takeaway

India’s rare earth story is yet to be written. The opportunity is huge — fueled by the growth in demand for permanent magnets to be used in electric cars, wind farms, and other clean tech — but the way ahead is by no means easy. The country is only beginning to explore and it lacks deep refining and separating abilities that China has been developing over decades. Construction of this ecosystem will involve heavy capital investment, technological partnerships, and policy encouragement, as well as resolving environmental and regulatory challenges that frequently delay mining projects.

The economics of rare earth production is extremely volatile, influenced by global price cycles, concentration of supply, and geopolitical developments, the firms entering this market need to contend with lengthy development periods before commercial returns become a reality.

For investors, this represents opportunities. But these opportunities are filled with uncertainties. A thorough evaluation of every firm’s execution record, projects, capital use, and strategic placement is needed before making any bets. Rare earth metals can indeed boost the next chapter of India’s clean energy movement, but investors betting on this story will benefit only if they go beneath the surface and do a complete analysis of the company.

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

Disclaimer:

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to dig deep into the world of companies, studying their performance, and uncovering insights that bring value to her readers.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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