The PSU Gamble: Story Behind PM Modi's Investment Tip
Pay attention when Prime Minister (PM) Narendra Modi is giving investment tips. On August 10, the Parliament guffawed when the PM, in his usual aplomb, asked stock market investors to 'bet on the PSU stocks.' Like most of the PM's colleagues in the Parliament, stock market punters and investors largely passed his investment tip as just another light-hearted Lok Sabha chatter meant to amuse the gallery. But sources in New Delhi's policy-making circles are agog with the talks of India's grand lithium mining plan where auctions for the site in Jammu and Kashmir (J&K) are likely to be held before December 2023. The anticipation is high. The government is expecting thousands of crores from the auctions to flow into the coffers before the end of the current fiscal year. But that is not the big story. Stock traders can reap huge profits by simply following the PM's tip.
Companies including National Mineral Development Corporation (NMDC), Gujarat Mineral Development Corporation (GMDC), Steel Authority of India (SAIL), Hindustan Copper, National Aluminium Co (NALCO), Orissa Minerals Development Company, MOIL and Coal India are a few pure-play listed 'PSU' miners that are likely to be at the forefront of lithium mining in India. There will be other PSU miners, too, but they are not listed.
In the list above, NMDC is likely to assume the lead since it seems set for the game. NMDC has partnered with Australia's Hancock Prospecting, a company owned by billionaire Gina Rinehart for lithium and cobalt mining. Rinehart even had a one-on-one meeting with PM Modi when he was on his celebrated Australia tour earlier this year.
NMDC and Hancock are already exploring sites for lithium mining in Australia under the comprehensive strategic partnership. Australia is the world's largest lithium producer, and its lithium industry is more mature than India’s. Importantly, Australia's lithium reserves are in the same hard rock form as the deposits in India, and any expertise they get will be an edge.
GMDC and Hindustan Copper, too, have announced their plans this year for the mining of 'rare earth metals,' obviously with an eye on lithium and cobalt. The Gujarat state government in June appointed retired bureaucrat Hasmukh Adhia as the GMDC chairman - it is an open secret in the policy circles that Adhia enjoys PM Modi's backing.
All this is an indicator of the silent work that the PSUs are doing with an eye on the big game, and the government seems all geared up.
India's lithium plan
You do not need PM Modi to tell you that the country will be nowhere in the global league if it misses out on the clean energy play. Lithium mining is at the heart of this. India is way behind the curve when it comes to manufacturing laptops and mobile phones, but electric vehicles are something that the government has set its eye on. In the years ahead, all the battery-dependent electronic manufacturing will settle in countries that can source lithium easily.
In July, the Parliament cleared the Mines and Minerals (Development and Regulation) Amendment Bill, 2023 to allow private companies to mine six out of 12 atomic minerals, including lithium, and deep-seated minerals such as gold and silver. The bill has also been cleared by Rajya Sabha. The government will now insert the provision of an exploration license only for deep-seated and critical minerals in the law. This license will be granted through auction for undertaking reconnaissance and prospecting operations. The bill also empowers the central government to auction mining lease and composite license for certain critical minerals exclusively.
For the first time in his nine year tenure, PM Modi has given investment advice to the stock markets. This is after the amendment to mining bills were passed by both the houses of Parliament and when he was sure that there were no other major hurdles to India's grand plan.
Until now, India was playing into China's hands when it came to sourcing lithium for domestic needs. But that equation changed when in February the government announced the discovery of 5.9 million metric tons of lithium in J&K valued at around $410 billion. In May, news reports also suggested huge lithium deposits in Rajasthan as well.
What's more? Following India's lithium finds, the Tata Group in June entered into an agreement with the Gujarat government to invest Rs13000 crore for lithium battery manufacturing factory in Sanand. The government has also announced the National Program on Advanced Chemistry Cell (ACC) Battery Storage as part of the Make in India initiative, wherein it will grant over $2 billion in incentives to EV manufacturing companies. This will equip the Indian economy for every step in the lithium lifecycle and ensure that the benefits of domestic lithium mining stay in the country.
Just last week, auctions for two lithium mines in China's southwestern Sichuan province received nearly 7,000 bids, with prices hundreds of times higher than the starting levels. Therefore, place your bets on PSU mining company stocks blindfolded... especially when the investment tip comes from PM Modi.
The writer is author of the book: The Market Mafia - Chronicle of India’s High-Tech Stock Market Scandal & The Cabal That Went Scot-Free. Palak has been a journalist in Mumbai for nearly two decades now. He has worked for most premier pink papers including The Economic Times, Business Standard and The Financial Express and The Hindu Business Line. He was drawn to crime reporting at the age of 19 but a few years in the field told him that the fabric of crime had changed and the organised gangs, as Mumbai had witnessed during the eighties, no longer existed. It was business and markets that dominated the scenario. His passion to unravel the intricacies of the ‘white money’ economy led Palak to the world of finance and regulations.
