Best Lithium Stocks in India: From Mines to Markets

Lithium, also known as White Gold or the New Oil, is crucial for India to ensure its future energy security. India discovered its first lithium deposits in Jammu and Kashmir in February of the previous year. The estimated reserves were 5.9 million tonnes. In July 2023, India revised its mining regulations, permitting private miners to explore for materials. With lithium being a key component in electric vehicle batteries, this development opens doors of opportunity for major lithium stocks in India.

Lithium for Energy Transition 

Lithium plays a central role in the manufacturing of lithium-ion batteries, which are lightweight and easily rechargeable. These batteries are primarily utilized in Electric Vehicles, Laptops, Smartphones, and battery energy storage systems. With their high energy density, lightweight design, and long cycle life, lithium-ion batteries have become the preferred choice for portable electronic devices and electric vehicles (EVs).

India has ambitious goals for environmental sustainability. By 2070, it aims to achieve Net Zero emissions. Additionally, it targets a 30% share of Electric Vehicles (EVs) in new vehicle sales and aims to increase non-fossil fuel energy capacity to 500 GW by 2030. Achieving these targets will require significant amounts of lithium and the batteries manufactured from it. Thus, Lithium is the single most important critical mineral for the energy transition.

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Understanding the Lithium Market in India:

I) Current State of the Lithium Market in India

A. India’s lithium demand and supply dynamics. 

As per IBEF,  India’s lithium-ion battery sector is on the brink of exponential expansion, with the recycling market forecasted to reach 22-23 GWh by 2030.

-This industry is witnessing a meteoric rise, with projections indicating a surge from 2.9 GWh in 2018 to approximately 132 GWh by 2030, boasting a remarkable CAGR of 35.5%.

-By 2030, India’s total energy storage demand is estimated to reach 903 GWh, encompassing various technologies such as lithium-ion, redox flow, and solid-state batteries.

-In particular, the lithium-ion battery market in India is expected to experience a staggering 50% CAGR, scaling up from 20 GWh in 2022 to a projected 220 GWh by 2030.

-The Indian Lithium Market is poised for sustained growth, with a projected CAGR of 6.1% from 2023 to 2028, signalling promising opportunities for the sector. The Lithium stocks in India thus have a blooming chance to seize the moment.

B. India’s lithium import dependency and efforts to establish domestic lithium reserves.

As per the Indian Council of World Affairs, India heavily relies on imports to fulfil its lithium requirements, being the world’s largest importer of processed lithium.

-In the fiscal year 2020-2021, India imported lithium worth over 722.5 million USD, primarily from Hong Kong and China.

-The country is also a major importer of lithium-ion batteries. Thus sourcing them from China, Japan, and South Korea.

-India’s lithium-ion battery imports surged from $384.6 million in 2018–19 to $2.8 billion in 2022–23. Thus indicating a substantial increase.

-China currently holds a dominant position, controlling 60–70 percent of the global lithium refining capacity and possessing significant lithium reserves. Due to this dependency, India is compelled to diversify its sources and develop domestic reserves. This necessity presents a prime opportunity for Lithium Stocks in India to capitalize on the burgeoning demand and emerging opportunities in the lithium market.

II. Government Initiatives and Policies Shaping the Lithium Market

According to Global Market Estimates, Reduced GST on lithium-ion batteries and EVs, alongside income tax exemptions for EV buyers, incentivizes electric vehicle adoption.

As per IBEF, The FAME-II Scheme and Production Linked Incentives aim to bolster the electric vehicle industry. Further, it will boost the domestic manufacturing capacity for advanced chemistry cells (ACC). ACC is known as the foundation of future low-carbon transportation and energy systems.

Implementing the Battery Waste Management Rules and introducing a draft Battery Swapping Policy ensures sustainable practices. This streamlines battery usage in India.

Now that we have discussed the emerging trends in the Lithium Market in India, it is time to look at the best Lithium Stocks in India that are backpacked to capitalize on this growth. Here we go.

Best Lithium Stocks in India

The best Lithium stocks in India are Exide Industries Ltd, Bharat Heavy Electricals Ltd, Amara Raja Energy & Mobility Ltd, Gujarat Mineral Development Corporation Ltd, Vedanta Ltd, Reliance Industries Ltd, JSW Energy Ltd, Adani Enterprises Ltd, HBL Power Systems Ltd, Exicom Tele-Systems Ltd, High Energy Batteries (India) Ltd, and Hindustan Zinc Ltd.

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Data collected as of 22nd April 2024.

Let’s Explore some of these Lithium stocks in India

Exide Industries Ltd

Exide Industries Ltd specializes in manufacturing lead-acid storage batteries and inverters. The company offers a diverse product portfolio including automotive, industrial, and submarine batteries. With subsidiaries in the UK, Singapore, and Sri Lanka, the company exports its products to 60 countries across six continents. As a prominent player in the auto ancillary sector, Exide boasts a large-cap status, with a market capitalization of ₹38,254 Crores.

The company’s profitability ratios are moderate, with a ROCE of 10.2% and a ROE of 7.28%. Its price-earnings ratio of 43.69 indicates overvaluation compared to the sector PE ratio of 33.29. However, Exide maintains positive Earnings per Share of ₹ 10.3 per share, reflecting healthy profit growth. The current dividend yield is 0.44%. A debt-to-equity ratio of 0.02 implies sound financial health as assets are primarily financed through equity.

Promoter Share Holding remains steady at 45.99%, indicating stable ownership. Despite a sector-wide revenue growth of 25.89% in the last fiscal year, Exide’s Annual Revenue saw an 18.3% rise, reaching ₹15,202.9 Cr. Moreover, the company’s Stock Price surged by 139.05% in the past year, outperforming its sector by 67.29%.

3-Year Performance:

-Profit Growth Compounded: 1%
-CAGR for Stock Price Growth: 37%
-Growth in Compound Sales: 1%
-Equity Return: 22%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 11%
-CAGR for Stock Price: 139%
-Growth in Compound Sales: 9%
-Equity Return: 7%

With the Lithium market poised for significant growth in India, Exide Industries Ltd has the potential to emerge as a dominant player in the sector by tapping into a wide range of opportunities.

Amara Raja Energy & Mobility Ltd

Amara Raja Energy & Mobility Ltd is a leading technology-driven manufacturer of lead-acid batteries in India, catering to both industrial and automotive sectors. The company supplies automotive batteries to major OEMs like Ashok Leyland, Ford India, Honda, Hyundai, Mahindra & Mahindra, Maruti Suzuki, and Tata Motors. Additionally, its industrial and automotive batteries are exported to various countries in the Indian Ocean Rim.

With a market capitalization of ₹18,174 Crore, Amara Raja holds a mid-cap status in the auto ancillary sector. The company boasts robust profitability ratios, with ROCE at 20.2% and ROE at 14.8%. Its price-to-earnings ratio is 22.38, indicating a fair valuation compared to the sector PE ratio of 33.29. Amara Raja Energy’s earnings per share stand impressively at 45.93 Rs per share, indicating consistent earnings growth. The current dividend yield is 0.60%. The company maintains a healthy debt-to-equity ratio of 0, implying that its assets are mainly financed through equity.

Promoter Share Holding remains stable at 28.06%, indicating consistent ownership. In the last fiscal year, the company’s annual revenue surged by 19.43% to ₹10,480.24 Cr, slightly below the sector’s average revenue growth of 25.89%. Despite a stock price increase of 71.12% in the past year, Amara Raja Energy underperformed its sector by 0.64%.

3-Year Performance:

-Profit Growth Compounded: 4%
-CAGR for Stock Price Growth: 7%
-Growth in Compound Sales: 15%
-Equity Return: 14%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 25%
-CAGR for Stock Price: 62%
-Growth in Compound Sales: 7%
-Equity Return: 15%

With robust fundamentals and healthy performances, this mid-cap company can become the next big player in the industry.

Gujarat Mineral Development Corporation Ltd

Established by the Government of Gujarat on May 15th, 1963, Gujarat Mineral Development Corporation Ltd (GMDC) aims to develop major mineral resources in the state. It is a prominent mining and mineral processing company in India, renowned as the largest merchant seller of Lignite in the country. Additionally, GMDC is involved in power generation.

As a midcap company, GMDC holds a market capitalization of ₹12,205 Crores. The company maintains solid profitability ratios, with ROCE at 31.3% and ROE at 22.9%. Its price-to-earnings ratio of 14.16 is lower than the sector PE ratio of 19.75, suggesting a fair valuation. However, there have been inconsistencies in earnings per share over the past three years, raising concerns. Currently, it stands at Rs 27.1 per share.

The current year dividend for GMDC stands at Rs 11.45, with a yield of 2.96%. The company maintains a debt-to-equity ratio of zero, indicating a debt-free status. Promoter Share Holding remains stable at 74%. In the last fiscal year, GMDC saw a significant increase in annual revenue, rising by 34.83% to ₹3,895.01 Cr, outpacing the sector’s average revenue growth of 11.51%. Despite a stock price surge of 188.32% in the past year, GMDC outperformed its sector by 96.11%.

3-Year Performance:

-Profit Growth Compounded: 103%
-CAGR for Stock Price Growth: 93%
-Growth in Compound Sales: 34%
-Equity Return: 15%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: -12%
-CAGR for Stock Price: 183%
-Growth in Compound Sales: -26%
-Equity Return: 23%

In summary, GMDC stands as a notable player among the Lithium stocks in India.

JSW Energy Ltd

JSW Energy Ltd, the diversified energy arm of the billion JSW Group, boasts an installed generating capacity of 6,564 MW. This includes 3,158 MW from thermal power, 1,358 MW from wind power, 1,391 MW from hydropower, and 657 MW from solar power. Since June 2006, the company has also been active in power trading.

With a market capitalization of ₹1,07,846 crores, JSW Energy is a significant player in the power generation sector. It demonstrates decent profitability ratios, with ROCE at 7.28% and ROE at 7.22%. However, its price-earnings ratio of 65.42 exceeds the sector PE ratio of 30.14, indicating slight overvaluation. Despite this, JSW Energy maintains positive and growing earnings per share, with a TTM EPS of 9.99 Rs per share. The company’s current year dividend stands at Rs 2, offering a yield of 0.32%. However, its Debt to Equity Ratio of 1.33 suggests reliance on debt financing.

Promoter Share Holding increased by 0.29% in the most recent quarter, now standing at 73.67%. In the last fiscal year, JSW Energy recorded a 24.4% increase in annual revenue, reaching ₹10,867.05 Cr, slightly below the sector’s average revenue growth of 31.26%.Despite trailing slightly behind the sector average, JSW Energy’s stock price surged by 142.5% in the past year, outperforming its sector by 15.29%.

3-Year Performance:

-Profit Growth Compounded: 9%
-CAGR for Stock Price Growth: 81%
-Growth in Compound Sales: 8%
-Equity Return: 8%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: -16%
-CAGR for Stock Price: 136%
-Growth in Compound Sales: 13%
-Equity Return: 7%

The reliable and uniform growth positions JSW Energy as a long-term player in the Lithium stocks in India.

High Energy Batteries (India) Ltd

The company operates as a battery manufacturer, with its factory situated near Trichy in Mathur. It specializes in manufacturing batteries for diverse applications, including Indian Army, Navy, Air Force, and Launch Vehicles, as well as commercial batteries for auto and standby VRLA applications.

Despite being a micro-cap company with a market capitalization of ₹925 crores, it demonstrates robust profitability ratios, with ROCE at 37.3% and ROE at 33.9%. The price-earnings ratio stands at 47.93, lower than the sector PE ratio of 58.18, suggesting a favorable valuation. High Energy Batteries maintains consistent earnings growth, with positive and growing earnings per share. The TTM EPS stands at Rs 21.69 per share. Additionally, the company offers a current-year dividend of Rs 3.50 per share, with a yield of 0.35%.

The debt-equity ratio of 0.28 is less than 1, indicating healthy financials and implying that assets are predominantly financed through equity. Moreover, Promoter Share Holding increased by 0.39% in the most recent quarter, reaching 41.28%. In the last fiscal year, High Energy Batteries recorded a notable 17.34% increase in annual revenue, reaching ₹93.56 Cr, outperforming the sector’s average revenue growth of 12.04%. Furthermore, the company’s stock price surged by an impressive 200.3% in the past year, significantly outpacing its sector by 184.26%.

3-Year Performance:

-Profit Growth Compounded: 58%
-CAGR for Stock Price Growth: 87%
-Growth in Compound Sales: 15%
-Equity Return: 40%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 6%
-CAGR for Stock Price: 184%
-Growth in Compound Sales: 2%
-Equity Return: 34%

Consistent growth and opportunities can help grow High Energy Batteries in the upcoming future.

Emerging Trends and Future Outlook

Business Standard reported that the Indian government, through Khanij Bidesh India Ltd (KABIL), has agreed with Catamarca Minera Y Energética Sociedad Del Estado (CAMYEN) of Argentina.

-The partnership aims to acquire five lithium brine blocks, boosting India’s lithium sourcing efforts and leveraging CAMYEN’s expertise.

-This initiative underscores the importance of regulatory frameworks governing international collaborations and investments in the lithium sector. Thus paving the way for future ventures and partnerships aimed at meeting India’s growing demand for lithium resources.

Conclusion

In our blog today, we learned that how India is on its way to emerge as a Lithium powerhouse of the world. We explored the scenario of the Lithium market in India and the various efforts taken by the Indian Government to further boost this development. This includes “Production Linked Incentives”, “FAME II”, “Aatmarnirbhar Bharat”, and “the Budget 2023”. The discovery of the first lithium deposits in Jammu and Kashmir is another major development in the field. This made India revise its mining regulations, permitting private miners to explore for materials. This has further opened doors for the major Lithium Stocks in India.

However, the road ahead is not a bed of roses. The lack of adequate infrastructure, R&D, dependency on China for raw materials and sectoral end products, and absence of a trusted supply chain are the major challenges in the paths. India’s target of 30 percent share of EVs in new vehicle sales and aim to increase non-fossil fuel energy capacity to 500 GW by 2030 will pave the path for this revolution and the Lithium Stocks in India.

That’s all for today’s post. Hope you get some valuable insights from here.

Happy reading!

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Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not have any direct recommendations about investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.