October 31, 2025
Imagine this…
You scroll through your phone, charge your wireless earbuds or see an electric car zoom past you.
Cool, right? But here’s the twist: none of this forward-looking technology is possible without a so-called family of minerals rare earth metals.
Don’t be fooled by the name. They’re not exactly “rare”, but they are out there Are super crucial for India’s dreams: solar energy, wind energy, electric vehicles, semiconductors, defense, smartphones, batteries, you name it.
Here’s the catch: China controls almost 90% of global supply. That means when China sneezes, the rest of the world, including India, catches a cold.
Many of our major automotive, energy storage and electronics companies are already flagging this shortage as a roadblock.
So, what does India do? Finally awake.
In 2025, the government launched the National Critical Mineral Mission (NCMM). It is a step towards building a local rare earth ecosystem.
The government has also rolled out a massive plan worth Rs 73 billion (billion) to make permanent magnets from rare earth metals at home. This is found in EV motors, wind turbines and countless gadgets. For the first time, we are building our own capacity instead of importing almost everything.
This is huge because when you hear “new government plan” plus “critical resource” plus “import dependency” it usually means possibilities. And yes, some listed Indian companies will benefit greatly from this.
Some time ago I wrote to you about the rare earth crisis. It looks like the story is finally getting going.
Perhaps it’s time to take another look at the rare earths ecosystem and see which stocks might be able to ride this wave.
Read more…
What I think about the chance of rare earth metals
There was a time, not so long ago, when the world found liberation in globalization.
Capital flowed freely, each country found its niche, developed expertise around it, and the world seemed borderless for trade.
Taiwan emerged as the global chip hub. India became the pharmacy of the world. China is the global factory, and countries like Bangladesh and Vietnam have carved out their place in the textile sector.
It was a system built on core competencies and synergies, with everyone playing to their strengths and acting interdependently. It worked almost seamlessly until the cracks appeared.
When the pandemic hit, the world realized how dangerously dependent China had become, which turned out to be the weakest link. From chips to APIs, when China shut down, the world came to a standstill… and as the pandemic subsided, other fault lines emerged.
Political tensions increased. Protectionism crept back into global policy. Trade wars became increasingly common. During the Trump regime, the US imposed impractical tariffs that not only targeted competitors but also hurt its own economy.
India is gradually trying to circumvent the growing crisis and creating substantial prosperity in specific sectors in a relatively short time.
Sectors such as electronics, defense and auto components have found a ‘Make in India’ tailwind thanks to policy support. Companies such as Dixon, Amber Enterprises and PG Electroplast saw their shares rise as domestic manufacturing gained momentum.
In their defense, government capital allocation and policy support have given rise to a new breed of manufacturing champions and multibagger stocks.
But this is just the beginning…
New crises are in the making, bringing opportunities.
The recent one is the rare earth crisis. The government quickly announced a rare earth incentive program of up to Rs 50 billion to address this problem.
Rare earth elements are critical to some of the most essential sectors in critical industries: electric vehicles (EV), renewable energy equipment, semiconductors, medical devices and defense systems.
So what’s the catch? China controls almost 90% of the global supply of rare earths (refined). And it is now flexing its muscles by choking supplies to other countries, including India.
So what happens when something as groundbreaking as rare earths starts to become rare?
Well, there are two choices.
First, build a local ecosystem, develop mining and refining capabilities and establish alternative supply chains.
Second, innovate from the problem and find new technologies that eliminate or completely reduce the need for rare earths.
Some Indian companies are making these choices and they deserve to be on your watchlist.
I will be focusing specifically on companies in the small cap space.
The first is Sterling Tools. It is known for making fasteners for the automotive sector; nuts and bolts that hold the industry together.
But it also does something much more exciting. Through its subsidiary Sterling Gtake E-Mobility, the company has entered the EV motor control market.
What makes this move more interesting is the partnership with a UK-based company, Advanced Electric Machines, to develop rare earth free motorcycles in India. That’s not just smart positioning, it’s a potential pioneering advantage in an entirely new category.
Then there is Permanent Magnets Limited. It is a company that makes magnets and magnetic assemblies for electricity meters, automobiles and industrial equipment.
The company has indicated plans to… complete manufacturing and supply chain of rare earth magnets in India. It’s still early days, but if they succeed, it could be a breakthrough in reducing India’s dependence on Chinese imports for crucial magnet components.
Speaking of rare earth elements, you can’t miss Gujarat, which is home to the Ambadongar deposit, a rich source of rare earth elements.
The company at the center of this resource is GMDC, a government-owned mining player that is quietly transitioning from lignite to critical rare earth minerals.
With an investment plan of Rs 30-40 billion, GMDC aims to build an entire ecosystem from mining to refining. If done right, this could be a major turning point for the company.
And let’s not forget the companies that literally extract value from waste. Owais Metal and Mineral Processing has developed a unique way to extract rare earth metals such as tantalum, niobium and titanium from industrial slag, with a purity of 99.9%.
With a production capacity of 100 kg per day and an estimated annual turnover of almost Rs 580 million at profit margins of 36-40%, this company is a perfect example of turning a crisis into innovation. Its customer base, ranging from electric vehicles to defense and medical technology, makes it even more interesting.
But the story doesn’t stop with mining and extraction. Meet recycling company Eco Recycling, one of India’s first players in the e-waste space.
As electronics accumulate, so does the treasure hidden within them: metals like cobalt, nickel and manganese, all of which are crucial to modern technology.
Traditionally, the black mass was exported for metal mining. Now Eco Recycling is working to do this here in India. According to management, there are at least 17 valuable metals that can be recovered from electronic waste – and building the technology to do so.
Then there are companies that make end industries rare earth proof…
Time Technoplast is the second largest manufacturer of composite cylinders in the world. Now it makes cylinders that can store hydrogen, an alternative green fuel that is gaining popularity as countries look beyond electric cars and lithium batteries.
Time Technoplast is the first Indian company to get permission to make these hydrogen storage cylinders for fuel cell-powered drones and vehicles. It has also received approval from France, opening doors to global markets.
Whether or not China gives in, the world needs alternatives… and governments want independence. The end-user industries want reliability and predictability. And there are small businesses emerging to meet these needs.
None of this is investment advice. These are not stock tips or recommendations.
But these are the companies that deserve further study and should be on your watchlist during the rare earths crisis.
Have fun investing.
Kind regards,
Richa Agarwal
Editor and research analyst, Hidden gem
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)
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