Fortune Scrip     

Published: September 30, 2025
Updated: September 30, 2025

Gujarat Mineral Development Corporation

Turning the corner with expert inputs: From 2018 slump to surging financials

This fortnight, we have selected a PSU with tremendous growth potential as the Fortune Scrip. It is Gujarat Mineral Development Corporation, one of India’s leading mining and mineral processing companies. The Ahmedabad-headquartered GMDC is the second largest lignite manufacturing company in India and is also engaged in the exploration of bauxite, fluorspar, manganese, silica sand, limestone, bentonite and ball clay. The company also has a sizeable presence in the energy sector.

Promoted over six decades ago in 1963, the company commenced operations with a small silica sand quarry. It was followed by bauxite mines in Kutch, and today it operates six bauxite mines. In 1971, a beneficiation plant was commissioned to process 500 tonnes of fluorspar ore and produce calcium fluoride, which is used for the manufacture of hydrofluoric and as flux in metallurgical industries. A captive mine was established in Amubadungar to feed the plant.

In 1973, lignite was discovered in Gujarat and GMDC started its first lignite mines in Panandhro. This was followed by a captive refining plant with copper mines set up near Ambaji. In 1983, another lignite mine was discovered and the company started operations at Rajpardi near Bharuch. This was followed up with setting up a calcination plant to add value to the bauxite plant at Gadhsisha in Kutch. In order to use the lignite mined by it, GMDC started a thermal power plant at Nanichhar in Kutch. In 2005 and 2009, more lignite mills were started at Ankleshwar near Surat and near Bhavnagar. Meanwhile, it developed a manganese ore mine at Shivrajpur near Panchmahals. It also set up an alumina plant with Raytheon Corporation of the US.

NEW MINES

Today, GMDC has six lignite mines, of which three will soon reach the end of their life, but six new mines will be added and thus the company will have nine operating lignite mines. For 2023, the company produced 10 million tonnes of lignite, against 8.5 million tonnes in fiscal 2022. In the case of bauxite, the company has nine mines, of which eight are in Kutch and one in Dwarka.

GMDC was making steady progress for the first 55 years, with sales turnover in fiscal 2018 crossing the Rs 2,000-crore milestone and operating profit reaching near Rs 500 crore. But thereafter, the company’s financial performance started deteriorating and the balance sheet for fiscal 2020-21 stunned observers as a profit-making company plunged into the red, incurring an operating loss of Rs 10 crore and a net cash loss of Rs 39 crore. Observers were shocked at the slump in the performance of the company, which has the only lignite mine in Gujarat. Hundreds of small and medium-sized industrial units in Gujarat would obviously prefer to buy lignite frome GMDC, instead of importing coal from Coal India, which is 700 km away and involves high transportation costs, besides logistic problems.

The government decided to adopt a professional approach to transform the fortunes of the company. Instead of instituting a departmental enquiry, it embarked on a remarkable transformative exercise by roping in four top global management consulting firms — Boston Consulting Group (BCG), McKinsey & Co, AT Kearney, and Deloitte — to find the reasons for the debacle and suggest concrete steps needed to take the company back on a robust growth path.

To begin with, on the recommendation of the four consultants, the top management of the company was changed. Gujarat’s Additional Chief Secretary Rajkumar was appointed Chairman and Gujarat Commissioner of Geology and Mining Roopwant Singh was given charge as Managing Director. Both bureaucrats are known for their far-sightedness and professional approach.

EXPERT INPUTS

Among the consulting groups, BCG was asked to look into the company’s transformation – from being known as a lignite miner to its aspiration of becoming a diverse mineral resources player in the niche as well as volume segment. McKinsey was entrusted with the task of helping the company build a portfolio of rare earth elements (REE). ATK was asked to help the company transform its thermal power projects, and Deloitte was supposed to speed up the company’s new lignite mining projects. It was indeed an intelligent task allotment exercise as these renowned consultation groups could give their best in the area entrusted to them.

The new management implemented the suggestions of the expert groups with remarkable sincerity and utmost efficiency. The outcome was as expected. The company not only turned the corner but quickly went on to the growth path. In the next four years, GMDC came out with an extraordinary performance — sales turnover which had declined from Rs 2,051 crore in fiscal 2018 to Rs 1,326 crore in 2021 more than doubled, rocketing to Rs 2,851 crore in fiscal 2025, with operating profit skyrocketing to Rs 637 crore in striking contrast to a loss of Rs 10 crore in 2021. At the net level, the loss of Rs 39 crore transformed into a net profit of Rs 798 crore – the highest in the over six-decade history of the company.

Currently, the company’s financial position has become very strong, with reserves at the end of March 2025 standing at around 100 times its equity capital of Rs 64 crore. GMDC is now a virtually debt-free company with its interest for fiscal 2025 being just Rs 2 crore on a sales turnover of Rs 2,851 crore. What is more, the share price during the last one year or so has shot up by over 160 per cent to Rs 588.

But we have not picked GMDC as the Fortune Scrip because of its past laurels. We are of the strong opinion that the company’s future outlook is all the more promising. Consider:

OTHER MINERALS

• As the company was overly dependent on one product - lignite -- which accounts for over 90 per cent of its revenue, the team of consultants strongly recommended diversification of the product range. The new management started planning to build on the company's capabilities in other minerals and metals, including silica, fluorspar, limestone and even rare earth elements (REEs). The management is now aiming at achieving 50 per cent of its revenues from non-lignite segments. The target is easily achievable as the company has plenty of non-lignite prospects, given that Gujarat's northern district of Banaskantha has base metal deposits and GMDC holds a mining lease on about 184 hectares in the area. The company has substantial financial resources to implement a geological study of the area, followed by geophysical mapping and drilling of the total mineral and metal deposits in the area. Over 10 per cent of the area is expected to have base metals, of which 1.5% is copper, 3.5% is lead and the rest zinc. This will enable the company to venture into high-value products. The implementation of the plan will give a big boost to its topline as well as bottomline.
• Even in lignite itself, there are tremendous growth prospects. Of late, coal prices in the global market are on the rise, prompting coal users to shift to cheaper sources like lignite, pushing up the demand for lignite. Further, the prolonged Russia-Ukraine war has aided the rising price trend in coal. What is more, global coal prices are expected to remain robust in the medium term as natural gas has become scarce due to export cutbacks by Russia. In Gujarat, GMDC has an established lignite demand of around 25-26 million tonnes. But the company produces only around 8.5 million tonnes. Thus, there is a huge scope for growth, with GMDC working on six new mining projects having reserves of 540 million tonnes. The company has earmarked capex of Rs 670 crore to operate these six mining projects. This exercise will give a big boost to the company's revenues and earnings.
• Mining of fluorspar is another area which GMDC has planned to foray into. It has some good mines in Kadipani of fluorspar mineral. It has already floated an RFP (request for proposal) for the PMC (project management contract) of the plant. Fluorspar finds applications in industries like steel, aluminium and welding electronics, among others. This will boost the company's financial performance

THERMAL 'DRAG'

• The thermal power projects - which were mainly responsible for the dismal performance of the company in 2021 -- were entrusted to Chicago-based AT Kearney for transformation, and have taken up for implementation. The consultant has already completed the technical study and financial assessment of the plant with recommendations on improvements required for the turnaround of its operations to remain sustainable. The company has realised that it needs to strongly address the cash-burn operations, which includes the 250 MW thermal power plant in Kutch.
• GMDC is also focused on increasing bauxite sales. It currently has nine bauxite mines, of which eight are in Kutch and one in Devbhoomi Dwarka.
• Apart from these major minerals and metals, there are associated minerals in these blocks, including limestone deposits and silica. These blocks will be developed one by one within the next couple of years. GMDC has large reserves of limestone to the tune of 2,000 tonnes at its upcoming Lakhapatpur mine's Panandhro extension and Bhaikandan, and is approaching various cement companies across India for setting up cement plants where GMDC will be a long-time limestone supplier. As the market for overburden minerals like silica sand, ball clay and bentonite is increasing, entering the benefication industry of these minerals offers a larger scope in terms of revenue, customer base and marketshare. As a result, GMDC is planning to enter this benefication industry by way of long-term supplies of these minerals.

RARE EARTHS

• All these measures will give a big boost to the company's revenues and earnings. But the most important development at this stage is its entry into rare earth oxide mining, which may prove to be a game changer for GMDC. The recent surge in the company's stock price can be majorly attributed to the company's growing involvements in rare earth minerals (REMs). According to the company's estimates, rare earth oxide deposits in the Ambaji Dungar area of Chhota Udaipur in Gujarat are around 3,46,000 tonnes. In in a reply to a question in the Lok Sabha on February 2, 2022, the Union government had stated that as of January 31, 2022, rare earth oxide deposits in the Ambaji Dungar area are not less than 7,27,283 tonnes - almost double the earlier estimates. The government is pushing for self-reliance in rare earth production and has targeted a threefold increase in rare earth mining capability by December 2032. The biggest advantage here is the fact that rare earth deposits are contiguous to the fluorspar deposits that GMDC is currently mining. Hence, GMDC will have a major role to play in this endeavour. The Union government is reported to be thinking of allowing private sector companies to mine rare earth minerals, and GMDC may also follow suit. The company could be a beneficiary in this regard as it has a proven 11.6 million tonnes of fluorite and rare earth reserves that have a high concentration of cerium (a rare earth mineral) in the Ambaji Dungar area and is looking for a global partner for mining these minerals.
• In a major development, the Union cabinet has approved a Rs 15 billion incentive scheme under the National Critical Mineral Mission to promote recycling of critical minerals such as lithium, cobalt, copper, nickel and rare earth elements (REL). This 6-year scheme (from fiscals 2026 to 2031) aims at developing at least 270 kilo tonnes of annual recycling capacity, resulting in around 40 kilo tonnes of annual critical minerals production. GMDC is already working towards building an end-toend REE value chain, spanning mining, processing, separation and manufacture. Rare earths are essential inputs for electrical vehicles, renewable energy and advanced electronics, and GMDC is developing rate earth deposits in Gujarat's Chhota Udaipur district and creating an integrated supply chain for the same. The company's share price, which was around Rs 226 on March 3, shot up to Rs 643 before settling at around Rs 588. GMDC has tremendous growth potential, and discerning investors can certainly add the stock in their portfolio.