If you want to start a business, What kind of business market do you want to compete in?
You can disrupt the business model, and become a Monopoly like Microsoft (Operating system) or you can choose to be another grocery store owner until the competition(online or another grocery store) eats away at your profit.
It is incredibly hard to start a business and become a Monopoly. But it is not that hard to become an investor in Monopoly companies that are listed in the stock market.
In this article, we will look at the top 20 monopoly companies in india briefly.
Please note that by monopoly we mean a very high market share in the sector.
And it is very important to understand that it is not just the market share that matters.
There are 2 more key points to consider:
Size of the market.
For example, if company A has a 100% monopoly in a sector but the overall size of the sector is just 10 Cr.
And company B has a 50% market share in a sector but the overall size of the sector is 10000 Cr.
Then company B is better than company A.
Growth of the sector.
If company A has a 50% market share in a sector that is growing at let’s say 20% CAGR vs company B with a 75% market share in a sector that is growing at 5%. Obviously, company A is better than B.
What is a Monopoly stock?
Monopoly stock refers to company with no or less competition in its operating sector. Due to its single seller presence, the company controls the prices for its services and enjoys higher profits.
The Indian railways is a monopoly player in the Indian railway sector. Due to this factor, it controls the price for the service it offers.
There are several ways a company can become a Monopoly by creating a barrier in the industry, like technological barriers, distribution reach or regulations.
Also, sometimes customers buy from the same company due to high switching costs.
Switching cost refers to the cost incurred by the customers for changing to another product or company. The cost advantage allows the company a wider moat.
E.g.: Brokerage firm doesn’t change their Depositary participants due to large volume of critical data transfer & high switching cost.
The substantial competitive advantage, along with the product’s unique feature, brand loyalty, prevents customers from buying competitor’s products, allowing companies a monopoly status.
These companies are successful in creating customer stickiness.
Factors to consider before investing in Monopoly stocks in India
The following points are to be considered before investing in top monopoly companies in India, because monopoly won’t be the single factor to generate good returns.
Companies with Monopoly in India face nil or less competition in the market. Due to this, such companies emerge as a market leader.
Under such circumstances, the business can generate significant profits which is followed by greater stock returns.
When we hold stocks for an extended time, it can provide you substantial returns. As an investor, due diligence on growth prospects, management integrity and past success can’t be ignored.
Avoid stocks with Government intervention:
Some of the top monopoly companies in India are backed by the government like Coal India, IRCTC, HAL, BEL etc.
Because government regulations and interventions may affect the overall company’s performance.
Even the PSU companies did well in the market for sometime, Yet the government policy can impact the future growth of the PSU and becomes a value trap company.
Read more : What is midcap stocks in India?
Companies with sustainable moat has pricing power on their products.
Whenever there is a sharp rise in raw material price, it can pass the raising cost to its consumer to sustain their profits.
In 2008, a Lite(cigarette) cost Rs 10, But in 2020 lite costs more than Rs 18.
Investing in companies with pricing power on their can be a smart move.
Uncertain Growth Prospects:
Future growth & profitability is more important to the company than current share price & profitability. Assessing the growth potential is crucial in this.
Commanding the market within a particular sector does not necessarily imply room for expansion.
Private companies might also experience growth uncertainties and become a stagnant player in their market sector.
Top 20 monopoly companies in India
Indian Railway Catering & Tourism Corporation Ltd:
IRCTC was incorporated on 27th September 1999 as an extended arm of the Indian Railways to upgrade, professionalize and manage the catering and hospitality services at stations, on trains, and other locations and to promote domestic and international tourism through the development of budget hotels, special tour packages, information & commercial publicity and global reservation systems
Its has 100% market share in railway ticketing business with a market cap of Rs 50,972 Cr.
Hindustan Aeronautics Ltd:
Hindustan Aeronautics is engaged in the business of Manufacture of Aircraft and Helicopters and Repair, Maintenance of Aircraft and Helicopters.
HAL plays a strategic role in India’s defense program being the only Indian company having specialization in aircraft manufacturing and providing its Maintenance and related service. Its export revenue accounted for 1%
Its has 100% market share in Defence manufacturing with a market cap of Rs 95,000 Cr.
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Indian Energy Exchange Ltd:
IEX is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of electricity.
The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution.
IEX accounts for 95% short-term electricity contracts in India with a market cap of Rs 13,600 Cr.
Multi Commodity Exchange of India Ltd:
The Multi Commodity Exchange of India Limited is India’s first listed exchange.
It is a commodity derivatives exchange that facilitates online trading of commodity derivatives transactions, thereby providing a platform for price discovery and risk management.
This Company has a 96.8% share in the commodity derivatives market as of Dec 2022.
It controls a 100% share of Precious metals & stones, Energy & base metals with the exception of Agri-commodities where it commands a share of 22.2%.
MCX India is the 7th largest by the number of Commodity Futures traded and the 6th largest by the number of Commodity Options. The 2nd largest player NCDEX in the commodity exchange market controls the rest 3.1% market share
Coal India Ltd:
Coal India was incorporated in 1973 as Coal Mines Authority Ltd after the nationalization of the coal sector. It is a ‘Maharatna’ company under the Ministry of Coal, Government of India with headquarters at Kolkata, West Bengal.
CIL is the single largest coal producing company in the world and one of the largest corporate employers which controls 82% of coal production in India. Coal India has a market cap of Rs 1.41 lakh Cr.
Hindustan Zinc Ltd:
Hindustan Zinc is the only integrated producer of Zinc, Lead, and Silver in India and is having a dominant market position with ~80% market share in India’s primary zinc mining industry.
Incorporated in 1966, Hindustan Zinc has a rich experience of more than five decades in Zinc- lead mining and smelting.
Established in 1910, ITC is the largest cigarette manufacturer and seller in the country.
ITC operates in five business segments at present — FMCG Cigarettes, FMCG Others, Hotels, Paperboards, Paper and Packaging, and Agri Business.
ITC is the leader in the organized domestic cigarette market with a market share of over 80%.
It’s wide range of brands include Insignia, India Kings, Classic, Gold Flake, American Club, Wills Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal.
Marico Limited is one of India’s leading consumer goods companies operating in global beauty and wellness categories.
It is present in over 25 countries across emerging markets of Asia and Africa.
It nurtures leading brands across categories of hair care, skin care, edible oils, healthy foods, male grooming and fabric care.
Marico is a market leader in hair oil products with 73% share.
Computer Age Management services ltd:
CAMS is the India’s largest registrar and transfer agent with a market share of 70%
CAMS currently provides technology-based services including dividend processing, transaction origination interface, payment, transaction execution, dividend processing, intermediary empanelment, report generation, investor interface, settlement and reconciliation, compliance-related services, and brokerage computation.
This company charges fixed fee based on the AUM of the mutual fund. Currently Top 5 of the Mutual fund are its customers.
Pidilite Industries Ltd:
Pidilite Industries Limited is a leading manufacturer of adhesives and sealants, construction chemicals, craftsmen products, DIY products and polymer emulsions in India.
Most of the products have been developed through strong in-house R&D.
Brand name like Fevicol has become known with adhesives to millions in India and is ranked amongst the most trusted brands in the country.
Some of the other major brands are M-Seal, Fevikwik, Fevistik, Roff, Dr. Fixit, Fevicryl, Motomax, Hobby Ideas, Araldite.
It holds 70% market share in adhesive segment.
Container Corporation of India Ltd:
Container Corporation Of India (CONCOR) is engaged in the business of providing inland transportation of containers by rail.
It also covers the Management of Ports, Air cargo complexes and establishes cold chains.
Through the Ministry of Railways, the Government of India holds 55% stake in the company. Its accounts for 68.5% in cargo carrier market.
Praj Industries Ltd:
Praj Industries Ltd, incorporated in 1985 and headquartered in Pune has a presence across the globe with more than 750 references in more than 75 countries.
It began as a supplier of an ethanol plant, today it is a global company providing various solutions with a focus on the environment, energy, and agri-process industry.
Praj Industries is a market leader in ethanol plant installation with 60% market share.
Bharat heavy Electricals Ltd:
Bharat Heavy Electricals Ltd is an integrated power plant equipment manufacturer engaged in design, engineering, manufacture, erection, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy, viz. Power, transmission, Industry, transportation, renewable energy, Oil & Gas and defence.
It is the flagship engineering and manufacturing company of India owned and controlled by the Govt. of India.
Its commands 67% share in the power equipment sector.
Central Depository Services Ltd:
Central Depository Services Limited is a Market Infrastructure Institution (MII), part of the capital market structure, providing services to all market participants – exchanges, clearing corporations, depository participants (DPs), issuers and investors.
It is a facilitator for holding of securities in the dematerialized form and an enabler for securities transactions
It controls over 59% in the depository business. Its rival is NDSL.
APL Apollo Tubes ltd:
APL Apollo Tubes Limited (APL Apollo) is one of India’s leading branded steel products manufacturers.
Headquartered at Delhi NCR, the Company runs 10 manufacturing facilities churning out over 1,500 varieties of MS Black Pipes, Galvanized Tubes, Pre-Galvanized Tubes, Structural ERW Steel Tubes and Hollow Sections to serve industry applications like urban infrastructures, housing, irrigation, solar plants, greenhouses and engineering.
Its has 50% market share in the pre-galvanized and structural tube industry.
Nestle India Ltd:
Nestle India Limited is a subsidiary of Nestle which is a Swiss MNC. The company operates in the Food segment.
Nestle India is a subsidiary of Nestle S A (holds 62% stake) a Switzerland-based company that is the world’s largest food company based on Revenue.
NESTLE”s relationship with India dates back to 1912. Almost 97% share in baby food products like Cerelac is dominated by Nestle India Ltd.
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The Borosil Group is the only solar glass manufacturer in India.
Borosil Renewables is engaged in the business of manufacturing of extra clear patterned glass and Low Iron Solar Glass for application in Photovoltaic panels, Flat plate collectors and Green houses.
Asian Paints is a dominant player in the Indian paint market, with a 50 percent market share.
Its market portion increases to 60 percent when it comes to decorative paints.
Although several other players exist in the industry, Asian Paints has created a significant competitive advantage with its extensive product range, massive distribution network, and continuous innovation.
NOCIL Ltd., incorporated in 1961, is engaged in the manufacture of rubber chemicals which are used by the tyre industry and other rubber processing industries.
The company has long-term business relationships with type manufacturing companies like Apollo tires, JK Tires, Sumitomo Rubber, MRF, CEAT, Michelin, Yokohama Rubber, Continental, Bridgestone and others.
With a 40 percent market share, NOCIL is India’s largest rubber chemical manufacturer.
Oriental Carbon & Chemical:
Oriental Carbon & Chemicals started operations as Dharuhera Chemicals Limited in 1978 and was later merged with Oriental Carbon Limited in 1984.
It belongs to the JP Goenka Group of Companies.
In 1994, OCCL set-up a manufacturing facility for the production of Insoluble Sulphur, which is now the flagship product of the company. OCCL also manufactures Sulphuric Acid & Oleum.
The company is the only Insoluble Sulphur (IS) manufacturer in India. It dominates the domestic market with a 55-60 percent market share. In the global market, they enjoy a 10 percent market share.
IS is a critical component in tyre manufacturing that influences functionality, life, and quality.
This blog post reviewed the Monopoly stocks in India across Large cap, Mid cap, and small cap segments.
Companies with Monopoly in India might be overpriced because of its leadership in their market. Investors need to take cautious view before investing in such stocks.
Again companies included in the top 20 monopoly companies in india are due to market share and sole player in their segments.
Thank You for reading!
Disclaimer: This article is solely for education purposes, not for any investment advice. Please do your own research before investing. Thank You.