When you want to travel on a flight the first step is to scout for cheaper flight tickets among all the vendors available. But can you do that in the case of railways? The best you can do is find alternative trains but they all are provided by a single vendor. Such a monopolistic position in the market is surely an attractive investment option for investors and will also provide good returns. There are many monopolistic companies in India having a niche and a command over market share in their respective industries. Given here is a list of such companies and their related details.
Read More: Top 5 stocks with highest 5-Year CAGR in their sector
What are monopoly stocks?
Monopoly stocks are stocks of companies that dominate their industry or market, which means they have little to no competition. This makes them very powerful and profitable as they can charge higher prices for their products or services without fear of losing customers to competitors. There are several factors that can lead to a stock becoming monopolistic in the market. Some of these factors include entry barriers for more competition due to any legislation, economies of scale, high brand recognition for a particular company which makes it difficult for competition to enter the market, technological and financial restraints for new entrants in the market, issues of supply chain or distribution, etc.
Best monopoly stocks in India
Some of the monopolistic stocks in the country and their key details are tabled hereunder.
IRCTC
IRCTC is the pioneer name in the railway industry and is considered to be a natural monopoly due to its exclusive control over the rail network. The company was established in 1845 and is one of the largest railways in the world, providing employment to a vast number of people. The railway sector in the country is considered to be Mini Ratna (Category-I) Central Public Sector Enterprise under the Ministry of Railways, Government of India. While there has never been private participation in railways, a recent government announcement is set to change this status. India announced its plans to open up the railway sector to private players, which will introduce competition and potentially impact IRCTC’s monopoly status. Some of the key details of this company are here.
| Category | Details |
| Market Capitalization | Rs. 50,764 crores |
| PE Ratio | 53.18 |
| Return on Equity | 45.66% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 62.40% |
| Share price | Rs. 632.90 |
| Dividend Yield | 0.56% |
The trailing returns of IRCTC are tabled below
| Period | Trailing Returns |
| 1 year | -2.90% |
| 3 years | 33.50% |
HAL
Hindustan Aeronautics India Limited (HAL) is a vital player in the Indian aviation industry, with a significant presence in the country’s defense sector. Established in 1940 by Walchand Hirachand and the Government of Mysore, the company’s objective was to manufacture aircraft within the country.
HAL is a state-owned enterprise that specializes in the design, fabrication, and assembly of various aircraft, including jet engines, helicopters, and spare parts. Its contributions to the Indian aviation sector have been immense and on the rise as well as it remains an important entity in the country’s defense preparedness.
The key details of this company are.
| Category | Details |
| Market Capitalization | Rs. 1,02,726 crores |
| PE Ratio | 17.62 |
| Return on Equity | 30.24% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 71.65% |
| Share price | Rs. 3,097.65 |
| Dividend Yield | 1.70% |
The trailing returns of HAL are tabled below
| Period | Trailing Returns |
| 1 year | 104.51% |
| 3 years | 80.73% |
| 5 years | 23.95% |
| 10 years | – |
IEX
Indian Energy Exchange (IEX) is a platform licensed by the Central Electricity Regulatory Commission (CERC) that facilitates the buying and selling of electricity in India. IEX provides an automated infrastructure where power producers and consumers can trade electricity units in a spot market. This means that electricity is traded for immediate delivery, rather than through long-term contracts.
Additionally, IEX also allows trading of Renewable Energy Certificates (REC) and Energy Saving Certificates (ESCerts). REC is a market-based instrument that provides evidence that a unit of electricity was generated from renewable sources. On the other hand, ESCerts are used to promote energy efficiency by allowing the trading of certified energy savings.
The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 13,839 crores |
| PE Ratio | 45.24 |
| Return on Equity | 40.69% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | – |
| Share price | Rs. 157.25 |
| Dividend Yield | 1.26% |
The trailing returns of IEX are tabled below
| Period | Trailing Returns |
| 1 year | -15.86% |
| 3 years | 43.36% |
| 5 years | 23.74% |
| 10 years | – |
MCX
The Multi Commodity Exchange of India Limited (MCX) is the first exchange in India that is listed publicly. It is a platform for trading commodity derivatives, which are contracts based on the value of a commodity, such as gold, silver, crude oil, or agricultural products.
The exchange enables buyers and sellers to trade these derivatives online, allowing them to discover the fair market price of a commodity and manage the risk of price fluctuations. The MCX began its operations in November 2003 and operates under the regulatory framework of the Securities and Exchange Board of India (SEBI).
The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 7,030crores |
| PE Ratio | 39.07 |
| Return on Equity | 9.29% |
| Debt Equity Ratio | – |
| Promotor’s Holdings | – |
| Share price | Rs. 1,375 |
| Dividend Yield | 1.26% |
The trailing returns of MCX are tabled below
| Period | Trailing Returns |
| 1 year | 19.56% |
| 3 years | 5.96% |
| 5 years | 11.91% |
| 10 years | 3.87% |
Coal India
Coal India Limited (CIL) is a company that mines and refines coal, making it an important player in the energy sector. It is owned by the Union Government of India and is managed by the Ministry of Coal. In fact, it is the largest coal-producing company in the world, with its operations contributing up to 82% of the total coal production in India.
For a long time, CIL has had a monopoly in the Indian coal sector, meaning that it was the only company allowed to mine and produce coal in the country. However, this year the Indian government announced that it would be opening up the coal sector for commercial mining. This move could potentially end CIL’s monopoly in the future, as other companies would be allowed to enter the market and compete for coal production.
The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 1,47,567 crores |
| PE Ratio | 4.99 |
| Return on Equity | 59.07% |
| Debt Equity Ratio | 0.07% (TTM) |
| Promotor’s Holdings | 62.40% |
| Share price | Rs. 239.60 |
| Dividend Yield | 7.16% |
The trailing returns of Coal India are tabled below
| Period | Trailing Returns |
| 1 year | 42.03% |
| 3 years | 22.73% |
| 5 years | -1.88% |
| 10 years | -2.23% |
CAMS
Computer Age Management Services (CAMS) is a company that provides financial and mutual fund services in India. It is a major player in the industry, with a dominant market position. CAMS offers a range of services to its clients, including mutual fund transfer agency, transaction origination interface, and electronic payment services.
The mutual fund industry in India has been growing rapidly, and CAMS is well-positioned to benefit from this trend. As more and more people invest in mutual funds, the demand for services like those offered by CAMS is expected to increase.
In addition, the financial services industry in India is becoming increasingly digitized. This means that more and more financial transactions are being carried out online, and companies like CAMS are well-equipped to handle these transactions. This trend is also expected to benefit CAMS in the coming years.
The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 10,181 crores |
| PE Ratio | 35.62 |
| Return on Equity | 37.99% |
| Debt Equity Ratio | 0.00 |
| Promotor’s Holdings | 19.92% |
| Share price | Rs. 2,076.30 |
| Dividend Yield | 1.82% |
The trailing returns of CAMS are tabled below
| Period | Trailing Returns |
| 1 year | -3.43% |
| 3 years | – |
| 5 years | – |
| 10 years | – |
CDSL
Central Depository Services (India) Ltd (CDSL) is one of the two prominent companies in India that offers depository services. These services include dematerialization, trading, and securities settlement. In simpler terms, CDSL helps individuals and organizations to hold and manage their securities, such as stocks and bonds, in electronic form. As more and more individual investors participate in the Indian stock market, CDSL is expected to benefit from this growing involvement. The company provides the infrastructure and support needed for investors to easily trade and settle their securities transactions, without the hassle of physical certificates.
The key details of this company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 10,375 crores |
| PE Ratio | 37.51 |
| Return on Equity | 24.50% |
| Debt Equity Ratio | 0.00 |
| Promotor’s Holdings | 20.00% |
| Share price | Rs. 991.95 |
| Dividend Yield | 1.62% |
The trailing returns of CDSL are tabled below
| Period | Trailing Returns |
| 1 year | -8.90% |
| 3 years | 64.44% |
| 5 years | 28.76% |
| 10 years | – |
What are the factors to consider while investing in monopoly stocks?
When taken at face value, investing in monopolistic stocks seems to be a very lucrative investment option as compared to investing in an industry or a business that has high competition. However, there are several factors that investors should consider before investing in such stocks. Some of these factors are highlighted hereunder.
The business model of the company
When considering investing in monopoly stocks, it’s important to evaluate the company’s business model. A monopoly company is one that dominates a particular market or industry. It’s essential to understand how the company generates revenue, what products or services it offers, and how it plans to sustain its monopoly status. Investors should research the company’s target market and competitive landscape to determine whether its business model has the potential to generate long-term revenue.
The competitive advantage of the company
A monopoly company must have a competitive advantage that sets it apart from its competitors. This can be in the form of a patent, proprietary technology, or a unique distribution network. Investors should understand what makes the company unique and whether its competitive advantage is sustainable. They should also consider whether the company’s competitive advantage is vulnerable to new technology, changing consumer preferences, or other factors.
The size of the market and its ability to grow
The size of the market that a monopoly company operates in is a crucial factor to consider. A larger market provides greater growth potential, while a smaller market may limit the company’s ability to grow. Investors should evaluate the company’s market share and how it has evolved over time. They should also consider the size of the market the company operates in and whether there is room for growth.n
Valuation of the business
Valuation is an important factor when investing in monopoly stocks. Before investing, investors should consider the company’s price-to-earnings (P/E) ratio and compare it to its peers to determine if it’s overvalued or undervalued. They should also look at the company’s historical P/E ratio and whether it’s trending up or down. Investors should consider the company’s growth potential and the earnings outlook to determine whether the stock is priced fairly.
The financial health of the business
The financial health of a company is a critical factor to consider before investing. Investors should evaluate the company’s revenue growth, earnings per share (EPS), and cash flow to ensure it has the financial strength to weather any downturns. They should also look at the company’s debt levels and whether it has the ability to pay off its obligations. Profitability is also an important consideration, as a company with consistently high profitability is generally a more attractive investment opportunity.
Regulatory Framework for the Industry
In India, the regulatory environment plays an important role in the success of monopoly companies. Investors should keep an eye on any changes in regulation that may impact the company’s operations. For example, a regulatory change that increases competition or limits pricing power could negatively impact a monopoly company’s profitability. Investors should also consider the potential for regulatory risk and how it may impact the company’s future earnings.
Conclusion
Monopolistic stocks may be rare in the Indian markets but can provide a very good investment opportunity. Investing in monopoly stocks in India can be a profitable opportunity for investors who do their research and make informed decisions. Monopoly companies have a strong market position, which can lead to higher profits and better returns. However, investing always carries risks, so it’s important to conduct research and seek professional advice.
FAQs
Investing in monopoly stocks can be beneficial for many reasons like offering stability and predictability, providing high potential for profits, limited competition, and the potential for long-term growth.
The target investors for monopoly stocks can be value investors, institutional investors, long-term investors, and investors having a lower risk appetite and long-term investment horizon.
IRCTC has a complete hold on rail services in the country with a market share of 100%.
There are certain situations when investors should exercise caution or avoid investing in monopoly stocks. These situations include when the valuation of the business is excessively high, when there is a lack of innovation and growth prospects in the industry, excessive dependency on a single industry, or regulatory changes that can significantly impact the monopolistic status of the company.
