In India, a monopoly is a situation where a single company dominates an entire industry, creating barriers to entry for new players. This can significantly impact the stock market, and investors need to be aware of the potential risks and rewards when investing in monopoly stocks. In this article, we will explore the world of monopoly stocks in India, discussing the advantages and disadvantages of investing in them and their impact on the economy.
What are Monopoly Stocks?
A monopoly stock is a stock of a company that has a monopoly in its industry or sector. These companies have a significant competitive advantage, often due to the high barriers to entry in their industry. Monopoly stocks can provide attractive returns, but they also come with risks.
| Sl.no | Name | Market graph | Market-cap |
|---|---|---|---|
| 1 | IEX | click here | 136.58 B |
| 2 | Asahi Glass | click here | 112.26 B |
| 3 | Zydus Wellness | click here | 97.89 B |
| 4 | HLE glass coat | click here | 38.62 B |
| 5 | Praj Industries | click here | 64.34 B |
| 6 | IRCTC | click here | 482.44 B |
| 7 | Nestle | click here | 1976.21 B |
| 8 | Pidilite | click here | 1240.36 B |
| 9 | Asian Paints | click here | 2764.5 B |
The top monopoly stocks in India are:
1. IEX- Indian energy exchange
IEX has an exciting business that most people are unaware of. IEX is India’s first largest energy exchange providing an automated trading platform for the physical delivery of electricity. It needs to look more obvious; let’s make it easy.
A yarn market in Chandani Chowk, and people are trading for clothes in the market. So, IEX is a platform where they don’t trade clothes but trade electricity units by buying and selling them. It is India’s most prominent and first company to do so. It’s found that it plays a significant role daily.
if You analyze the current situation. It has closed 95% of the market shares. 95% of the market share for trading electricity in India. So, it’s dominant, but if it’s the market leader, will selling electricity work in the future? Will it work in the future? Let’s do its market analysis. If you look at the power market industry, you can see that India is only 6%.
In contrast, it is 30-80% in developed economies. As our economy continues to grow, It will improve over time. It has to improve. So, it’s playing a significant role in the critical sector. Let’s look at its fundamentals.
IEX has the sales of 11.2% for the past three years. Profit growth for the past year is 19.6%, ROE is 46.2%, ROCE is 59.70%, and PE is 74.02%. It has been five years since the listing of the company. Returns of the company have been 350% since its inception. So this is one of the major Monopoly stocks in India.
2. Asahi India Glass
You use it every day. When you look at the bottom of your cars, “AiS” printed in black, you would find. That “AIS” glass is Asahi glass. Let’s see the domination. What do they do?
It’s India’s leading integrated window solution company. They have a business of Glass and windows. Their primary role in operations is, first, in automotive, to insert & remove glasses, not insert; it’s like a power window up & down.
Their market share in automotive passenger cars is 70%. So, Out of 4 Indian vehicles, three cars have windows. Whenever you sit in your car, you’ll find that logo. Which are their customers? Their customers are Maruti Suzuki, Hyundai, Tata Motors, Mahindra, Toyota, MG, and Renault, the top automotive companies.
A Japanese group has promoted the whole group of Asahi glass. If you look at their worldwide ranking, This group has a 12% share in the world on floating Glass. I am talking about a 12% global market share. 30% share in the automotive industry at the global level. So, this company is a monopoly in domestic & international groups.
About its fundamentals, Sales growth for the past three years has been -ve, i.e., 2.76%. Because of the covid, fewer manufacturing issues were closed with manufacturing plants, supply chains, and infrastructure. So, it is evident for less usage of Glass.
So, profit growth for the past three years was -9.14%. RoE is 9.71%, RoCE 11.03%. And PE is 37.8%. This company was listed 25 years before. Since its inception, This has given a return of 47,000%. Forty-seven thousand percent is their return on the stock. So this is one of the major Monopoly stocks in India.
3. Zydus Wellness
You may not know the company. But you are using it without knowing. Which Owns Sugar-free, Complan, Glucon-D, Ever-Youth, Nickel, and then Sugarlite, Complan & Nutralite; Zydus Wellness owns these many famous brands. It is India’s most prominent consumer wellness company.
Let us know about the stats of their monopoly. Sugar-free has a 96% market share. Sugar-free is not a product now; it has become word of our mouth. Sugar-free means zero-calorie sweetness. Earlier, Equal was a significant market player.
Sugar-free has replaced everything. 96% of the market share is crazy. Then for glucose intake, Glucon-D is the only. It has 58% of the market share. Ever-youth Scrub has 39% of the market share. Ever-Youth peel-off has 76% of the market share. So, this is one of the major Monopoly stocks in India.
They are talking about the company’s fundamentals. Their sales growth for the past three years is 53.8%. Their profit growth for the same is 23.70%, RoE has been 6.19%, RoCE is 6.46%, and PE is 34.4. Let me show its graph. It was listed 12 years ago. It has given a return of 730%.
4. HLE glass coat
This company is a leader in filtration and drying equipment & the largest glass-lined equipment supplier. Objects having Glass fitted in them. You require this equipment in laboratories and factories. Drying equipment is the primary use case, but we must know such facts as consumers.
Their share in filtration & drying equipment has 60%. In Glass-lined equipment, 30% market share. Why is monopoly in the glass sector? as it follows the inorganic growth policy, which keeps acquiring smaller businesses. That’s why it reached that stage.
Their clients are DV laboratories, Sun Pharma, Atul, GSK, Lorris Lab, Aarti Industries & many others. Some of the most prominent players who share we invest are its clients.
Fundamentally, they are imposing. Sales growth for three years is 63.4%, Profit growth for three years is 115%, RoE is 41.40%, RoCE is 40.90%, and PE is 124. If you remember, the IPO of Glass Coat also came. It has been one year since its inception. It has given you a return of 180%. So this is one of the major Monopoly stocks in India.
5. Praj Industries
Praj Industries. This industry is widespread; They started from an ethanol plant. They had been created from an ethanol plant. It is a global company providing solutions; it is an international company providing solutions focusing on the environment, energy, and agri-processed industry.
Its clients are also in India, such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum. So, it’s enormous. So, it’s considerable. Let me tell you why they are monopolies. India, as 60% of the market share in the manufacturing ethanol plants & machinery, That’s a clear majority.
Ethanol has an important use case; In global presence, They have a 10% market share globally of ethanol under Praj Industries. So, a vast & essential monopoly. Ethanol is a crucial product & its use cases are large.
Sales growth for the past three years is 12.50%. Profit growth for the past three years is 33%, RoE has been 10.6% & RoCE is 15.20%, and PE is 54.4. it has given whooping returns of 55,000 percent. So this is one of the major Monopoly stocks in India.
6. IRCTC
IRCTC Began in 1999. It’s the railway’s online ticket booking service. Who Sells Water under the name of Rail Neer, There’s only a catering service at the station.
Under the name of Railway Catering, The company is constantly expanding its biz; where it also gives hotel booking, flight booking, holiday packages, and everything, IRCTC is among the most user-friendly websites. And every month, almost 27-28M transactions occur through the IRCTC website. And nearly every passenger makes a train to book through IRCTC.
On 14 Oct 2019, the company launched an IPO@320Rs/share, And after that, history was created, which gave great returns. If you look at its financials, then there’s a constant increase. In 2021, there was an impact due to covid.
Recently they even split their share. Because it had become too expensive, And so that it could come within people’s reach.
Now understand how it’s a monopoly works. IRCTS is the only company GOI has permitted to sell railway tickets. Thus, a monopoly in the context of ticket selling. Only authorized companies on platforms can Sell catering and packaged drinking water. So this is one of the major Monopoly stocks in India.
7. Nestle
Nestle is One of India’s top FMCG companies. This company works in various segments like food, chocolate, and beverage. Some of its favorite products are Maggi, milky bar, Nescafe, KitKat, bar one, milkmaid, and Nesta. And they even bought some more products Nestle, nestle milk, nestle slim milk, Nestle dahi, nestle jeera raita, etc.
The company covers 50% of the Indian market in its product segment. It also has a 75% market in the instant pasta segment and Maggi & KitKat products, both very famous in the Indian market. Their monopoly isn’t because of Maggi or KitKat. Their monopoly is because of their baby product, cerolac, lactogen.
There are two reasons behind monopoly in the baby segment. First is the sensitive mindset of parents. Nestle India has been making baby products for the last few decades, And thus, parents trust it. Because no other parent, Wants to experiment with any other brand.
Cerolac and lactogen have become parents’ first choices. Our parents and we too used this only. So, this has been going on for years. Here, the baby food segment has an 85% market share. And almost 66% of the company’s revenue is generated from this.
the second reason behind this monopoly is that No random company can make baby products; It has to take various permissions from the govt., Which itself is a very lengthy process. And only that company can survive in this market; who wants to remain stable in it seriously.
So, this is the big reason no one has been able to break Nestle’s monopoly. And if we look at the return of just one year, Then it has given a gigantic return of 226%. And if we look at net income, it has been increasing continuously. So this is one of the major Monopoly stocks in India.
8. Pidilite
Pidilite began in 1959, making products in the chemical adhesive segment. The company didn’t have any monopoly till 2020, But in 2020, the company acquired a major adhesive-making company called Araldite in 2100 cr.
After this acquisition, the company captured 73% of the Indian market in the adhesive segment. It keeps on doing R&D in newer things constantly. Whose outcome they’ve shown this by launching products, Like fevikwik, m-seal, and Dr. Fixit, in the market, And proving their monopoly in the country.
Many people in the country might not know that; the fevicol that comes from pasting wood, its name is white glue. The company markets its product so that The identity is from the name of its brand only. Be it literate or illiterate, to stick anything, They ask for fevicol and not white glue.
Many products in the market can compete with it. But fevicol, m-seal, and MobiKwik fitted in the customer’s mind, that they all joined in monopoly to this brand. A big reason why none’s able to touch them. The share has given great returns, And the net income is constantly increasing. So this is one of the major Monopoly stocks in India.
9. Asian Paints
Asian Paints Began in 1942, working in the paint & varnish segment. It is the country’s biggest paint company And Asia’s third-biggest paint company. It’s the 9th biggest paint company in the world And has a presence in 14 countries. In 12 countries, it is considered to be the top 3. They cover 50% of the country’s paint & varnish market. In terms of decorative paints, they cover 60% of the market.
Their competition was with Berger, indigo, Sirca, and Shalimar paints, but they were kept from beating them. Image of Asian paints has been inscribed in the heart of peoples. Many companies came, But they did not form a monopoly.
Their product demand in the market is accurately 95%. Hear marketing team has expertise in this, And due to this, due to predicting these things correctly, No other company can beat them. And the company has given great returns.
When we look at their excellent financials, the net income continuously increases. So this is one of the major Monopoly stocks in India.
Six components That make any company a monopoly.
- Price maker
- Barriers to entry
- No close substitute
- Full control over the supply
- The downward-sloping demand curve
- The firm is itself an industry
In any monopoly company, All these six components can always be seen. And when a company becomes a monopoly, people know the industry by that company’s name. For ex. – when you talk about any soft drink, You ask for Coca-Cola. When you ask for fevikwik, it is a monopoly only; no other product can replace it. Because people think that if we want to stick something, Then it has to be fevikwik! This is the power of monopoly.
Five reasons you should avoid certain monopoly stocks.
- The first reason is that if a PSU company trades at a slightly higher or even an average price, you should avoid buying it.
- If the company has limited growth potential or prospects, please avoid it.
- if the company has unclear growth prospects, then you could consider avoiding that company.
- If the business’s nature is cyclical, avoid it; for some years, it goes up, and for some years, it goes down.
- The fifth and final point is if the government intervention in that sector is high or will become high, avoid that sector altogether.
What type of monopoly stocks should you be buying?
- The Firm should look to make profits. A classic case in point is Nestle. Now, tell me, how many different types of Maggie are there? Nestle is now a market leader in the Maggie market and keeps launching new brand after brand. After the brand’s Maggie. That Oates, Maggie at Maggie this, Maggie Green, Maggie, pink Maggie.
So the bottom line is that Nestle is a company interested in making a profit. It will do market research. It will study consumer buying patterns and negotiate good deals with distributors. So all these things are to what it simply points to the fact that Nestle is interested in making profits.
And if it is a monopoly, it can retain its ITC’s position because it is working so hard to maintain its profit margins. So it’s a definite investable company from that particular perspective.
- The company should have a specific MOAT. A classic case in point is something like, let’s say, Pidilite. Now, Pidilite has a product called Fevicol. If you remember the tagline of Fevicol, that tagline is recalled and recognized by crores and crores of people.
And whenever they go to a shop to buy any adhesive, they prefer to buy Fevicol. Or they will not even say Furniture Zoden Wali Cheeze De Do. They will go and say Fevicol.
Commanding that particular brand value is a massive moat or a competitive advantage for a monopoly that will not go away, at least for the next ten years. So it becomes an investable company.
- You might be paying a premium valuation. So it would be best to remember that a monopoly must also have an obvious growth path. I told you Pidilite and Nestle’s story. Now think about it this way.
Now, here is the press release of Nestle. Nestle India launches Maggie, basically a dominant, so this is a brand campaign that they have launched. They have launched the Fight Against COVID. They have launched, like, a bunch of different, different things. They have launched Number One, Cola, Mint, and beverage Milo in India.
They have launched Maggie Fusion noodles. So if you go through this entire list, you will know what, They are just exploring new paths to profitability. Because they will be able to launch new products, sell them, and make more money in the market. So they are on that product launch roadmap.
And whenever the economy improves, they will continue to exhibit similar behavior. Similarly, talk about the Pidilite story. They launched Fevicol first. Now they are getting into a bunch of other different products. And here is their product line.
So the point is that they made Fevicol stand out. Now, they are getting into a range of other products, which will generate much money for them. So there is a noticeable growth path to profitability.
Also read- top 3 multi-bagger stocks in india
FAQ’s
How do monopoly stocks differ from other types of stocks?
Monopoly stocks differ from other types of stocks in that they are associated with companies with significant market power and operating in markets with few competitors. This makes them less sensitive to market conditions and more likely to generate stable and predictable profits.
Are monopoly stocks a good investment?
Monopoly stocks can be a good investment, as they tend to be associated with stable and predictable profits. However, it is important to carefully evaluate the company's competitive position, regulatory environment, and growth prospects before investing.
What are the risks associated with investing in monopoly stocks?
The risks associated with investing in monopoly stocks include regulatory, competition, and market risks. Additionally, investing in a single company exposes investors to idiosyncratic risks that can impact the performance of their portfolio.
How can I identify monopoly stocks?
Identifying monopoly stocks can be challenging, as it requires a deep understanding of the industry, the regulatory environment, and the company's competitive position. Investors can use various tools, including financial statements, industry reports, and regulatory filings, to assess the company's market power and competitive advantage.
Can monopoly stocks be a good long-term investment?
Monopoly stocks can be an excellent long-term investment, as they tend to generate stable and predictable profits over time. However, it is important to carefully evaluate the company's growth prospects, competitive position, and regulatory environment before investing.
What are some examples of monopoly stocks in India?
Some examples of monopoly stocks in India include Coal India, Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Oil and Natural Gas Corporation.
Are monopoly stocks legal?
Owning monopoly stocks is legal, but companies with a monopoly position in a market are subject to regulation by government authorities to prevent abuse of market power.
What are the advantages of investing in monopoly stocks?
The advantages of investing in monopoly stocks include stability, predictability, and potential for long-term growth. These companies tend to have a strong market position, which can translate into consistent profits and cash flow.
What are the disadvantages of investing in monopoly stocks?
The disadvantages of investing in monopoly stocks include regulatory risk, competition risk, and limited growth potential. These companies may also face public scrutiny and criticism for their dominant market position.
How can investors profit from monopoly stocks?
Investors can profit from monopoly stocks by buying and holding shares for the long term, collecting dividends, and potentially selling shares when the stock price rises. It is important to note that investing in monopoly stocks carries risks and requires careful evaluation of the company's competitive position and regulatory environment.
Can monopoly stocks be a part of a diversified portfolio?
Monopoly stocks can be a part of a diversified portfolio, but investors should be careful not to overexpose their portfolio to a single company or industry. Diversification across different sectors and asset classes can help to manage risk and maximize returns.
Hi there, I’m shiv singh, a financial advisor at Tata Group with a Master’s degree in Commerce from SRCC – Shri Ram College of Commerce. With over three years of experience in the financial sector, I possess a wealth of knowledge and expertise that I share through my blog posts on FinancialMajestic.com. Join me as I simplify complex financial concepts and empower readers with valuable insights.