How many monopolistic Indian corporations can you name? Today, we are looking at one of Warren Buffett’s favorite categories: monopolies, specifically in Indian markets. A monopoly refers to businesses that are market leaders in their industry due to a significant competitive advantage. These firms are challenging to compete with and hold the largest market share for their products and services.
In the investment world, stocks of these companies are referred to as MOAT stocks. The term “moat” originates from the broad ditches that surrounded medieval castles, providing a margin of safety. In a corporate context, moats can represent entry barriers, such as substantial capital requirements or government regulations, as well as competitive advantages that a company has established.
We will explore the Indian monopoly stocks that dominate their respective industries. These industry leaders face little to no competition. Examples of monopolies in India can be found across various sectors and sizes. The top monopoly stocks are categorized into three groups: large-cap, mid-cap, and small-cap monopoly stocks in India. Let’s dive in!
Table of Contents
Strategies for Establishing a Strong Market Monopoly
In a monopolistic market, customers consistently choose to purchase a specific company’s products or services because that company controls the market. There are several strategies that businesses employ to create monopolies within their industries. These include overcoming significant technological barriers, expanding distribution networks, and navigating regulatory environments.
Often, customers remain loyal to a company’s offerings due to high switching costs, which effectively helps the company maintain its monopoly. By establishing these barriers, businesses can secure their market position and limit competition, ensuring sustained profitability and influence in their sector.
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Understanding Switching Costs
Switching costs refer to the expenses incurred by customers when they change from one product or service provider to another. Companies that possess strong pricing power and a significant competitive advantage often create unique features in their offerings, making it challenging for customers to opt for a competitor’s product. This uniqueness not only provides a competitive edge but also fosters customer loyalty, leading to consistent revenue streams. As a result, such monopolistic firms tend to have a promising outlook for the future.
Another critical aspect that sets monopoly stocks apart is the company’s goodwill.
For instance, when you think of toothpaste, Colgate is likely the first brand that comes to mind. Similarly, when it comes to noodles, Maggi is often the immediate choice.
Monopolistic companies enjoy exceptional brand recognition because they invest heavily in making their products distinctive. They also allocate substantial resources to marketing and expanding their distribution networks.
Due to these factors, monopoly companies in India have the potential to become multi-baggers over the long term.
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Smallcap Monopoly Stocks in India
In India, a small-cap company is typically defined as one with a market capitalization of less than INR 5,000 crores, although the exact definition is not crucial to our discussion. Investors often seek out these emerging firms that are experiencing rapid growth and expansion.
#1 Oriental Carbon & Chemicals
Oriental Carbon & Chemicals is the only manufacturer of Insoluble Sulphur (IS) in India. It holds a dominant position in the market, capturing approximately 55% to 60% of the domestic market share, with the remainder supplied through imports. Additionally, the company commands around 10% of the global market share.
IS is utilized for vulcanizing rubber, which is subsequently used in tyres production. Vulcanization involves heating rubber with sulfur, enhancing the stability of rubber products.
Although IS constitutes a minor portion of tyre costs, it plays a crucial role in tire performance, longevity, and quality. The manufacturing process is highly specialized and capital-intensive, with a rigorous and lengthy approval process that can span several years. Oriental Carbon is the only domestic player in this specialized market.
Oriental Carbon leads the market due to its continuous capacity expansion. The company boasts strong financials and robust in-house research and development capabilities.
The company operates advanced manufacturing facilities in Dharuhera (Haryana) and Mundra (Gujarat), with a combined capacity of 39,500 MTPA for insoluble sulfur and 88,000 MTPA for sulfuric acid and oleums as of 31 March 2024.
#2 NOCIL
NOCIL is the largest rubber chemicals manufacturer in India, holding over 40% of the market share. The company has established long-term partnerships with major players such as Apollo, JK, Sumitomo Rubber, MRF, Ceat, Michelin, Yokohama Rubber, Continental, and Bridgestone.
NOCIL is also gaining market share internationally as global buyers seek to diversify their sourcing beyond China.
The company’s revenues are projected to increase in the current fiscal year due to the ramp-up of newly added capacity, consistent price increases, and growth in export markets.
In the rubber chemicals industry, pricing power is limited. Growth primarily depends on sales volumes and the diversity of products offered. NOCIL has successfully maintained profitability by keeping prices competitive, distinguishing itself among monopoly stocks.
Midcap Monopoly Stocks
Midcap companies are defined as those with a market capitalization between INR 5,000 crore and INR 20,000 crore. Investing in these businesses can be riskier compared to large-cap companies; however, mid-cap firms typically have a proven track record and a longer operating history than small-cap stocks.
#3 Borosil Renewables
Borosil Group has taken a leading role in capitalizing on the solar opportunity in India. Its subsidiary, Borosil Renewables, stands out as the country’s first and only manufacturer of solar glass. Given the immense potential within the renewable energy sector, particularly the expected strong demand from residential households, Borosil Renewables presents an attractive long-term investment option for investors.
Currently listed among midcap monopoly stocks, Borosil Renewables boasts a three-year revenue CAGR of 29.26%, suggesting it is on track to transition into a large-cap company in the coming years. The company is also focusing on international expansion and has announced plans to acquire Interfloat Group, Europe’s largest solar glass manufacturer.
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#4 CAMS
Computer Age Management Services (CAMS) provides financial infrastructure and services to India’s rapidly growing mutual fund industry, holding a market share of nearly 69%. As the largest registrar and transfer agent for mutual funds in India, CAMS also extends its services to corporate clients beyond the mutual fund sector. Although CAMS operates in a duopoly with KFin Technologies, which has a 30% market share, it possesses all the characteristics of a monopoly stock.
CAMS launched its IPO in September 2020, providing substantial returns to investors, with its shares appreciating by over 100% within a year of listing. Operating in a promising industry, CAMS is well-positioned for continued success in the coming years, reinforcing its status among monopoly stocks.
Largecap Monopoly Stocks
#5 Coal India
Coal India is the leading coal mining and processing company in India. Established in 1973 as Coal Mines Authority Ltd., it is now owned and managed by the Union Government through the Ministry of Coal. It holds the title of the largest coal-producing company in the world. Until 2020, coal mining in India was a government monopoly; however, the sector has since been opened to private players. Despite this change, Coal India remains a dominant force in the industry, serving nearly all domestic power and steel companies as its customers.
India is now the world’s second-largest coal producer. In the fiscal year 2023-24, coal excavation reached a record-breaking 773.647 million tonnes, representing a 10% increase compared to the previous period and the highest level since inception. The coal off-take also saw a significant rise, totaling 753.52 million tonnes in 2023-24, up from 694.689 million tonnes in the previous year.
While Coal India maintains a monopoly in the coal generation sector, it is actively diversifying its operations by developing solar power projects and establishing fertilizer plants. The company is nearly debt-free and offers a healthy dividend yield, making it an attractive option for dividend investors.
#6 Relaxo Footwears
Relaxo stands out among footwear manufacturers, and its classification as a monopoly stock may raise some eyebrows given the presence of multiple competitors in the sector. However, Relaxo effectively maintains its dominance in the non-leather footwear market by keeping costs low, earning less than INR 5 per pair, which creates a virtual monopoly.
The company operates nine manufacturing facilities with a capacity to produce ~10.5 lakh pairs daily. Relaxo boasts a robust pan-India distribution network and retail presence, supplying its products through over 60,000 points of sale (POS). This extensive reach results in significant geographical and customer diversification, reinforcing its market position.
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#7 Asian Paints
Asian Paints is the leading paint company in India, holding a 50% share of the domestic paints market. This figure rises to 60% in the decorative paints segment, which is the company’s core business. While it may not strictly qualify as a monopoly stock, Asian Paints effectively exercises monopoly-like powers, particularly in pricing. The company’s extensive product range, vast distribution network across India, and strong culture of continuous innovation contribute to its ability to maintain its market share.
Lately, the supernormal profits enjoyed by Asian Paints have attracted the attention of other players and JSW group and Aditya Birla group’s Grasim Industries have expressed their interest in entering this lucrative market. This is not the first time Asian Paints’ market dominance has been challenged and the company has survived and thrived over several decades.
The supernormal profits of Asian Paints have drawn attention from competitors, with the JSW Group and Aditya Birla Group’s Grasim Industries expressing interest in entering this lucrative market. This is not the first instance of Asian Paints facing challenges to its market dominance; the company has successfully navigated competitive pressures for several decades.
This list does not encompass all monopoly stocks available; there are numerous other monopoly shares in India. Below are some of these monopoly players along with their price performances.
Monopoly Stocks in India With Returns
| Company Name | Price on 4 Dec 2024 | 1-Yr P/L (%) | 3-Yr P/L (%) | 5-Yr P/L (%) |
| Multi Commodity Exchange | 6,216.50 | 101.17 | 289.26 | 442.78 |
| Hindustan Aeronautics | 4,518.85 | 79.36 | 606.92 | 1,075.56 |
| CAMS | 5,120.20 | 76.93 | 75.24 | – |
| Central Depository Services | 1,663.90 | 72.66 | 122.68 | 1,392.29 |
| Hindustan Zinc | 507.15 | 59.53 | 45.32 | 139.39 |
| Bharat Heavy Electricals | 252.35 | 44.99 | 314.37 | 417.64 |
| Praj Industries | 822.70 | 29.15 | 156.33 | 673.58 |
| Pidilite Industries | 3,149.00 | 23.32 | 43.04 | 140.21 |
| Page Industries | 46,143.25 | 23.09 | 20.42 | 110.18 |
| Indian Energy Exchange | 178.10 | 22.87 | (29.16) | 280.80 |
| Marico | 641.70 | 19.72 | 23.59 | 84.40 |
| Asahi India Glass Limited | 692.90 | 19.12 | 50.39 | 238.00 |
| Coal India | 422.10 | 19.00 | 184.15 | 114.92 |
| Jubilant FoodWorks | 657.05 | 17.03 | (11.37) | 107.99 |
| Eicher Motors | 4,844.35 | 15.88 | 98.21 | 126.19 |
| Indian Railway Catering and Tourism Corporation | 831.85 | 15.40 | 3.80 | 374.83 |
| NOCIL | 278.00 | 13.54 | 20.42 | 176.89 |
| Expleo Solutions | 1,427.95 | 10.11 | 8.62 | 422.96 |
| Borosil Renewables | 474.80 | 6.72 | (16.01) | 178.80 |
| Container Corporation of India | 839.85 | 4.86 | 33.44 | 47.97 |
| ITC Limited | 472.55 | 4.07 | 116.87 | 91.35 |
| Procter & Gamble Health | 5,289.05 | 2.29 | 1.64 | 22.93 |
| APL Apollo | 1,556.80 | (3.82) | 72.18 | 886.44 |
| Nestlé | 2,261.70 | (7.32) | 18.93 | 58.27 |
| IndiaMART | 2,357.55 | (9.48) | (33.42) | 117.52 |
| Delta Corp | 120.48 | (14.22) | (50.72) | (43.96) |
| Mold-Tek Packaging | 687.65 | (22.03) | (2.29) | 152.25 |
| Asian Paints | 2,469.40 | (22.70) | (18.72) | 43.92 |
| Relaxo Footwears | 683.95 | (25.45) | (45.40) | 13.82 |
| Oriental Carbon & Chemicals | 248.81 | (67.30) | (73.21) | (74.58) |
Closing Thoughts
While there has been extensive discussion about investing in monopoly stocks and businesses, it is crucial to first assess whether a company can maintain its dominance in the future. For instance, in this article discussing the best monopoly companies in India, firms like Relaxo, Asian Paints, and Oriental Carbon were highlighted for their robust financials.
Establishing and sustaining monopolies is challenging, particularly due to the absence of government support. Some monopolies, especially public sector undertakings (PSUs) like IRCTC, can disappear with a simple policy change. In such extreme scenarios, companies may experience a gradual decline over several years, with large-cap monopoly stocks potentially becoming mid-cap and mid-cap stocks transitioning to small-cap status.
Investing hinges on a company’s ability to uphold a strong market position, safeguarding its market share and ensuring long-term profitability. A wider moat indicates greater security for the business. Conversely, a weak moat can lead to increased competition that erodes returns and diminishes market share and profits.
Thus, selecting firms with solid moats is a prudent investment strategy, and monopoly stocks fall into this category. However, it is essential to evaluate the company’s valuations alongside its inherent value and margin of safety. Investing in monopoly stocks is not a guaranteed success; even these stocks can face downturns at times.
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Monopoly FAQs
Are there monopolies in India?
Yes, there are monopolies in India, other than those mentioned above such as IRCTC, which has a 100% market share in online train ticketing. There are some companies with a large market share, such as IEX, which has a 95% share in short-term electricity agreements in India.
In a monopoly, how many players are there?
In a clear monopoly, only one player is controlling the market. However, markets with multiple players are also considered monopolies as long as a single company yields control.
What are the four kinds of monopolies?
Monopolies are classified into four types:
Natural Monopolies: This is a situation in which one company manufactures a product.
Geographic monopolies: These occur when there are few sellers in a geographical area.
Government-Sanctioned Monopolies: These are created by the government and are not open to private players.
Technological monopolies: These occur when a single company owns all of the manufacturing technology.
Why do power companies have monopolies?
Power generation and distribution is an expensive business. The advantages of large-scale production can be provided to the customers. One company with lower costs is in a stronger place to charge a lower price to a customer than multiple players who work hard to reduce variable and fixed costs.
Is it profitable to invest in monopoly stocks?
As IPO Central’s data suggest, it is profitable to invest in monopoly stocks over a long timeframe.
thanku very much for telling Best Monopoly Shares of 2023