“In business, I look for economic castles protected by unbreachable ‘moats,” said Warren Buffett in his 1995 letter to shareholders. What he meant by this quote is, find a business that never gets affected by market competition. Basically finding Monopoly Stocks in India.
In India, there are many businesses that have very less or zero competition. Whenever someone asks me my opinion about long-term investment, I always suggest stocks that have zero competition. Monopoly businesses help to achieve great wealth. These stocks are never affected by the market competition. In this article, I will discuss such monopoly stocks in India. I will also tell you whether this is the right time to invest in these stocks or not. So let’s get started.
What is Monopoly Business?
In the monopoly business, the seller faces no competition as he is the only seller available in the market. Such businesses usually have a long life and steady revenue. Thus are good for long-term investment. They can fetch you higher returns and dividends. In the monopoly business, the seller has the power to set the selling price of the product without any question. Monopoly stocks have the potential to become multi-bagger stocks in the future.
Best Monopoly Stocks in India
I have list down monopoly stocks in India for you.
IRCTC LTD.
The company was incorporated on 27th September 1999 as ‘Indian Railway Catering and Tourism Corporation Limited. It is a public sector enterprise wholly owned by the government of India under the administrative control of the Ministry of Railways. It is the only entity authorized by Indian Railway to provide catering services to railways, online railway tickets, and packaged drinking water at all the railway stations.
Later on, the company has also diversified into other businesses like non-railway catering and services like e-catering, executive lounges, and budget hotels. The company was ranked under Fortune India Next 500 list of Indian companies.
Here are the reasons why you should have this stock in your portfolio for lifetime.
- Railways will always remain a part of human life.
- government undertaking.
- Expansion of cargo business.
- The strong business model of online ticketing, catering, hotels, etc.
- Solid business moat (No. competition).
The key point here is, IRCTC is in a monopoly business to provide all the services to Indian Railways. Since railways are the backbone of the country and the government mostly isn’t going to give license to any other company to convert it into a duopoly, this stock is always going to be on a bull run. You can accumulate it for the long run and this should be a part of your core portfolio.
IRCTC was listed on BSE and NSE on 14th October 2019. IPO issue price was ₹ 320. Today it is trading at ₹ 1720.
Torrent Power Ltd.
Torrent Power is a power generation and distribution company. It has distribution licenses in Ahmedabad, Surat, Dahej, Dholera. It also has got the licenses in Diu, Daman, and Dadra Nagar haveli recently. Providing electricity to the people falling under its license area is its business. The company enjoys a monopoly in power distribution in the above cities. The company is paying healthy dividends year on year basis.
Founded in the year 1996 with its headquarter in Ahmedabad, Gujarat, the company is operating in the power generation and distribution business. It also has a franchise business in Agra, Bhiwandi, Shil, Mumbra, Kalwa. The T&D losses of 6.54% in Ahmedabad are the lowest across the country. It is service around 3 million customers across various cities where the company is operating.
Indian Energy Exchange
The Indian Energy Exchange is the online power trading exchange. It is just like a stock market for the power sector where the power distribution company can buy/sell power units to anyone across India. The exchange is regulated by Central Electricity Regulation Commission (CERC). The company was founded in the year 2008 and its headquarter is in Delhi.
IEX operates a day-ahead market based on closed auctions with double-sided bidding and uniform pricing, it has over 3,800 Registered clients, over 300 private generators, and more than 3,300 industrial electricity consumers.
It also has an Indian Gas Exchange, which is the whole subsidiary of Indian Energy Exchange. It operates in the gas business across India. Same like IEX this also has an online trading exchange for gas manufacturers and distributors. The exchange has over 500 registered clients and 15 members. It currently operates from three physical hubs — Hazira, Dahej, and KG Basin.
CDSL Ltd.
Central Depository Services Ltd. is the first listed security depository company in India. It was earlier promoted by BSE Ltd. The main function of CDSL is to facilitate holding of dematerialized securities enables securities transactions to be processed by book entry. CDSL was listed on June 30, 2017, on the National Stock Exchange (NSE) through Initial Public Offer (IPO) and thereafter became the first and the only depository to get listed in the Asia-Pacific region and second in the World. The company was listed on 30th June 2017 on BSE and NSE and become the first and the only depository company in India. The only other company that is providing depository service is NSDL, but since it is not listed in India till now, I am not considering it here.
Adani Total Gas Ltd
Adani Total Gas Limited is into a business of City Gas Distribution (CGD) and supplies PNG gas to industrial, commercial and domestic consumers. It also supplies CNG to transport sector in India.
The company has already set up city gas distribution networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana, and Khurja in Uttar Pradesh. In addition, the development of Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad, and Udhamsingh Nagar gas distribution is awarded to a consortium of Adani Total Gas Ltd and Indian Oil Corporation Ltd.
Recently the French energy giant Total has taken a stake in Adani Gas and hence the company name is now changed to Adani Total Gas Ltd. The stock of Adani Total Gas has shot up many folds in the last 5-6 months.
Financials of Monopoly Stocks
| Company Name | Market Cap (Cr.) | Debt to Equity | PE Ratio | EPS |
|---|---|---|---|---|
| IRCTC Ltd | 28028 | Debt Free | 135 | 14.8 |
| Torrent Power Ltd | 20549 | 0.78 | 13.3 | 12.9 |
| Indian Energy Exchange | 10396 | Debt Free | 52.8 | 6.57 |
| CDSL Ltd | 6852 | Debt Free | 38.7 | 17 |
| Adani Gas Ltd | 116651 | 0.25 | 34.5 | 4.01 |
Why Should You Invest in Monopoly Stocks in India?
Well, the main benefit of investing in monopoly stocks is that the business will remain steady as there is no market competition. Thus, it has the ability to generate a higher return on equity deployed. Below are the reasons why you should invest in monopoly stocks in India and it should be a part of your lifetime portfolio.
- No competition in business they operate so enjoys 100% market shares
- Steady revenue and profits
- Usually gives higher dividends
- Potential to become multibagger in the future
- Risk to Reward ratio is low (safe investment)
Conclusion:
These monopoly stocks should be there in your main portfolio for lifetime. These are the stocks which can give higher returns in the long run. They also has an ability to fetch you higher dividends year on year. These stocks can definitely can give higher returns than the bank fixed deposits. Icing on the cake would be its dividend payout every year.