Stocks of companies which are operating in a market having limited or no competition are referred to as monopoly stocks in Indian stock market. Monopoly stocks which investors should consider in 2023 are required to have a commanding position in their respective industries, creating obstacles for new competitors to enter and challenge market position. Investing hard-earned money in monopoly stocks can be considered as a lucrative option for investors because such companies have a stable market share, strong pricing power, and sustained profitability. However, it is of utmost importance to consider several factors including company performance, industry outlook, and market trends before going long on any company’s stock.
What are Monopoly Stocks?
Monopoly stocks which investors should consider in 2023 are required to have a dominant position in the market, which should allow such companies to manage supply of goods or services and restrict new players from making an entry. These companies tend to have very high barriers to entry. There such companies make it difficult for new players to make an entry and challenge the market position of players which are already operating in the industry. These kind of companies have significant pricing power. Therefore, such companies might charge increased prices for their products or services. There are a range of ways in which a particular company can achieve a monopoly position. One common method is by making acquisition of the competitors and consolidating market position. Another way is when such companies tend to leverage their technological advantage or patents to sustain their market position.
Making investments in monopoly businesses in India can be considered as a lucrative option for investors. This is because such companies tend to have strong pricing power, and consistent profitability. Since such companies don’t face any competition, they are allowed to charge premium pricing and operate their businesses without the threat of rivals capturing market share. Moreover, such businesses have significant advantage in terms of pricing.
Since such companies have dominant position, they can think of charging premium prices for products or services. As a result of this, such companies might have better profit margins. Because they have no competition to undercut their prices, they are allowed to maintain high prices over more extended period. This supports them in consistent revenue stream. Monopoly companies are typically established companies and such companies are in the business for an extended period of time. There is a track record of consistent growth and performance of such companies are quite predictable. For some investors, these traits can be quite appealing for stable and healthy returns.
Top Monopoly Stocks to Buy in 2023
Monopoly stocks which investors should consider in 2023 are required to operate in the industry which has favourable government policies and huge potential for investments from FIIs. Increased investments mean that the company has sound business potential and can manage industry-wide risks.
1. IRCTC
Indian Railway Catering and Tourism Corporation Ltd. has been categorised as “Mini Ratna (Category-I)” Central Public Sector Enterprise under Ministry of Railways, Government of India. With the company being incorporated on 27th September, 1999, it has an extended arm of Indian Railways to upgrade, professionalize and manage a range of catering and hospitality services at stations, on trains and other locations. This helps in promoting domestic and international tourism through development of budget hotels, special tour packages, etc.
Indian Railway Catering and Tourism Corporation Ltd. mainly deals in catering & hospitality, internet ticketing, travel and tourism, and packaged drinking water.
During FY23, the company saw strong performance, with total income of INR3,661.90 crores which increased from INR1,954.48 crores in FY22. EBITDA of the company came in at INR1,396.65 crore over INR949.42 crores in the previous year. PAT grew to INR1,005.88 crores from INR659.55 crores in FY22. Performance of the company was supported by costs’ management, optimisation of operational efficiencies and diversification of revenue streams.
Focus of the company is now on expanding into new business verticals, strategic partnerships, and collaborations which should help contribute to its growth trajectory. The company aims to diversify revenue streams, tap into emerging areas, and explore innovative business models.
2. Computer Age Management Services
CAMS is technology-driven financial infrastructure and services provider to Mutual Funds and several other financial institutions. It has been categorised as a market leading registrar and transfer agency to Indian Mutual Fund industry, and it continues to serve ~69% of the average AUM– as of June 2023.
In 1Q24, its revenues came in at INR261.30 crores, exhibiting a rise of 10.4% on year-over-year basis. PAT of the company came at INR76.34 crores, up 17.9% year-over-year, with PAT margins coming at 28.2%. Indian mutual fund industry went up by 6.4% quarter-on-quarter to touch INR43.8 trillion in AAUM and is well-positioned for future growth. The company’s assets under management grew by 6.8% quarter-on-quarter, ahead of the industry, to cross INR30 trillion mark.
Accelerated growth in its non-mutual fund businesses is expected moving forward and this growth should stem from innovation, accelerated value creation and exploration of new frontiers.
3. Reliance Industries Limited
Reliance Industries Limited is an Indian multinational conglomerate, which has its headquarters in Mumbai. Businesses of the company consists of energy, petrochemicals, natural gas, retail, telecommunications, mass media, and textiles.
The company’s performance is expected to be supported by organic growth as it plans to expand market share and customer base, expansion of addressable market, cost competitive global supply chain, etc. It has a strong cash flow generation capacity to largely finance growth capex and the company plans to maintain net debt at below 1x EBITDA. Plans are there to maintain strong balance sheet and superior investment grade ratings through business cycles. It has domestic rating at AAA and above sovereign international credit ratings.
Conclusion
While above are some of the top monopoly stocks which investors should consider in 2023, there are several other stocks which have strong potential. Since monopoly stocks have stability and predictability, strong pricing power, dividend income and long-term growth, it should always be beneficial to invest in such stocks.
Resilience, capital appreciation and steady returns can easily be provided by the top monopoly stocks.
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