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Hello Investors,
Let's today talk about the companies which have a monopoly in the business. Monopoly meaning they have full control over the business and no other company provides the same in that sector. In today's article, we will talk about these monopolies and their business models in detail.
So the first company we will talk about is IRCTC owned by the government of India and operates under the Ministry of Railway and has a monopoly in their business segment. The company's business is of catering, online ticket bookings, and packaged water in the railways. The barrier of entry is soo high that no company can operate in this sector right now.
IRCTC's website is the most visited in India with 25 to 28 million transactions happening every month. The company is also trying to expand into other businesses as they have recently opened railway lounges. The IPO was launched on 30th Sept 2020, with a price of Rs 320, and today it trades above Rs 1450 and once there was a time when the share price touched Rs 2000 and came down.
Since COVID impacted all businesses across sectors, a dip in the total sales and revenue was seen in quarter 1,2 and 3.
In quarter 1, the sales went down by 71%, 82% in quarter 2 and 68% in quarter 3 which shows the impact of covid on the company.
If we speak about the financials of the company so that we can see the impact of monopoly on its share price. The market capitalization of the company is ₹ 31,083.20 Cr. and the PE ratio is around 112 and the company has no debt in recent times.
The next company is HAL, Hindustan Aeronautics Ltd and is an alone player in its sector. It was incorporated in 1940 by Walchand Hirachand in association with the Government of Mysore. The full control was shifted to the Government of India and manufactures different aircraft for them.
After 1951, the company was put under the Ministry of Defense who still owns it. It has a monopoly because due to security reasons, the ministry doesn't allow any other company's in air defence.
The sales went to -47% due to COVID in the first quarter and rose to 45% in quarter 2. The market capitalization is around 31000 Cr and the PE is less around 12.6. It has given a 15% return in the past year and the debt to equity ratio is 0.31 which is a good number.
The third company is Coal India Ltd which is headquartered in Kolkata, West Bengal and is the biggest coal producing company in the world, and the largest to give corporate employment.
They have 82 mining areas spread across 8 states with 394 coal production mines. The major consumers are the power sector, the steel sector and the cement sector too buy from Coal India.
This is one of a few companies which didn't see any impact on COVID and the usage remained the same. It was a fully established monopoly till the government auctioned 41 mines where entry of private players is also possible.
The interesting fact here is that Coal India provides 80% of the coal to the whole power sector and the demand is expected to remain the same and even grow more.
It is a profit-making company that gives out huge dividends to its investors and is the highest company to give dividend yield in nifty 50. The market capitalization is around 78000 Cr and has given more than -25% returns to its investors in the past year.
ALSO READ Top 15 Mutual Funds & 9 Stocks that gave highest returns in Jan 2021.
The fourth company is Hindustan Zinc which is a part of the Vedanta group and makes lead, zinc and sulphuric acid. It is the only company that makes zinc and lead and is the biggest integrated company in the world. The company is said to be the leading steel manufacturer and at the lowest of costs.
It was incorporated in 1966 under the public sector and after the disinvestment of 26%, it was given to the Vedanta group. The zinc market share of the company is 78% and to challenge this a lot of capital would be required because the company is already the market leader and the business is capital intensive.
Due to which the barriers to entry is tough and hence the company maintains its leverage. The company's market cap is 160000 Cr and the PE ratio is around 17 and the company has given over 41% returns to its investors in the past year due to which it has outperformed nifty.
The next company is ITC Ltd who has a very diversified business spread across sectors. ITC's major business is in Tobacco, Agri, FMCG, and hotels but the major is tobacco with a market share of 77% due to which the company has acted as a monopoly in that sector.
The operating profit margin of the company from this segment is 70% and return on capital is 400% in the cigarette and tobacco segment but in recent times, they have tried diversifying their business in the FMCG sector on products like Aashirwad and many more where they have established a presence but how will they improve their margins, that would be seen in the coming times.
If we speak about the company's compounded sales for the past 5 years, it is 5% and profit with a growth of 10% CAGR. The company saw a negligible impact of COVID but its hospitality sector suffered the most.
The hotel segment suffered but as compared to the company size it can be adjusted and hence little effect on sales and profit. The market cap is 2.5 lac Cr and the PE ratio is around 17 and has given -13% returns in the past year. They have aspirational goals in the FMCG sector as the valuations there are very high. But their margins are lacking. This can become a very good case study on how they increase their market share and margins.
Before starting about the next company, you might have used fevicol once and the name is associated with the brand and the company which owns fevicol is a brand named Pidilite and they run their business in the adhesive and chemical sector where their market share is around 70%.
It was incorporated on 28th July 1969 after which they made there mark and now is the most trusted brand. The company's products like adhesive, ceilents, construction chemical
The company has some big brands which are directly associated with the products like Drfixit, mseal, feviquick where Pidilite has a big name. The company has 9 regional offices with 23 brands and international manufacturing which is spread across the USA, Thailand, Dubai, Brazil.
The company has been giving good returns to its investors in terms of revenue and profits because the company has been innovating itself according to the requirements due to which they have entered new segments and have brought new products from time to time to meet customer demands. The sales of the company have compounded by 8.5% in the past 5 years and for such a big company growing at this rate is a huge impact.
Now if we speak about the company's profit, it has compounded by 18% in the past 5 years which is referred to as a positive sign. Pidilite has given a return of 10% in the past year and its market cap is around 85000 Cr. The PE ratio is around 85 meaning it has been trading on good premium valuations because of the huge market share and monopoly. You can assume that the company doesn't have debt, it is only negligible. The operating profit margin is around 23% which is a strong point and if sales are high, the profit will be high too.
Let's speak about the last company on the list named Container Corporation of India. It was established in 1966 and comes directly under the Ministry of Railways. It has a market share of 68% in its market segment and the government of India has a 54% stake in the company and the govt is planning to disinvest 30% of its stake and will maintain the rest 24%. The market cap is 25000 Cr and the PE ratio is around 35 as compared to the industry ratio of 22 which means it is a bit higher than the industry's ratio. The company has given a -24% return to its investors in the past year.
THANK YOU
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