No-Competition Shares: Monopolistic businesses present themselves as excellent choices for long-term investment portfolios. These companies enjoy a distinct advantage of facing minimal to no competition, primarily attributed to formidable entry barriers within their respective industries.
If you are interested in exploring potential investment opportunities within this realm, here is a compilation of three such businesses that fit this description.
Multi Commodity Exchange of India Limited
Multi Commodity Exchange of India Ltd (NSE:MCEI) is a prominent player in the commodity exchange market, boasting a market capitalization of INR 8,363 crores. While there are other commodity exchanges such as NCDEX and NSE in existence, MCX holds a commanding market share of over 90%, which is why it is included in this list.
In the fiscal year 2023, MCX achieved an unprecedented milestone with a record-high revenue of INR 581.17 crores, resulting in a profit of INR 148.97 crores. The company operates with an impressively high profit margin, averaging 34.7% over the past three years. Although NSE is also making efforts to strengthen its presence in the commodity market by introducing WTI oil and natural gas derivatives trading, it still has a long way to go to even come close to matching the market share of MCX.
Central Depository Services (India) Limited
Central Depository Services India Ltd (NSE:CENA) stands as one of the two primary depositories in India, boasting a market capitalization of INR 11,680 crores. Depositories play a crucial role in holding securities in dematerialized form. Despite being a duopoly market, CDSL has established a significant lead over its competitors. As of May 2023, CDSL reported an impressive 8.62 crore demat accounts, while NSDL lagged behind with only 3.2 crores.
This translates to a substantial market share of approximately 73%. The depository business operates with high profit margins, as evidenced by CDSL’s average profit after tax (PAT) of 48.6% over the past three years. Notably, major investors such as Foreign Institutional Investors (FIIs) have increased their stake in the company, rising from 9.16% in December 2021 to 14.67% in March 2023.
Indian Railway Catering and Tourism Corporation Ltd
Indian Railway Catering and Tourism Corp (NSE:INIR), commonly known as IRCTC, holds the exclusive position as the country’s sole railway operator, operating under the administration of the Ministry of Railways and boasting a market capitalization of INR 50,326 crores. While private players have emerged in various modes of transportation such as airways, roadways, and waterways, the railway sector remains untouched by privatization.
Consequently, IRCTC faces no competition, contributing to its remarkable growth in net income. The company has achieved an impressive 5-year compound annual growth rate (CAGR) of 35.4%, reaching a record-breaking net income of INR 1,005.88 crores in FY23. This performance has caught the attention of mutual funds, as they have significantly increased their stake in the company, escalating from a mere 0.1% in March 2022 to 0.86% in March 2023.