Investing in a monopoly business is considered a better investment strategy. In the absence of any major competitor in the market, there is no big risk on this type of stock. That’s why it is believed that less competition, more profit. However, it is also true that such companies are very difficult to find as new players often enter the market by attracting high profits. There are very few such companies in the market which are completely monopoly but there are companies which are very close to monopoly. This is because of their brand identity and their dominance in a particular geography. Here we bring you 4 such smallcap companies that have a strong monopoly in their segment and are in the leadership position of their category. Let’s take a look at these.
Nocil is the first company in this list which is India’s largest rubber chemical company. It has 40 per cent share in the Indian market. The company is one of the few companies in the world with 22 rubber chemicals in its product portfolio. The company has business relationships with more than 40 rubber makers from around the world and this relationship has been around for 40 years. The company’s customer list includes companies like Apollo, MRF, JK, Fiat, Ceat, Michelin, Bridgestone, Yokohama rubber, Sumitomo Rubber, Continental.
Experts say that in the future, the company will also get the benefit of China Plus One of the global players. Investors should keep an eye on this stock.
2-Oriental Carbon & Chemicals
Oriental Carbon & Chemicals is the only company to manufacture Insoluble Sulfur (IS) in the domestic market. It has a leadership position in the domestic market. It has 55%-60% share in the domestic market and 10% in the global market. IS is used in tire industries to vulcanize rubber. Under vulcanization, rubber is heated through sulfur. The company is focusing on expanding its capacity. Currently this stock is seen up 10% from its 52 week high. The market giants are expecting a good rise in this stock going forward.
Mold Tek Packaging holds a leading position in the field of plastic packaging in India. It is the only company in India to manufacture in-house robots for its mold labeling business. Apart from this, it is the only packaging company in the country which is backward integrated. Presently its client list includes big names like Asian Paints, Kansai Nerolac, Castrol, Mondelez, HUL.
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Looking at the track record of Mold-Tek, it has posted strong profit margins. Going forward, the company will further improve the product mix by getting new customers in the food segment. This stock has been a multibagger stock of the last few years. It is expected to perform better in future as well.
Triton Valves is the leader in the domestic automatic tube valve and core segment. Its market share is 75 percent. Almost all tire manufacturing companies in India are included in its customer list. The company has been continuously paying dividends to its shareholders. For FY21, it had paid a dividend of Rs 20 on shares of Rs 10 face value.
The only issue of concern for the company is its debt level. The company has a debt of about Rs 1 billion. Due to which its debt equity ratio goes above 1. It is expected that the company will invest Rs 15 crore in FY 2022, out of which some money will be arranged through debt. This stock has been under pressure for some time now. The company had made losses in the June and September 2021 quarters. The stock has seen a growth of 28 per cent in the last few years.
Now the question is, are all monopoly stocks risk free? So the answer is no. There are many such examples where companies that enjoy monopoly falter when suddenly a big competitor came in front of them. So keep in mind that all monopoly companies are risk free. Thinking like this in itself is a big mistake.
Taking the example of the Indian market, the arrival of Reliance Jio in the market suddenly created a big competitor in front of the already existing telecommunication companies in the country. Companies like Bharti Airtel and Vodafone had to face the blow of this competition. Vodafone Idea is today trying to save its existence. In such a situation, while investing, do not make monopoly business only your basis. While investing, keep in mind the company’s business model, its management, its ability to survive the competition.
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