Top 5 Monopoly Stocks to Watch Out in 2025

If you're in India and an Indian resident, have you ever travelled on a train that was not operated by the Indian Railways?

My guess would be no.

The Indian Railways has a monopoly in India when it comes to the railway business.

How about the stock exchanges? Well, the Bombay Stock Exchange (BSE) competes directly with the National Stock Exchange (NSE). So, there is no monopoly there. It's a duopoly market.

How about the commodity exchanges? The Multi Commodity Exchange of India (MCX), which trades basic metals and energy, has a monopoly on the trading of these commodities.

Both Indian Railways (IRCTC) and the MCX are prime examples of monopoly companies in India.

Now, we at Equitymaster are huge admirers of monopoly stocks. But do you know who else likes monopoly stocks? It's none other than investing legend Warren Buffett.

That's right! He has made most of his wealth by investing in monopoly stocks.

He refers to these stocks as companies with economic moats.

What is a moat?

Economic moat is company's ability to maintain competitive advantages over its competitors to protect its long-term profits and market share.

With this brief explainer out of the way, let's delve deeper into some of the monopoly stocks in India that hold more than massive market share in their respective industries.

These companies are setting for a strong year in 2025 as major growth levers kick in.

#1 Praj Industries

First on the list is Praj Industries.

Praj Industries stands as a multinational corporation at the forefront of ethanol and brewery industry solutions.

With operations spanning over 30 countries, it is a major player in the global market. Praj Industries specialises in process technology, engineering, and turnkey solutions for ethanol and brewery industries.

Its offerings include process engineering, project management, technology licensing, equipment supply, construction, commissioning, training, and after-sales services.

Coming to its financials, Praj Industries reported a 5.1% YoY decrease in sales to Rs 7 bn in Q1 of FY25. This decline was due to challenges related to unresolved feedstock issues and domestic bioenergy business disruptions caused by central elections.

Despite a decline in the top line, the operating profit for the year grew by 22% to Rs 867 m, with the operating profit margin for the quarter increasing to 12.4% from 10% in Q1 FY24.

The net profit for the quarter grew by 43.4% to Rs 841 m, and the net profit margin increased to 12% from 8% in Q1FY24.

Here's a table showing the company's performance over the past 5 years -

Praj Industries Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-3%	18%	80%	51%	-2%
Gross Profit Margin (%)	50%	44%	38%	38%	43%
Operating Profit Margin (%)	7%	9%	8%	9%	11%
Net Profit Margin (%)	6%	6%	6%	7%	8%
Return on Capital Employed (%)	11%	15%	23%	31%	29%
Return on Equity (%)	10%	10%	16%	22%	22%

Data Source: Ace Equity

The company has successfully produced the first batch of Lactic Acid 90%, a key component for bioplastic, at its plant for BioPolymers in Jejuri near Pune.

Praj has also established a Centre of Excellence & Innovation (CoEI) in collaboration with the Vasantdada Sugar Institute to integrate a "Farm to Fuel" model with the development of alternate feedstock.

The ethanol company expects its capital expenditure for FY25 to be in the range of Rs 750 m to Rs 1 bn and is exploring funding options for this capital allocation.

It further expects improvement in margins due to shift to more international orders.

For more information, you can have a look at the factsheet and quarterly results.

#2 Coal India

Next on the list is Coal India.

The company contributes 80% of the country's coal production. It supplies more than 80% of its production to the power sector.

It operates across eight states with 318 mines and thirteen coal washeries. It has a total washing capacity of 24.9 metric tonnes (MT) per annum.

Coal India offers a wide range of products, including coking coal, non-coking coal, washed and beneficiated coal, coke, tar, and other value-added products.

Coming to its financials, state-owned Coal India reported a revenue from operations of Rs 364.7 bn during Q1 of FY25 compared to Rs 359.8 bn in the same quarter last year.

The company's consolidated EBITDA for the quarter stood at Rs 143.4 bn, with margins at 39.3%.

Profit before tax (PBT) saw a 6.0% YoY rise, reaching Rs 141.5 bn compared to Rs 133.9 bn in the same period last year.

Coal production increased to 189.0 m tonnes in Q1FY25, up from 175.0 m tonnes in the previous-year period, while offtake improved to 198.0 m tonnes from 186.0 m tonnes in Q1FY24.

It also saw an increase of 4.0% YoY in its consolidated net profit to Rs 109.6 bn for the quarter ended June 2024. On a sequential basis, net profit rose 26.2% from Rs 86.8 bn in the preceding March quarter, while revenue fell 3.0% quarter-on-quarter.

Here's a table showing the company's performance over the past 5 years -

Coal India Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	-4%	-6%	22%	26%	3%
Gross Profit Margin (%)	101%	102%	98%	100%	101%
Operating Profit Margin (%)	22%	21%	23%	32%	34%
Net Profit Margin (%)	17%	14%	16%	23%	26%
Return on Capital Employed (%)	72%	46%	54%	78%	64%
Return on Equity (%)	72%	46%	54%	78%	64%

Data Source: Ace Equity

Recently, on 23 September 2024 the company entered into two joint ventures (JV) with Rajasthan Rajya Vidyut Utpadan Nigam (RRVUNL). Under one JV the joint entity will undertake Renewable Energy Business in Rajasthan.

Going ahead, Coal India's diversification into sectors like renewables and critical minerals aims to reduce import dependence while enhancing its growth prospects.

The company aspires to emerge as a global energy and mineral conglomerate, committed to sustainable development.

For more details, see the Coal India fact sheet and quarterly results.

#3 IRCTC

Third on the list is IRCTC.

IRCTC is a Mini Ratna (Category 1, Central Public Sector Enterprises) and the only company authorized by the Indian government to provide online railway tickets, catering services, and packaged drinking water at railway stations and trains in India.

It manages catering and hospitality services at railway stations, on trains, and other important locations and promotes domestic travel and international tourism through the development of budget hotels, special tour packages, and e-ticketing services.

Coming to its financials, the company in Q1FY25 achieved a revenue of 11.2 bn, growing at a rate of 11.8% YoY.

EBITDA increased to Rs 3.8 bn, reflecting a 9.3% YoY growth and a 3.4% QoQ rise.

Furthermore, the EBITDA margin improved to 33.5%, highlighting operational efficiency and effective cost management.

In Q1FY25, IRCTC reported an all-time high profit of Rs 3.1 bn. The company achieved profit growth of 32.5% year-on-year. While the net margin stood at 27%, during the quarter.

Here's a table showing the company's performance over the past 5 years -

IRCTC Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	21%	-66%	142%	89%	21%
Gross Profit Margin (%)	94%	94%	94%	94%	94%
Operating Profit Margin (%)	31%	24%	47%	36%	34%
Net Profit Margin (%)	23%	24%	35%	28%	26%
Return on Capital Employed (%)	62%	16%	51%	59%	54%
Return on Equity (%)	39%	13%	35%	41%	34%

Data Source: Ace Equity

The company is on track to getting the Navratna status. During the quarter, it was upgraded from Schedule B to Schedule A company by the Government of India.

The company's management remains optimistic about future growth driven by the government's investment in railway infrastructure worth Rs 2.6 trillion planned for the current year.

IRCTC is also expected to expand services in some segments, including flights and buses.

This is a trend we're seeing for the past few quarters. Every quarter, the company announces some new thing, which is expected to add up to its topline in the long run.

With a strong deal pipeline for railways, and growing demand, IRCTC is expecting good growth.

To know more about the company, check out IRCTC's detailed financial factsheet and its quarterly report.

#4 Hindustan Aeronautics (HAL)

Fourth on the list is Hindustan Aeronautics.

Hindustan Aeronautics Limited (HAL), one of India's premier public sector undertakings (PSUs), stands on the verge of being elevated to the "Maharatna" status.

The company develops, designs, manufactures, and supplies aircraft, helicopters, drones, avionics, and communications equipment for military and civil markets. It also builds certain components of the PSLV rocket for ISRO.

Apart from this, one of the company's main lines of business is the maintenance, upgrade and overhaul of various aircraft. This includes changes like avionics upgrades integrating new weapon systems, software upgrades, etc.

Coming to its financials, for the June 2024 quarter, HAL reported an 11% (YoY) increase in revenue, reaching Rs 43.5 bn compared to Rs 39.2 bn in the same period last year.

This growth was driven by higher demand for HAL's aerospace and defence products, which includes significant contracts, and projects.

HAL's operating profit has shown substantial improvement, rising from Rs 64 bn in FY22 to Rs 116.4 bn in FY24.

Net profit surged by 77%, rising to Rs 14.4 bn from Rs 8.1 bn a year earlier. While the net margin for the quarter also rose to 33% from 21%, in Q1 FY24.

Here's a table showing the company's performance over the past 5 years -

Hindustan Aeronautics Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	7%	7%	8%	9%	13%
Gross Profit Margin (%)	57%	52%	60%	63%	65%
Operating Profit Margin (%)	23%	23%	22%	25%	32%
Net Profit Margin (%)	13%	14%	21%	22%	25%
Return on Capital Employed (%)	24%	26%	30%	31%	39%
Return on Equity (%)	22%	21%	26%	25%	26%

Data Source: Ace Equity

HAL is strategically pivoting towards the development of its own products, including advanced fighter aircraft and helicopters.

Going forward, to meet the growing demand, HAL has established a new production line in Nashik for the LCA Mk-1A, complementing the existing line in Bengaluru.

This expansion will enable HAL to increase its production capacity from 16 to 24 LCA Mk-1A jets annually, with the delivery of the 87 jets expected to be completed by 2028.

To support this ramp-up, HAL is also expanding its manufacturing facilities. A new helicopter manufacturing facility is being set up in Tumkur.

To know more about the company, you can have a look at the financial factsheet and quarterly results.

#5 Indian Energy Exchange (IEX)

Fifth on the list is Indian Energy Exchange (IEX).

Indian Energy Exchange Ltd provides an automated platform and infrastructure for carrying out trading in electricity units for physical delivery of electricity.

The company is the 1st power exchange-licensed by the Central Electricity Regulatory Commission ('CERC') for spot trading in electricity and trading of Renewal Energy Certificates (REC) and ESCerts.

The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution.

Coming to its financials, led by strong volume growth its consolidated revenue grew 21.3% YoY, rising from Rs 1.2 bn in Q1FY24 to Rs 1.5 bn in Q1FY25.

The hot weather led to a surge in electricity demand in Q1FY25. Peak power demand hit 250 GW, surpassing the previous high of 243 GW in September last year.

Coal production increased by nearly 11% YoY to 247 m tonnes. The auction premium under Shakti B8 has been around 20% for the last three months.

The operating profit for the quarter stood at 1 bn, while the operating profit margin for the quarter stood at 81% versus 78%, in Q1FY25.

IEX's profit after tax increased 27.2%, from Rs 740 m in Q1FY24 to Rs 930 m in Q1FY25. While the net profit margin for the quarter stood at 75% versus 71.1%, in Q1FY24.

Here's a table showing the company's performance over the past 5 years -

Indian Energy Exchange Snapshot (2020-24)

	FY20	FY21	FY22	FY23	FY24
Revenue Growth (%)	1%	23%	34%	-6%	12%
Gross Profit Margin (%)	80%	82%	86%	84%	84%
Net Profit Margin (%)	69%	67%	71%	73%	76%
Return on Capital Employed (%)	56%	59%	62%	49%	50%
Return on Equity (%)	46%	40%	43%	37%	36%

Data Source: Ace Equity

Going forward, the company's future is anchored on several growth drivers and strategic initiatives. It plans to introduce new products like long-duration contracts and green real-time markets (RTM).

The company sees potential in shifting demand from costlier power sources to cheaper, surplus power available during the daytime.

It aims to increase the share of renewable energy through market-based models. Initiatives include Contracts for Difference (CfD), virtual power purchase agreements (PPAs), and peer-to-peer (P2P) trading models.

To know more about the company, you can have a look at the financial factsheet and quarterly results.

Conclusion

Investing in India's monopoly stocks presents a unique opportunity due to their strong pricing power, high market share, and stable profitability.

However, potential risks include regulatory changes, technological disruptions, and shifts in consumer preferences.

Regulatory risks are especially pertinent as governments may intervene to foster competition and protect consumer interests.

Public and political scrutiny can also impact stock prices, highlighting the importance of evaluating these factors alongside financial stability and market position.

Additionally, ethical considerations and corporate practices may influence public perception and regulatory scrutiny, potentially affecting stock performance.

Investors are advised to conduct thorough research and consider these factors carefully before making investment decisions in monopoly stocks.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...