Duopoly apparent across some industries in India

A duopoly is defined by two major firms manufacturing the same or comparable goods and services in a market or industry. The important elements of a duopoly are the interactions and effects between the competing enterprises.

In a duopoly, two businesses effectively dominate the entire market for the products and services they manufacture and distribute. Even though other businesses could be active in the same market, a duopoly is distinguished by the presence of just two major firms. The market in which the two businesses compete is shaped by them and their interactions.

The Relevance of Duopolies

Due to the need for each business to analyse how its decisions may influence its rival, or how the rival firm will react, duopolies are important. It has an impact on how each business runs, how it manufactures its products, how it markets its services, and finally how and what products and services are offered and priced. Prices frequently fall to or below the cost of production when the two businesses compete on price, eliminating any hope of making a profit.

Owing to this, most duopolistic enterprises find it advantageous and generally necessary to agree to establish a sort of monopoly by agreeing to set prices that permit both firms to take a portion of the market and, consequently, a portion of the profit. The Competition Commission and other antitrust rules in India make collusive action illegal, therefore if this approach is used improperly, it might be troublesome.

Companies like Visa vs. MasterCard, Boeing vs. Airbus, Coke vs. Pepsi, Netflix vs. Amazon Prime, etc. are some of the most well-known duopolies in the world today. These mega-corporations cannot be identified individually without referencing the other, whether that is a blessing or a curse. Such has been the story of duopolies, with their ferocious rivalry and courteous cooperation resulting in an interdependence where each has reached heights. Let’s now take a closer look at a couple of India’s tech-driven duopolies that offer taxi, payments, and depositories services.

Duopolies in Taxi Services: Ola vs Uber (Ride Booking/Sharing)

Only Ola & Uber offer taxi service through a tech app in India. A few local players had to close their businesses or were acquired by private cab operators in the past.

So, Ola and Uber are the market leaders in India’s ride-hailing industry. Uber is a well-known company with operations in 785 major cities all over the world. Since their entry into the Indian market in 2013, they have provided 14 million trips each week. Ola, on the other hand, started in 2010 and has now expanded to cover over 250 cities and receive 28 million weekly bookings. Numerous other operators were forced to close down or sell their taxi services to the two giants due to their tremendous financial resources.

 

Strategies used by them

The acquisition and investment tactics have also been employed by Ola and Uber. To expand its presence in the two-wheeler ride-hailing market, Ola invested in VOGO while Uber purchased Kareem, a company known for its service in the Middle East. In every category of road transportation, Uber and Ola have engaged in strong competition (inc. two-wheeler, three-wheeler).

Ola is also expanding into the 2W EV space with an electric scooter factory in Tamil Nadu. They have already launched the OLA electric Scooter OLA S1 last year. Even Ola co-founder and CEO Bhavish Aggarwal has hinted that the company could venture into the electric car space as well in the next two years. Teasers for OLA electric cars have already been released last week. The teaser gives us a sneak peak of not 1, but 3 electric cars.

They have also ventured into other markets, such as the food technology sector, where Uber launched UberEats and Ola bought Foodpanda, both of which were subsequently acquired by larger food tech companies . 

Through UberAir, which operates VTOL aircraft in the US, and UberBoat, which docks in Mumbai at the jetty connecting the Gateway of India to Alibaug, Uber has also expanded its service to additional modes of transportation. Additionally, they are particularly interested in creating self-driving vehicles to be used in the ride-hailing industry.

Duopoly in Card Payments Network: Rupay vs Visa/Mastercard

India’s first domestic card payment network of its kind is called RuPay. While a debit card from the International System is Visa or MasterCard. The cost of operating these cards is one of the key distinctions between a RuPay card, a MasterCard, and a Visa debit card. RuPay has lower service fees than Visa and Mastercard.

Moreover, it’s critical to understand that the payments processing industry is a classic case of the chicken and the egg. This implies that more customers will prefer to use a certain type of card if more merchants accept it. On the other hand, businesses will be compelled to accept a particular card type if a lot of customers use it. It’s not apparent what must occur first, though.

RuPay card associate offers only the option of debit cards, whereas VISA offers debit as well credit cards. About safety and security of transactions, both RuPay and VISA card associates are equally good.

 

Future

First and foremost, the banning of MasterCard is a significant lifeline, with RuPay expected to gain the most as a result. Its justification may be seen in the fact that when American Express cards were outlawed immediately before Mastercard, RuPay saw the biggest spike, with the majority of Amex users migrating to RuPay.

RuPay is still being actively expanded by the government in an effort to catch up to businesses like VISA. This is demonstrated by the desire to increase use of credit cards, which account for most transactions in India. The major benefit of RuPay cards remains their accessibility, as it is significantly simpler for someone with less financial means to obtain one.

Overall, RuPay has unquestionably transformed India’s banking industry. It has raised the bar for financial inclusion and competed favourably with international behemoths like VISA. It is the first indigenous attempt to capture the payment network market share, which was in the stronghold of American corporations.

 

Duopoly in Depositories in India: CDSL vs NSDL (Listed & Unlisted)

NSDL (promoted by NSE) and CDSL (promoted by BSE) are the only two depository institutions in India. Both NSDL and CDSL are depositories that maintain ownership records of financial securities. They are linked with investors through Depository Participants (DPs), also called stockbrokers.

On December 12, 1997, Central Depository Services (India) Limited was established in Mumbai. On August 19, 1998, SEBI issued a certificate of registration for the Company under the Depositories Regulations. On February 8, 1999, CDSL got a certificate stating that it may officially start doing business as a depository under the Depositories Regulations.

CDSL was first advertised by BSE Ltd. After that, in 2016, it sold its stake to prestigious banks that served as CDSL’s “Sponsors.” The National Stock Exchange (NSE), Metropolitan Stock Exchange of India (MSEI), and all other major stock exchanges have connectivity with CDSL. In addition to depository services, CDSL offers services for electronic insurance accounts, KYC, electronic voting, electronic notices, electronic negotiable warehouse receipts, and commodities repositories.

 

While the other oldest and biggest depository in India is NSDL. It started operating in Mumbai in 1996. This depository was the first to offer trading services in an electronic format. According to SEBI data, NSDL has more than 36,123 depository participant service centres spread across 2,000 cities, with an estimated 2.4 crore active investors. While CDSL is also listed on stock exchange and NSDL is yet to get listed.

 

Even the number of active dematerialised (demat) accounts in the country jumped 63% in the past 12 months to 89.7 million in financial year 2021-22 (FY22), shows data provided by depositories. As of March 31, the Central Depository Services (CDSL) managed 63 million accounts with assets under custody (AUC) of Rs 37.2 trillion. Meanwhile, the National Securities Depository (NSDL) handled 26.7 million accounts with AUC of Rs 302 trillion.

In the post-pandemic world, the number of demat accounts  have jumped 2.2 times, while combined AUC too has doubled.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

 

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