top of page
Search

Entry Barriers and Competitive Intensity | Quick ₹eads

by Karnivesh | 10 February 2026


The room falls silent as the new telecom license auction results flash on screen. Reliance Jio wins spectrum at ₹2.2 lakh crore valuation. Bharti Airtel secures second place. Vodafone Idea scrapes through at highest cost. Analysts cheer "Jio disruption phase over." Three months later, Jio slashes tariffs 50%. Airtel matches. Vodafone's EBITDA evaporates. Debt covenants trigger. The "survivor" story becomes a debt crisis overnight.

High entry barriers protect incumbents until a deep-pocket disruptor arrives. Low barriers invite endless competition. India's telecom collapse (7 players → 3), airline carnage (20 → 4), and paint wars reveal how entry barriers + competitive intensity determine industry profitability. Strong barriers + low rivalry = fat margins. Weak barriers + high intensity = margin destruction.

Entry Barriers: The Gatekeepers

Entry barriers dictate who plays. High barriers create oligopolies. Low barriers spawn chaos:


Capital Intensity (₹10,000+ Cr Minimum):

  • Refineries: Reliance Jamnagar ₹3 lakh crore scale. New entrant needs ₹1 lakh crore + 5 years. Result: 4 players control 95% capacity.

  • Airlines: IndiGo 60% share needs ₹20,000 crore fleet. 20 airlines → 4 survivors. SpiceJet debt ₹5,000 crore.


Regulatory Moats:

  • Spectrum Licensing: ₹2 lakh crore auctions. Vodafone Idea loses EBITDA covering spectrum cost.

  • Demat Processing: CDSL/NSDL 100% duopoly. ₹500 crore tech + SEBI approval.

  • Pharma APIs: Divi's Labs ₹500 crore FDA validation per client. 35% ROCE vs generic 15%.​


Distribution Scale:

  • FMCG: HUL 9 million outlets (₹5,000 crore network). New entrant needs 10 years replication. ITC Sunfeast gains 10% share via same pipes.

  • Paints: Asian Paints 55% share, 50,000 dealers. New entrant starts at 1-2%.​

Competitive Intensity: The Profit Destroyer

Barriers get you in. Rivalry determines survival:

 

Telecom Carnage (High Barriers + Insane Rivalry):

 

 

 

Airlines (Moderate Barriers + Cutthroat Rivalry):

  • IndiGo: 60% share via cost discipline (₹2.5/ASK)

  • Others: Jet bankrupt, SpiceJet 90% grounded

  • 20 airlines → IndiGo 60% + 3 survivors

FMCG (Low Barriers + Moderate Rivalry):

  • 100+ biscuit brands but HUL/ITC/Parle 70% share

  • New entrants cap at 2-3% via distribution access

  • Rural sachet war: 8% annual pricing power​

The Intensity Matrix: India's Industries

Barriers

Low Rivalry

High Rivalry

HIGH

Refineries (4 players, 20% margins)Demat (CDSL 85% fees)

Telecom (3 players, 0% margins)Airlines (IndiGo 60%, others bleed)

MEDIUM

Paints (Asian 55% share, 22% margins)

FMCG Biscuits (Top 3 70%, 15% margins)

LOW

N/A

Generic Pharma (100+ players, 8% margins)

Sweet Spot: High barriers + low rivalry = 20%+ ROCE oligopoly.

Real Winners: Barrier + Discipline

Asian Paints (Medium Barriers + Low Rivalry):

  • 50,000 dealers (₹2,000 crore network)

  • 55% volume share → 12% pricing power

  • 22% margins vs peers 8%

  • ROCE 35% decade average​

IndiGo (Moderate Barriers + Cost Discipline):

  • ₹20,000 crore fleet scale

  • ₹2.5/ASK vs peers ₹4-5

  • 60% share → EBITDA positive in losses

  • Debt/equity 1.2x vs SpiceJet 5x

Divi's Labs (High Barriers + Niche Focus):

  • ₹500 crore FDA switch cost per client

  • 90% retention → 35% ROCE

  • 20% API share vs generic price wars

Losers: Barriers Without Discipline

Vodafone Idea (High Barriers + No Discipline):

  • ₹2 lakh crore spectrum (high barrier)

  • ARPU ₹130 vs Airtel ₹210

  • Debt ₹2.1 lakh crore → covenants breach

  • Market share 20% → value destruction

SpiceJet (Moderate Barriers + Price Wars):

  • ₹5,000 crore debt vs IndiGo ₹20,000 crore equity

  • ASK cost ₹5 vs IndiGo ₹2.5

  • 90% grounded → market share 3%

The ROCE Reality Check


10-Year Returns Proof:

  • Asian Paints: 800% (28% CAGR)

  • IndiGo: 1,200% (IPO to peak)

  • Divi's Labs: 1,200% (35% CAGR)

  • Vodafone: -95%

 

Spotting Winners: The Framework


Green Flags (Barrier + Discipline):

  1. ROCE >25% despite sector average 15%

  2. Pricing Power: 8-12% hikes annually

  3. Cost Leadership: -20% vs peers

  4. Client Lock-in: >85% retention

  5. Debt Discipline: D/E <1x even in growth


Red Flags (Barrier Without Edge):

  1. ROCE = Sector Average

  2. Price Followers (not leaders)

  3. Debt >2x EBITDA

  4. Customer Concentration >30%

  5. Capex > FCF 3 years

 

India's Barrier Champions

Oligopoly Sweet Spots:

  • Demat: CDSL/NSDL 100% (85% fee revenue)

  • Paints: Asian 55% (22% margins)

  • API Pharma: Divi's 20% niche (35% ROCE)

  • Retail: D-Mart 20% ROE scale

Chaos Avoid:

  • Generic Pharma: 100+ players, 8% margins

  • Telco #3: Vodafone survives, doesn't thrive


The Bottom Line

Entry barriers create the game. Competitive intensity determines the score. Asian Paints thrives in moderate barriers via 55% share discipline. IndiGo dominates airlines via cost moat. Vodafone survives telecom via... luck.

India's compounding machines Divi's 35% ROCE APIs, CDSL 85% network, Asian Paints 22% margins combine barriers with execution. Price warriors erode capital.

 

Comments

bottom of page