Edited excerpts from a chat with Lalit Kumar, Fund Manager at ICICI Prudential Mutual Fund:
What’s the underlying investment thesis driving the Conglomerate Fund? How does the AMC define and filter “conglomerate groups” for portfolio inclusion — and what differentiates this universe from a traditional diversified equity fund approach?
The investment thesis of ICICI Prudential Conglomerate Fund is the belief that large promoter-led business groups possess structural advantages that help them create wealth across market cycles. Conglomerates typically enjoy deep balance sheets, lower borrowing costs, and access to multiple growth engines. For inclusion, the fund considers India-domiciled promoter-led groups with two or more listed companies across different sectors. The resulting 71-group, 240-company universe is distinct from traditional diversified funds, which include PSUs, MNCs, or standalone entities. This theme captures India’s evolving corporate structure where scale, integration, and financial strength help conglomerates not only survive downturns but emerge stronger from them.Given that conglomerates tend to have deep pockets and a lower cost of capital, how will the fund manager balance exposure between mature cash-generating entities and high-growth sunrise businesses within these groups?
The portfolio will follow a dual-lens framework which consists of structural strength and cyclical opportunity. Mature businesses with steady cash flows form the structural core, ensuring resilience, while selective exposure to sunrise areas such as semiconductors, renewables, nuclear, or EV ecosystems captures growth optionality. Conglomerates’ ability to fund long-gestation projects and expand into new sectors gives the portfolio a natural blend of stability and growth. Allocation between mature and emerging segments will be actively managed through bottom-up selection and sector-cycle assessment, ensuring participation in long-term wealth creation without risk concentration.
The fund has flexibility across market caps and sectors — how do you plan to deploy this flexibility? Is there a pre-set bias toward large caps given that many Indian conglomerates are already benchmark heavyweights?
Initially, the portfolio will have a larger tilt toward established large caps, which dominate India’s business groups. However, flexibility across large, mid, and small caps is integral to the strategy. Many group companies at the mid and small-cap level are emerging entities that benefit from the parent’s balance sheet and execution track record. These companies often list or demerge as they scale, creating new opportunities for alpha. The fund will actively rebalance based on valuation and sectoral cycles rather than preset bias, enabling a dynamic participation across India’s corporate hierarchy.
How do you ensure the portfolio remains meaningfully diversified without mirroring a concentrated large-cap benchmark?
Diversification is built into the fund’s design. The investment universe spans 71 business groups and 18 sectors, significantly broader than the typical large-cap index. The fund excludes PSUs, MNCs, and several standalone banks, creating a differentiated exposure set. Position sizes are determined through bottom-up research, cyclical analysis, and valuation discipline, ensuring no single group or sector dominates the portfolio. A minimum of 30 holdings and a cross-sector spread help reduce concentration risks. The result is a diversified portfolio that captures India’s leading business houses while maintaining active deviation from benchmark weights.
With conglomerates playing across multiple verticals, there’s an embedded layer of cross-holding and promoter exposure risk. How will the fund address governance or correlated business risks that come with group structures?
Governance quality and promoter track record are key parameters in the fund’s structural assessment. We focus on business groups with established capital allocation discipline, transparency, and credible succession planning. Within a group, stock selection will favour entities with stronger balance sheets and clearer earnings visibility rather than taking blanket exposure. Cross-holdings will be carefully evaluated to avoid potential risks. The aim is to capture the benefit of group-level strength without being overexposed to correlated businesses. Continuous monitoring through our internal research framework will help ensure adherence to governance and risk standards.
How do you see conglomerates positioned versus single-sector players?
Conglomerates have demonstrated the ability to withstand downcycles better than standalone companies because of their diversified earnings base and financial muscle. Historical data shows conglomerate groups have outperformed the broader market through full economic phases, both in downturns and recoveries. Their ability to allocate capital counter-cyclically, leverage group synergies, and participate across industries provides a competitive edge. In a transforming economy like India, where capital intensity and policy shifts create new opportunities, conglomerates are naturally positioned to dominate sunrise sectors while maintaining stability through legacy businesses.
What’s your take on the increasing representation of conglomerates in the Nifty 100 — rising from 26% to 36%? Do you see this as a structural trend or a cyclical overhang of a few dominant groups?
We view this as a structural evolution, not a short-term concentration effect. India’s corporate landscape is consolidating, and larger promoter-led groups are gaining share through organic growth and M&A. Over the last decade, conglomerates have expanded their footprint across renewables, digital, mobility, and manufacturing. Their rising index weight reflects economic formalisation, scale advantages, and improved access to capital. As newer sectors demand large investments and execution capability, conglomerates will likely remain at the forefront of India’s growth narrative.
How do you intend to handle conglomerate-specific risks in such a fund? For example, if there’s a negative news flow around Adani or Tata, all the group stocks can get affected without any direct relationship between their respective businesses.
The fund’s portfolio construction consciously limits group-level exposure and emphasises company-specific fundamentals. While short-term sentiment may affect multiple stocks within a group, the fund invests in businesses with independent cash flows, governance credibility, and sound balance sheets. Active position sizing ensures that no single group materially drives portfolio risk. Moreover, cross-sector diversification further cushions against correlated declines. Over time, quality businesses within such groups tend to recover faster as fundamentals reassert themselves. The fund’s research-driven approach and disciplined risk controls will help navigate such transient volatility.
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