ICICI Prudential Conglomerate Fund’s NFO will be open till October 17. The fund will invest in conglomerates and group companies with strong parent backing that can tide over business cycles and also gain from the diversified presence of these groups. The fund investing in parts of the conglomerates will be benchmarked to BSE Select Business Group Index which itself was launched in December 2024. Here we analyse the fund rationale and investor prospects.
Group advantages
Conglomerates are Indian companies with a minimum of two listed businesses in different sectors. The fund estimates that there are 70+ groups in India with 240 stocks in the investible universe.
These companies do possess a higher chance of surviving economic cycles. The parent backing can help group companies tide over liquidity, funding, and working capital challenges which can be highly magnified in times of harsh downturns. This is also a reason why these companies receive better credit ratings compared to a similar but non-conglomerate entity.
Not only do these companies have improved survivorship rates, but these firms can also emerge stronger post any eventual downturn. The ongoing consolidation in the cement industry or a similar phase for steel companies are prime examples. Adani-backed Ambuja Cements and Aditya Birla-backed Ultra Tech Cements, have acquired cement companies that have suffered weak business conditions post-Covid to emerge stronger, partly owing to the parent backing. Tata Steel, JSW Steel and Jindal Steel have similarly expanded their base inorganically in the lean phase of the last decade partly owing to the conglomerate status.
Supportive factors
There are other positives for group companies with conglomerate backing. But these are highly dependent on the holding structure of the group and not a general positive for all companies, and henceforth, are to be analysed on a case-to-case basis.
The financial and management bandwidth of these companies allows them to participate in sunrise sectors; for instance, the Tata’s with semiconductors, several auto companies in the EV ecosystem, steel and cement firms in renewable energy, energy storage or nuclear power. The large risk capital requirement, the long gestation period for profitability and technology barriers in sunrise sectors make it suitable for conglomerate participation. But the fund and investor benefits depend on the group holding structure. Tata Sons holds the semiconductor play in Tata Electronics and only those investors have that risk exposure; all group companies may not benefit.
Similarly, the group concerns may also have access to a captive financing arm, tech support, power, logistics arm and deep talent pool, which could benefit the individual companies, but again dependent on the holding structure of the group. A group company in a conglomerate is also more likely to be part of a value chain which ensures backward and forward supply chain integration and ready vendor/customer base along with cross-selling opportunities.
JSW Cement utilises the slag from JSW Steel, Tata Motors can utilise Tata Elxsi, TCS and Tata Steel for automobile production and soon from Tata Electronics for semiconductors. But the other companies may also be listed entities which should serve their shareholder interests with arm’s length transactions between sister concerns which should cap any benefit.
Investor prospects
Firstly, the index and two other funds in the theme have less than a year of performance which is inadequate to ascertain if the theme can outperform across business cycles. In the year to date, which has several characteristics of a change in business cycle, the fund has returned 3.3 per cent compared to 3 per cent for BSE Sensex. The top five index constituents as on Sep-30 are Reliance (23 per cent), L&T (13 per cent), Mahindra & Mahindra (9 per cent), TCS (5.9 per cent), and Ultra Tech Cements (4.5 per cent).
The benefits of a lower cost of funds, inorganic expansion, sunrise sectors and capital, management and technology bandwidth do provide a head start to this theme, but on a selective and case-to-case basis. We recommend investors earmark a small portion of their satellite portfolio to this fund on this basis.
The will be benchmarked to BSE Select Business Group Index which was launched in December 2024
Published on October 4, 2025
