Lalit Kumar of ICICI Prudential AMC unveils a constructive stance on commodities, emphasizing steel sector growth prospects amid cyclical and structural gains, while expressing caution on overextended sectors like hospitals and select new-age companies.
Lalit Kumar of ICICI Prudential AMC is staying constructive on commodities, but he is putting more weight on ferrous metals than on non-ferrous names. In an interview with CNBC-TV18, the senior fund manager said long steel now looks more appealing after its latest pullback, arguing that the sector remains below a true mid-cycle level even after the recent recovery.
Kumar’s case rests on both cyclical and structural factors. He said steel producers have already seen EBITDA per tonne improve over the past decade and should be able to sustain higher returns because many are expanding existing plants rather than building entirely new ones. That keeps capital spending lower on a per-tonne basis and, in his view, should support stronger incremental returns on capital. Research material from Selborne Research notes that EBITDA per tonne is widely used to compare steelmakers because it strips out size differences, although it can still be distorted by accounting and production choices.
He also pointed to global supply and demand dynamics as an important guide to timing. Kumar said Chinese steel exports are still running at roughly 110 million to 120 million tonnes, near levels seen around the 2015 cycle low, and he argued that investors should watch for signs that even the least efficient producers are starting to make money before the sector gets too hot. Separate commentary from ICICI Direct said India’s steel companies have recently benefited from a 12% safeguard duty on imports, though higher coking coal, freight and logistics costs are likely to limit how far margins can expand.
Beyond metals, Kumar said he sees scope in textile and manufacturing exporters, especially firms with exposure to garments, apparel and other export-led businesses. He said India’s currency advantage, geopolitical shifts and trade agreements are giving the sector a longer runway for growth, while companies that are diversifying into new product categories or entering joint ventures could be particularly well placed.
He was more guarded on areas where profitability already looks stretched. Kumar said hospitals are one such sector, with margins and valuations near peak levels and significant capacity additions likely over the next three years. He also took a selective view on new-age companies, saying he prefers businesses with durable competitive advantages rather than buying the sector as a whole. More broadly, he warned that strong first-quarter numbers should not be extrapolated too quickly, as some of the tailwinds from inventories, currency moves and tax changes are likely to fade in coming quarters.
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