Aditya Birla Capital Limited — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

Aditya Birla Capital reported a strong Q2 FY26 with consolidated PAT up 3% YoY to ₹855 crores and revenue up 4% YoY to ₹12,481 crores. The NBFC and HFC segments showed robust growth in disbursements and portfolio, while asset quality remained strong across the board. The asset management business saw healthy AUM growth, and insurance businesses demonstrated strong premium growth, though the health segment reported a net loss and the life segment faces short-term margin pressure from GST changes.

Highlights

  • Consolidated profit after tax increased by 3% year-on-year to ₹855 crore Rupees.

  • Total consolidated revenue grew by 4% year-on-year and 10% sequentially to ₹12,481 crore Rupees.

  • NBFC business disbursements increased by 39% sequentially to ₹21,990 crore Rupees, with portfolio growing 22% YoY.

  • HFC disbursements grew by 44% year-on-year to ₹5,786 crore Rupees, resulting in 65% YoY portfolio growth.

  • Asset Management average AUM grew by 11% year-on-year to more than ₹4.25 trillion, with Equity AUM up 7% sequentially.

Concerns

  • Life insurance net loss for H1 FY26 stood at ₹102 crores as per new accounting regulations.

  • Health insurance combined ratio was 112% in H1 FY26.

  • Short-term margin pressure in life insurance due to GST exemption, given inability to reprice products and loss of input tax credits.

Key financials

  1. Consolidated Profit After Tax ₹855 Cr +3%YoY
  2. Consolidated Revenue ₹12,481 Cr +4%YoY

What they filed

Q1 FY27: revenue up 24.4%, net profit up 32.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,158 3,792 3,853 4,010 4,507 +8%4,384 +16%4,572 +19%4,990 +24%
EBITDA3,718 3,505 3,795 3,850 4,001 +8%4,307 +23%— —
Net profit1,032 613 654 676 916 −11%740 +21%777 +19%893 +32%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • NBFC Segment
    ₹21,990 Cr Disbursements₹1.40L Cr Portfolio (AUM)₹714 Cr Profit After Tax2.2% RoA6.1% NIM (including fee)3% Gross Stage 2 and 3 loans1.2% Credit Cost1.9% Opex to AUM (H1)
  • HFC Segment
    ₹5,786 Cr Disbursements₹38,270 Cr Portfolio (AUM)₹194 Cr PBT1.8% RoA13.9% RoE61% Stage 3 loans2.4% Opex-to-assets61% Gross NPAs
  • Asset Management Segment
    ₹4.25L Cr Average AUM₹1.92L Cr Equity AUM₹270 Cr Operating Profit₹241 Cr Profit After Tax
  • Life Insurance Segment
    19% Individual First Year Premium Growth (H1 FY26)4.9% Market Share11.6% Net VNB Margin (H1 FY26)₹237 Cr Absolute Net VNB (H1 FY26)₹8,941 Cr Total Premium (H1)₹14,585 Cr EV
  • Health Insurance Segment
    ₹3,070 Cr Gross Written Premium (H1 FY26, old accounting)₹2,839 Cr Gross Written Premium (H1 FY26, 1/N basis)13.9% Market Share (SAHI)₹102 Cr Net Loss (H1 FY26, new accounting)108% Combined Ratio (H1 FY26, old accounting)

Guidance & targets

Profitability

  • NBFC Credit Cost Profitability · FY26 · High confidence 1.2% to 1.3%
    Our credit cost in the current quarter is 1.16% and we expect the credit cost to be in the range of 1.2% to 1.3% in FY26.

    — Vishakha Mulye

  • NBFC Credit Cost (Company Level) Profitability · High confidence 1.2% to 1.3% range
    Going forward, we remain confident to maintain the credit cost in the range of 1.2%-1.3% at the company level.

    — Rakesh Singh

  • HFC RoA Profitability · next 6 to 8 quarters · High confidence 2% to 2.2%
    Given this consistent improvement, we are on track to achieve ROA of 2% to 2.2% over the next 6 to 8 quarters, consistent with our guidance.

    — Pankaj Gadgil

  • Life Insurance VNB Margins Profitability · next 3 years · High confidence 18%+
    Our guidance is to grow Individual FYP at a CAGR of 20%+ for the next 3 years, whilst achieving this growth we intend expanding our current VNB margins of 18%+ and in absolute numbers double the value of our Net VNB in the next 3 years' time.

    — Mayank Bathwal

  • Life Insurance Net VNB Profitability · next 3 years · High confidence double

    — Mayank Bathwal

  • Life Insurance Net VNB Margin Profitability · FY26 · High confidence more than 18%
    Taking into consideration the above, in the life insurance business, we remain confident to achieve a net VNB margin of more than 18% in FY26.

    — Vishakha Mulye

  • Health Insurance Combined Ratio Profitability · current year · High confidence improvement from 105%

    From 105% today

    In the health insurance business, we remain confident of improving our combined ratio in the current year from 105% in the previous year.

    — Vishakha Mulye

  • NBFC RoA Profitability · medium term · Medium confidence 2.5%
    Suresh, we had given a guidance of 2.5%. By the end of this quarter 4, we should be closer to around 2.4%. And from there on, we will look at how do we expand the margins. But in the given environment, we had mentioned about 2.5% in the medium term. In slightly longer term, we will have to recalibrate and see how we expand the ROAs from there.

    — Rakesh Singh

  • NBFC RoA Profitability · end of Q4 FY26 · High confidence closer to 2.4%

    — Rakesh Singh

Growth

  • Life Insurance Individual FYP Growth Growth · next 3 years · High confidence CAGR of 20%+
    Our guidance is to grow Individual FYP at a CAGR of 20%+ for the next 3 years, whilst achieving this growth we intend expanding our current VNB margins of 18%+ and in absolute numbers double the value of our Net VNB in the next 3 years' time.

    — Mayank Bathwal

What to watch in Q3 FY26

NBFC Opex to AUM Ratio

next quarter
Current 1.9% (H1 FY26)
Target Normalization to 1.9% range

Why it matters

To confirm if the Q2 opex jump was a one-off and if cost efficiency is maintained in the NBFC segment.

So Chintan, on opex, it's one-off. And if you look at the H1 number, it is 1.9% opex to AUM. Going forward, we will be in this range. So, since the last quarter, 1.74% was slightly muted. If you see last year, it was above 2%. And if you look at it in H1, it is 1.9%. So going forward, it should be at 1.9% in that range. So, this one-off should get normalized going forward.

Risks & concerns

  • GST Exemption Impact on Life Insurance Profitability

    medium

    Short-term margin pressure due to inability to reprice products and loss of input tax credits, though mitigation efforts are underway.

    Management acknowledged

  • Competitive Intensity in HFC Segment

    medium

    Potential pressure on NIMs in a competitive and falling rate environment, though operating leverage is expected to compensate.

    Analyst acknowledged

  • Ongoing Tariff and Trade Policy Uncertainties

    low

    Potential impact on external demand, requiring close monitoring.

    Management acknowledged

Q&A highlights

8 direct
NBFC Opex one-off Direct
So Chintan, on opex, it's one-off. And if you look at the H1 number, it is 1.9% opex to AUM. Going forward, we will be in this range. So, since the last quarter, 1.74% was slightly muted. If you see last year, it was above 2%. And if you look at it in H1, it is 1.9%. So going forward, it should be at 1.9% in that range. So, this one-off should get normalized going forward.

Clarifies a significant sequential jump in operating expenses, indicating it's not a recurring trend and providing a normalized range for future quarters.

Asked by Chintan Shah

NBFC Yields/Margins trajectory Direct
So, I think the NIMs are quite stable, Chintan. As I said, as we grow our personal and consumer, we will start seeing the benefit in quarter 3, quarter 4 with the growth which we have seen in quarter 2. So yes, so I think the yields will start improving in the coming quarter.

Addresses concerns about declining yields and provides a timeline for expected improvement driven by growth in higher-yielding segments.

Asked by Chintan Shah

NBFC NPA sale rationale (CGTSME) Direct
So, Avinash, the rationale was we wanted to align the ECL policy and the write-off policy, and that's the reason why we did it because there used to be a cash flow mismatch in terms of when the claim comes back and all of that, and it used to look elevated. That's the reason one, we have taken a one-time decision to align it with all our other businesses.

Explains the strategic reason behind selling government-guaranteed unsecured business loans to an ARC, clarifying it's a policy alignment rather than a change in strategy for leveraging guarantees.

Asked by Avinash Singh

HFC competitive intensity/NIM pressure Direct
I think the idea is that there will be naturally some reduction in the NII. So, 5.07% that we're talking, realistically, we should be seeing it somewhere in the range of between 4.75% to 4.80% at the end of the year. So that's the broad range. But that will get compensated by the operating leverage that we will get.

Provides insight into the expected NIM trajectory for HFC in a competitive and falling rate environment, highlighting that operating leverage will offset potential NII compression.

Asked by Avinash Singh

NBFC Cost of Funds trajectory Direct
So, cost of fund, we operate in a competitive environment. And if the cost of funds comes down, if the floating rate interest is there, we need to pass it on to our customers. So, it's a fine balance, Nidhesh, and we will continue to do that. But as I mentioned, with the change in the product mix, our yield should improve, and that should help our margins to improve.

Explains the dynamic between cost of funds, customer rates, and product mix, indicating how margins are expected to improve despite competitive pressures.

Asked by Nidhesh Jain

HFC ROA guidance timeline Direct
So naturally, the impact has been sharper in the first quarter and the second quarter. The impact may not be 20 basis points in the third and the fourth quarter. It will be there, but we feel strongly that when I said ROA, I said 2% and 2.2%. So, for 2.2%, it will take that much of time to reach between 5 to 6 quarters. So, that is the way in which we are looking at the numbers right now.

Clarifies the timeline for HFC to achieve its 2-2.2% ROA target, explaining the diminishing incremental impact of operating leverage over time.

Asked by Nidhesh Jain

Life Insurance GST impact on VNB margins Direct
Typically, impact on VNB margins could range between 200 to 250 basis points. But like I said, depending on what we are negotiating right now and what discussions that we are doing, we continue to maintain our guidance. We have guided above 18% margins of net VNB, we still are giving the same guidance to say we'll get there by the end of the year.

Quantifies the potential negative impact of GST exemption on VNB margins but reassures that management is working to mitigate it and maintain guidance.

Asked by Nidhesh Jain

NBFC Medium-term ROA aspiration Direct
Suresh, we had given a guidance of 2.5%. By the end of this quarter 4, we should be closer to around 2.4%. And from there on, we will look at how do we expand the margins. But in the given environment, we had mentioned about 2.5% in the medium term. In slightly longer term, we will have to recalibrate and see how we expand the ROAs from there.

Clarifies the medium-term ROA target for NBFC, providing a more immediate target for Q4 FY26 and acknowledging the need for recalibration for longer-term expansion.

Asked by Suresh Ganapathy

3 min read 6 chapters

Detailed narrative

Consolidated Performance and Strategic Focus

Aditya Birla Capital reported a 3% year-on-year increase in consolidated profit after tax to ₹855 crores and a 4% year-on-year revenue growth to ₹12,481 crores in Q2 FY26. The company's strategy revolves around driving quality and profitable growth by leveraging data, digital, and technology. A customer-centric approach provides seamless financial solutions, supported by prudent risk management and a strengthening omnichannel distribution network, including digital platforms and branches.

NBFC Segment: Robust Growth and Asset Quality

The NBFC business demonstrated strong performance with disbursements increasing 39% sequentially to ₹21,990 crores, and the overall portfolio growing 22% year-on-year to ₹1.4 trillion. Personal and consumer loan disbursements grew 26% sequentially to ₹4,970 crores, while unsecured business loan disbursements rose 37% sequentially to ₹1,500 crores. Asset quality remained robust, with Gross Stage 2 and 3 loans declining by 67 bps sequentially to 3.03%, and a provision coverage ratio of 44.2% for Stage 3 assets. The segment's profit after tax grew 14% year-on-year to ₹714 crores, achieving an RoA of 2.20%.

Housing Finance: Strong Momentum and Operating Leverage

The HFC segment continued its strong growth trajectory, with disbursements increasing 44% year-on-year to ₹5,786 crores, leading to a 65% year-on-year portfolio growth to ₹38,270 crores. The business is experiencing significant operating leverage, with opex-to-assets improving by 20 bps sequentially to 2.39%. This contributed to an increase in RoA by 23 bps sequentially to 1.82% and RoE by 168 bps to 13.95%. Asset quality remains strong, with Stage 3 loans declining to 0.61% and a provision coverage ratio of 57.6%.

Asset Management: AUM Growth and Diversification

The Asset Management business achieved an average AUM of over ₹4.25 trillion, growing 11% year-on-year and 5% sequentially. Equity AUM increased 7% sequentially to ₹1.92 trillion. The segment saw significant growth in its Alternatives business, with PMS/AIF assets surging 8x to ₹30,250 crores from Q2 FY25. Passive AUM also grew 20% year-on-year to ₹36,000 crores. The operating profit for the segment grew 13% year-on-year to ₹270 crores, with profit after tax at ₹241 crores.

Insurance Businesses: Premium Growth and Regulatory Headwinds

The life insurance business reported a 19% year-on-year growth in individual first-year premium in H1 FY26, increasing its market share to 4.9%. Net VNB margin improved by 420 bps year-on-year to 11.6% in H1 FY26. The health insurance business grew gross written premium by 31% year-on-year in H1 FY26, with a combined ratio of 108%. However, the recent GST exemption on life and health insurance products is expected to cause short-term margin pressure due to the inability to reprice products and loss of input tax credits, though management is confident of achieving over 18% VNB margin for life insurance and improving the combined ratio for health insurance in FY26.

Digital and Omnichannel Distribution Expansion

Aditya Birla Capital is heavily investing in and leveraging its digital platforms. The D2C platform, ABCD, which went live a year ago, has already achieved over 7.6 million customer acquisitions. The B2B platform for MSME ecosystem, Udyog Plus, now contributes about 32% of the AUM of unsecured business loans. The company also expanded its branch network by 22 during the quarter, reaching 1,712 branches across all businesses, with a focus on penetrating tier 3 and 4 towns and new customer segments.

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