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    Aditya Birla Cap

    ABCAPITAL
    Financial Services·3 Feb 2025
    Management Summary

    Aditya Birla Capital reported a robust Q3 FY25 with strong growth across its lending and asset management businesses, despite a challenging macro-economic environment. While consolidated PAT saw a slight YoY decline, key segments like NBFC and HFC demonstrated significant portfolio expansion and improved asset quality. The company continued its focus on digital transformation and omnichannel distribution, with strategic initiatives like the amalgamation of Aditya Birla Finance progressing towards completion.

    Highlights

    8

    • Total consolidated revenue grew 10% YoY to ₹10,949 crores.

    • NBFC loan portfolio grew 21% YoY to ₹1.19 trillion, and PAT grew 5% YoY to ₹600 crores, with RoA at 2.10% and RoE at 13.87%.

    • HFC loan portfolio grew 62% YoY to ₹26,714 crores, achieving all-time high disbursements of ₹4,750 crores (136% YoY, 18% QoQ).

    • HFC Gross NPA reduced to 0.99%, the lowest in 15 quarters, and Stage 2 & 3 loans declined by 177 bps YoY to 1.77%.

    • AMC average AUM grew 23% YoY to ₹3.83 trillion, with PAT up 7% YoY to ₹224 crores.

    • Life Insurance individual first year premium grew 31% YoY in 9M FY25, and Group New Business Premium grew 32% YoY in 9M.

    • Health Insurance gross written premium grew 39% YoY in 9M FY25, increasing market share among SAHIs by 140 bps YoY to 12.0%.

    • Health Insurance combined ratio improved from 121% in 9M FY24 to 114% in 9M FY25, and net loss improved to ₹195 crores from ₹270 crores last year.

    Concerns

    3

    • Consolidated profit after tax declined 3.8% YoY to ₹708 crores from ₹736 crores in Q3 last year.

    • NBFC personal and consumer loans segment saw a slowdown in growth to 13.8% YoY in H1 FY25, leading to calibrated growth.

    • Life Insurance Net Margins for 9M FY25 were 10.8%, lower than 15.6% in the prior year, partly due to new surrender regulations and G-Sec rates.

    What Changed1

    vs Q4 FY25

    Guidance items11 → 7 (-4)

    Key financials

    Single quarter

    02 metrics
    1. 01Consolidated Revenue₹10,949 Cr+10%YoY
    2. 02Consolidated PAT₹708 Cr-3.8%YoY

    Segment breakdown

    NBFC
    ₹1.2L Cr Loan Portfolio (AUM)₹600 Cr PAT2.1% RoA13.9% RoE6% NIM (incl. fee income)136% Credit Cost4.3% Gross Stage 2 & 3 Loans45.6% Gross Stage 3 PCR1.9% Opex to AUM Ratio31.2% Cost Income Ratio
    Housing Finance (HFC)
    ₹26,714 Cr Loan Portfolio (AUM)₹4,750 Cr Disbursements₹110 Cr PBT142% RoA10.7% RoE99% Gross NPA1.8% Gross Stage 2 & 3 Loans2.8% Opex to Average Loan Book7.8% Cost of Borrowing (COB)
    Asset Management (AMC)
    ₹4.0L Cr Overall Average AUM₹3.8L Cr Mutual Fund Average AUM₹1.8L Cr Equity Average AUM₹224 Cr PAT₹1,382 Cr SIP Book₹3,853 Cr PMS/AIF Assets₹12,686 Cr Offshore Assets₹445 Cr Q3 Revenue from Operations₹262 Cr Q3 Operating Profit
    Life Insurance
    — Individual First Year Premium (9M FY25)— Group New Business Premium (9M FY25)10.8% VNB Margin (9M FY25)₹97,286 Cr AUM20.8% Opex to Premium194% Solvency
    Health Insurance
    ₹3,337 Cr Gross Written Premium (9M FY25, long-term accounting norms)₹1,167 Cr Gross Written Premium (Q3 FY25, long-term accounting norms)12% Market Share (SAHI, 9M FY25)114% Combined Ratio (9M FY25)₹195 Cr Net Loss (9M FY25)
    List

    Capital allocation

    2
    high confidence
    CategoryHeadline
    M&A

    Aditya Birla Finance

    merger · pending regulatory

    Liquidity

    Liquidity disclosed

    HFC infused equity capital of ₹300 crores in Q3 FY25, bringing cumulative infusion to ₹900 crores for the year. Life Insurance raised ₹311 crores via rights issue in Dec'24, with existing shareholders subscribing.

    Guidance & targets

    7
    CategoryTargetPriority
    Profitability
    Life Insurance VNB Margin
    17-18%
    		High
    Profitability
    HFC ROA Post Tax
    2-2.1%
    		High
    Profitability
    NBFC ROA
    2.4-2.5%
    		Medium
    Efficiency
    HFC Opex to Average Loan Book
    1.6-1.7%
    		High
    Portfolio Mix
    NBFC Personal and Consumer Loans Share of AUM
    18-20%
    		Medium
    Portfolio Mix
    HFC Housing Loans Share of AUM
    53-55%
    		High
    Asset Quality
    NBFC Credit Costs
    stable
    		High

    Life Insurance VNB Margin for FY25

    FY25
    Current10.8% (9M FY25)
    Target17-18%

    Why it matters

    Verifying if the expected margin expansion in Q4 materializes to meet the full-year target, crucial for profitability.

    Our endeavour is to close FY25 with a VNB margin of about 17%-18%.

    How to verify

    guidance_and_targets[category='Profitability'][metric='Life Insurance VNB Margin']

    Risks & concerns

    3
    RiskSeverity

    Challenging Macro-economic Environment

    Moderating urban demand, tight liquidity, high capital market volatility, slow government/private capex, rupee depreciation, and food inflationary pressures. — Management acknowledged

    medium

    Regulatory Impact on Life Insurance Margins

    New surrender regulations and lower G-Sec rates impacted Q3 margins, but management expects full recovery and expansion in Q4. — Management acknowledged

    medium

    Regulatory Accounting Changes for Health Insurance

    IRDAI guidelines on revenue recognition for long-term policies impact accounting financials in the short to medium term until IFRS migration, though unit economics remain unchanged. — Management acknowledged

    low

    Q&A highlights

    7

    “I think over the last 18 months to 24 months, we have made investments in widening our distribution. So the number of people that are there in sales, operations and the entire structure has been strengthened quite meaningfully. That, of course, by creating capacity is leading to high disbursements.”

    Management detailed the multi-faceted strategy (distribution, digital, Finverse, ecosystem leverage) driving HFC's 62% YoY AUM growth, indicating sustainability.

    asked by Chintan Shah

    2 min read6 chapters

    Detailed Narrative

    01

    Overall Performance and Strategic Direction

    Aditya Birla Capital reported a 10% YoY increase in total consolidated revenue to ₹10,949 crores for Q3 FY25, though consolidated PAT saw a slight decline of 3.8% YoY to ₹708 crores. The company continues to focus on quality and profitable growth, leveraging data, digital, and technology, while maintaining prudent risk management. Strategic initiatives include strengthening its omnichannel distribution network and the ongoing amalgamation of Aditya Birla Finance with Aditya Birla Capital, expected to complete by March 31, 2025.

    02

    NBFC Business Growth and Asset Quality

    The NBFC loan portfolio expanded by 21% YoY and 4% sequentially to ₹1.19 trillion. PAT grew 5% YoY to ₹600 crores, with RoA at 2.10% and RoE at 13.87%. Asset quality remained robust, with Gross Stage 2 & 3 loans declining 60 bps YoY to 4.25% and Gross Stage 3 PCR at 45.6%. The company strategically calibrated its portfolio by reducing exposure to smaller unsecured personal loans and increasing secured business loans, which now constitute 74% of the overall portfolio.

    03

    Housing Finance Business Momentum

    The HFC business demonstrated strong momentum, with its loan portfolio growing 62% YoY to ₹26,714 crores. Disbursements reached an all-time high of ₹4,750 crores, representing a 136% YoY and 18% QoQ increase. Asset quality improved significantly, with Gross NPA reducing to 0.99% (lowest in 15 quarters) and Stage 2 & 3 loans declining 177 bps YoY to 1.77%. The company infused ₹300 crores of equity capital in Q3, bringing the cumulative infusion to ₹900 crores for the year to support growth.

    04

    Asset Management Business Performance

    The Asset Management business saw its overall average AUM grow 23% YoY to ₹4 lakh crores, with Mutual Fund average AUM also up 23% YoY to ₹3.84 lakh crores. Equity average AUM grew 32% YoY to ₹1.79 lakh crores. PAT for the quarter increased 7% YoY to ₹224 crores. The SIP book grew 38% YoY to ₹1,382 crores, adding approximately 6.70 lakh new SIPs, a 3x increase compared to the previous year.

    05

    Life and Health Insurance Growth

    The Life Insurance business recorded a 31% YoY growth in individual first year premium for 9M FY25, with a VNB margin of 10.8%. The Health Insurance business continued to be the fastest-growing standalone health insurer, with gross written premium growing 39% YoY in 9M FY25 and market share increasing by 140 bps YoY to 12.0%. The combined ratio improved from 121% in 9M FY24 to 114% in 9M FY25, and net loss improved to ₹195 crores from ₹270 crores last year.

    06

    Digital and Omnichannel Initiatives

    ABCL's D2C platform, ABCD, launched in April 2024, now offers over 24 products and services and has acquired more than 4.1 million customers. The B2B platform, Udyog Plus for MSMEs, has over 2.2 million registrations and contributes about 25% of disbursements in unsecured business loans. The B2D platform, Stellar, for channel partners, went live in January, enhancing distribution capabilities and customer engagement across 1,482 branches.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.