Aditya Birla Capital Limited — Q4 FY25 earnings call

Call held 13 May 2025

Management summary

Aditya Birla Capital reported strong Q4 FY25 results with consolidated PAT (excl. one-off) growing 24% sequentially to ₹865 crore and revenue up 29% sequentially to ₹14,138 crore. The NBFC portfolio expanded 20% YoY to ₹1.26 trillion, while HFC AUM surged 69% YoY to ₹31,053 crore. Life insurance saw 34% YoY growth in individual first-year premium, and the health insurance business achieved breakeven. The amalgamation of Aditya Birla Finance with Aditya Birla Capital was successfully completed, releasing ₹3,000-3,500 crore in capital.

Highlights

  • Consolidated PAT (excl. one-off) grew 24% sequentially and 6% year-on-year to ₹865 crore.

  • Consolidated Revenue grew 29% sequentially and 13% year-on-year to ₹14,138 crore.

  • NBFC portfolio grew 20% year-on-year and 6% sequentially to about ₹1.26 trillion Rupees.

  • HFC AUM grew 69% year-on-year to more than ₹31,000 crore.

  • Life Insurance Individual First Year Premium grew 34% year-on-year, making it the fastest growing player.

  • Health Insurance achieved breakeven for the first time in FY25 with a profit of ₹6 crore (new accounting norms).

Concerns

  • Economic environment remains volatile due to recent tariff measures and geopolitical tensions.

  • Unsecured business loan Stage 3 loans increased from 4.1% to 4.7% sequentially (though management clarified it's due to government guarantee and not write-off).

  • IRDAI guidelines on revenue recognition for long-term policies impact accounting financials in the short to medium term.

Key financials

  1. Consolidated PAT (excl. one-off) ₹865 Cr +6%YoY
  2. Consolidated Revenue ₹14,138 Cr +13%YoY
  3. NBFC Portfolio (AUM) ₹1.26L Cr +20%YoY
  4. HFC AUM ₹31,053 Cr +69%YoY
  5. AMC Average AUM ₹3.81L Cr +15%YoY
  6. Life Insurance Absolute VNB ₹818 Cr +17%YoY
  7. Health Insurance GWP (old accounting) ₹5,252 Cr +42%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
    ₹19,523 Cr Disbursements₹652 Cr PAT2.3% RoA6.1% NIM (incl. fee income)1.2% Credit Cost3.8% Gross Stage 2 & 3 loans45% Gross Stage 3 PCR
  • HFC
    ₹5,820 Cr Disbursements₹419 Cr PBT1.5% RoA11% RoE66% Stage 3 loans1.4% Stage 2 & 3 assets
  • Asset Management
    ₹931 Cr PAT₹1,685 Cr Operating Revenue₹1,986 Cr Total Revenue₹944 Cr Operating Profit before Tax₹1,245 Cr Profit before Tax
  • Life Insurance
    34% Individual First Year Premium Growth23% Group New Business Premium Growth18% Net VNB margin₹13,812 Cr Embedded Value19.2% Return on Embedded Value₹20,639 Cr Total Premium
  • Health Insurance
    ₹4,940 Cr GWP (new accounting)12.6% Market share among SAHIs105% Combined Ratio (new accounting)₹6 Cr Profit (new accounting)

Capital allocation

high confidence
  • M&A Aditya Birla Finance Merger · Closed

    Simplified corporate structure, better access to capital, operational synergies, long-term growth, enhanced value creation.

    Successfully completed the amalgamation of Aditya Birla Finance with Aditya Birla Capital. Appointed date: April 1, 2024, effective date: April 1, 2025. This marks a significant step in transformative growth journey, increasing strength and agility as a unified operating entity. The merger released 3,000-3,500 crores of capital, helping meet 1-1.5 years of growth requirement.

    Before we talk about the financial performance, I am pleased to announce that we have successfully completed the amalgamation of Aditya Birla Finance with Aditya Birla Capital, following all requisite approvals. The appointed date of amalgamation is April 1, 2024 and effective date is April 1, 2025. Aditya Birla Capital now has two business segments, first- the NBFC lending business and second-the investment business through which it will continue to hold investments in all its subsidiaries and associate businesses. This marks a significant step in our transformative growth journey, increasing our strength and agility as a unified operating entity. With a simplified corporate structure, we now have better access to capital to drive operational synergies, long-term growth and enhanced value creation for all stakeholders. Coming to the financial and business performance.
  • Liquidity Liquidity disclosed HFC Tier 1 capital adequacy ratio is 14.3% (vs regulatory minimum 15%, internal guideline 16.5%-17%). Total CRAR for HFC is 16.54% after infusing ₹1,200 crore during FY25. Life Insurance solvency ratio is 188%.
    On a standalone basis, the tier 1 capad ratio for the merged entity is 15.93% and total CRAR ratio is 18.22%. Standalone return on equity adjusted for investments in subsidiaries and associates and excluding one-off items is 14.2% in Q4 FY25. ... If you look at the Tier 1 ratio is 14.3%, and we have sufficient headroom to raise even sub debt from the market. And whatever growth capital in the HFC will be required during the next year, we will also support from ABC from the operating and the holding company. So no worries on the capital requirement of the HFC for meeting the growth requirements. ... Our solvency continues to remain at a healthy rate of 188%.

Guidance & targets

Volume

  • NBFC Overall Portfolio Growth Volume · next three years · High confidence 25% CAGR
    Going forward, we remain confident of growing the overall portfolio by CAGR of 25% over the next three years.

    — Vishakha Mulye

  • NBFC Loan Book Volume · next 3 years · High confidence Double
    And as we have guided that in the next 3 years, we are looking at doubling our loan book.

    — Rakesh Singh

  • NBFC Personal and Consumer Loans Mix Volume · Going forward · Medium confidence Close to 20%
    Within that, if you look at retail and SME, as you rightly mentioned, personal and consumer can go to around close to 20% and unsecured business will again grow.

    — Rakesh Singh

  • Life Insurance Individual FYP Growth Volume · next three years · High confidence 20%-25% CAGR
    Going forward, we are confident to grow the individual FYP by a CAGR 20%-25% over the next three years and expand the VNB margin to more than 18%.

    — Vishakha Mulye

Profitability

  • NBFC RoA Profitability · Going forward · Medium confidence Expand gradually
    Further, we expect the RoA to expand gradually mainly driven by expansion in margins, improvement in productivity and the change in the product mix.

    — Vishakha Mulye

  • HFC RoA Profitability · next eight to ten quarters · High confidence 2.0%-2.2%
    Our aim is to achieve an RoA to 2.0%-2.2% in the next eight to ten quarters.

    — Vishakha Mulye

  • HFC Opex to Average Loan Book Profitability · next 8 to 10 quarters · High confidence Reduce by 100 to 130 basis points
    The endeavor in the next 8 to 10 quarters is to reduce that by between 100 to 130 basis points.

    — Pankaj Gadgil

  • HFC NIMs Profitability · next 8 to 10 quarters · High confidence Come down by 30 basis points
    In fact, the NIMs from 5.07% may come down by 30 basis points.

    — Pankaj Gadgil

  • Life Insurance VNB Margin Profitability · next three years · High confidence More than 18%
    Going forward, we are confident to grow the individual FYP by a CAGR 20%-25% over the next three years and expand the VNB margin to more than 18%.

    — Vishakha Mulye

  • Life Insurance Net VNB Profitability · next 3 years · High confidence Double the value
    Our guidance is to achieve a CAGR of 20-25% for the next 3 years in terms of business growth , 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

    — Kamlesh Rao

  • Health Insurance Combined Ratio Profitability · at the earliest · High confidence 100%
    However, our endevaor still remains to achieve a combined ratio of 100% at the earliest.

    — Vishakha Mulye

What to watch in Q1 FY26

NBFC RoA Expansion

Going forward
Current 2.25% in Q4 FY25
Target Gradual expansion

Why it matters

Key profitability metric for the largest segment, indicating efficiency and product mix benefits.

Further, we expect the RoA to expand gradually mainly driven by expansion in margins, improvement in productivity and the change in the product mix.

Risks & concerns

  • Economic Volatility and Geopolitical Tensions

    medium

    Recent tariff measures and geopolitical tensions pose uncertainties for growth, though bond yields have softened and crude oil prices fallen.

    The economic environment remains volatile due to recent tariff measures and geo political tensions in the region which pose uncertainties for growth. Amidst this turbulence, bond yields have softened and crude oil prices have fallen. CPI inflation has cooled significantly and RBI has reduced repo rate by 50 bps along with a change in stance from neutral to accommodative and has also taken various measures to improve system liquidity and stimulate growth.

    Management acknowledged

  • IRDAI Regulatory Changes on Revenue Recognition

    medium

    New IRDAI guidelines for long-term policies impact accounting financials in the short to medium term until migration to IFRS, despite unchanged unit economics.

    The recent IRDAI guidelines on revenue recognition for long-term policies represent an important regulatory shift. The unit economics of the business remains unchanged however the new accounting regulations do impact the accounting financials in the short to medium term till we migrate to IFRS.

    Management acknowledged

  • Stress in Unsecured Loan Industry

    low

    Management proactively tightened underwriting and slowed sourcing in response to early warning signals and challenges in the operating environment for personal, consumer, and unsecured MSME loans.

    We have highlighted in our previous quarters’ earnings call that given the early warning signals and challenges in the operating and macro environment, we had calibrated our sourcing from certain digital partners and reduced our exposure to smaller ticket size personal, consumer and unsecured MSME loans. This approach has held us in good stead.

    Management acknowledged

Q&A highlights

7 direct
NBFC Margins and Yields Direct
So if you look at our yields for quarter 3 and quarter 4 is quite stable at 12.9% and the margins expanding from 6% to 6.07%. And as we had mentioned to you in the last call as well, that the decline which we have seen over the past twelve months is on account of the change in the product mix. So our personal and consumer, which used to be almost 20% -- 19% of our overall loan book has come down to 12%, 13%, and that has impacted the yields.

Management explained the reason for margin pressure (product mix shift) and indicated stabilization and future expansion with segment growth.

Asked by Avinash Singh

Unsecured Business Loan Stage 3 NPA Increase Direct
And this looks elevated because it does not get written off at 180 days, and that's the reason it keeps looking elevated. So that's because this is backed by a guarantee from the SIDBI. So that was your question number two.

Clarified that the reported increase in Stage 3 for unsecured loans is due to government guarantees preventing write-offs, not necessarily a deterioration in underlying credit quality.

Asked by Avinash Singh

HFC Capital Adequacy and Growth Capital Direct
If you look at the Tier 1 ratio is 14.3%, and we have sufficient headroom to raise even sub debt from the market. And whatever growth capital in the HFC will be required during the next year, we will also support from ABC from the operating and the holding company. So no worries on the capital requirement of the HFC for meeting the growth requirements.

Addressed concerns about HFC's Tier 1 CRAR being slightly below regulatory minimum, assuring analysts of sufficient capital and support for future growth.

Asked by Chintan Shah

HFC RoA Improvement Drivers Direct
So the improvement in ROA will essentially come with operating leverage. So what is opex to average loan book, which is 2.94%. The endeavor in the next 8 to 10 quarters is to reduce that by between 100 to 130 basis points. ... In fact, the NIMs from 5.07% may come down by 30 basis points. So the net would be 100 basis points difference, 130 less 30, and that's 100 basis points.

Provided a detailed breakdown of how HFC plans to achieve its RoA target, primarily through operating leverage and opex reduction, despite potential slight NIM compression.

Asked by Chintan Shah

NBFC Loan Book Doubling Strategy Direct
We might look at one or two more products, but the way we are looking at, we want to sweat our existing branches, the branches which we have set up in the last 12 to 18 months and also branches which we will open in the next 6 to 12 months. Also the digital assets, which we have created both on the personal and consumer side and for MSME side, the Udyog Plus, which we have set up. So we want to sweat up these -- the channels, the platforms which we have created...

Management outlined a clear strategy for achieving the ambitious goal of doubling the NBFC loan book, focusing on existing infrastructure and digital platforms.

Asked by Abhijit Tibrewal

HFC LTVs and Growth Drivers Direct
On the LTVs, there are regulatory guidelines around LTV. So there is not too much of a play which is available on that. We have seen the last 2 years on the way LTVs have progressed. And I can give you comfort that our overall LTV, if I say all cohorts put together, is in between 50% to 60% in '24 and '25. So we have not seen a change. The growth is coming on the back of capacity, productivity and 12% of our disbursements, we have been saying we've been able to leverage the ABG ecosystem as well...

Reassured that HFC's rapid growth is not driven by aggressive LTVs but by capacity building, productivity, and leveraging the ABG ecosystem.

Asked by Abhijit Tibrewal

NBFC Unsecured Business Loan Flow Rates and Credit Cost Outlook Direct
So on the business loan, the earlier question, the flow rate is 0.8%. So that's how it's stacking up quite well, and we should see some improvement there. In terms of your question in credit cost. Credit cost, if you see in a difficult environment also last year when the stress was seen in the industry in unsecured loans, we have reduced our credit cost from 1.5% to 1.31%.

Provided specific flow rate data and explained the proactive measures taken to manage credit costs in the unsecured segment, indicating confidence in sustaining current levels.

Asked by Sameer Bhise

ABCD App Customer Engagement and Business Data Partial
It's about 100 crores run rate per month, Nidhesh. I think we'll keep it here. ... And as Pankaj said, the numbers we'll be able to share in the subsequent quarters.

Management gave a preliminary figure for personal loan origination via the ABCD app and committed to providing more comprehensive data in future quarters, indicating ongoing development and future transparency.

Asked by Nidesh Jain

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Detailed narrative

Q4 FY25 Consolidated Performance Overview

Aditya Birla Capital reported a strong Q4 FY25, with consolidated profit after tax (excluding one-off items) growing 24% sequentially and 6% year-on-year to ₹865 crore. Total consolidated revenue for the quarter increased by 29% sequentially and 13% year-on-year, reaching ₹14,138 crore. For the full fiscal year FY25, consolidated PAT (excluding one-off items) grew 8% year-on-year to ₹3,142 crore, and consolidated revenue rose 20% to ₹47,369 crore. This performance reflects a focus on quality and profitable growth across businesses.

NBFC Business Growth & Asset Quality

The NBFC business saw disbursements increase by 28% sequentially to ₹19,523 crore in Q4 FY25. The overall NBFC portfolio grew 20% year-on-year and 6% sequentially, reaching approximately ₹1.26 trillion. Asset quality remained robust, with credit cost improving by 22 bps year-on-year and 15 bps sequentially to 1.21% in Q4 FY25. Gross Stage 2 and 3 loans declined by 71 bps year-on-year and 47 bps sequentially to 3.78% as of March-end, with a Gross Stage 3 PCR of 45%. The profit after tax for the NBFC segment grew 11% year-on-year and 9% sequentially to ₹652 crore, with RoA improving to 2.25% in Q4 FY25.

HFC Business Momentum & Profitability

The Housing Finance Company (HFC) business demonstrated strong growth momentum, with AUM growing 69% year-on-year to over ₹31,000 crore as of March 31, 2025. Q4 FY25 disbursements were the highest ever at ₹5,820 crore, marking a 98% year-on-year and 23% quarter-on-quarter increase. Credit quality remained strong, with Stage 3 loans declining by 33 bps sequentially to 0.66%. The HFC achieved a RoA of 1.46% and RoE of 11.03% for FY25, with PBT growing 11% year-on-year to ₹419 crore. The company aims to achieve an RoA of 2.0%-2.2% in the next eight to ten quarters, driven by operating leverage.

Asset Management Business Performance

The Asset Management business reported a 15% year-on-year growth in average AUM, reaching approximately ₹3.81 trillion in Q4 FY25, with equity AUM comprising about 44%. Alternate AUM grew significantly by 70% year-on-year to ₹23,900 crore. The company's market share improved by 6 bps sequentially to 5.66%. Monthly SIP flows in March grew 5% year-on-year to ₹1,316 crore. For FY25, the profit after tax grew 19% year-on-year to ₹931 crore, with operating revenue up 25% to ₹1,685 crore.

Life Insurance Business Growth & VNB

The Life Insurance business continued its strong growth, achieving the fastest individual first-year premium growth in the industry at 34% year-on-year for FY25. The net VNB margin for FY25 stood at 18%, with absolute VNB growing 17% year-on-year to ₹818 crore. The embedded value increased by 20% to ₹13,812 crore, yielding a return on embedded value of 19.2% in FY25. Total premium for the year reached ₹20,639 crore, a 20% year-on-year growth. The company aims to grow individual FYP by a CAGR of 20%-25% and expand VNB margin to over 18% in the next three years.

Health Insurance Breakeven & Market Share

The Health Insurance business achieved breakeven for the first time in FY25, reporting a profit of ₹6 crore under new accounting regulations (₹75 crore under old accounting). Gross Written Premium (GWP) grew 33% year-on-year (42% excluding multi-year guidelines) to ₹4,940 crore (new accounting) or ₹5,252 crore (old accounting). Market share among standalone health insurers increased by 140 bps year-on-year to 12.6%. The combined ratio improved to 105% (new accounting) or 102% (old accounting) from 110% in FY24. The company aims to achieve a combined ratio of 100% at the earliest.

Digital Initiatives & Omnichannel Strategy

Aditya Birla Capital continues to strengthen its omnichannel distribution network and digital platforms. The D2C platform, ABCD App, launched a year ago, has seen robust response with 5.5 million customer acquisitions and contributed about 5% of personal loans disbursements in March. The B2B platform, Udyog Plus, has scaled to 2.3 million registrations and contributes about 21% of unsecured business loan disbursements. The company's 1,623 branches, with 60% co-located, further enhance reach into tier 3 and 4 towns. Management expects to share more detailed business data for the ABCD app in subsequent quarters.

Strategic Amalgamation & Capital Position

The successful amalgamation of Aditya Birla Finance with Aditya Birla Capital, effective April 1, 2025, marks a significant step in the company's transformative journey. This merger has created a unified operating entity with better access to capital and is expected to drive operational synergies. The amalgamation also resulted in the release of ₹3,000-3,500 crore of capital, providing significant headroom for future growth. The standalone entity maintains a strong capital position with a Tier 1 CRAR of 15.93% and total CRAR of 18.22%.

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