Aditya Birla Capital Ltd (ABCAPITAL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Q2 FY '24 earnings conference call of Aditya Birla Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Ms. Vishakha Mulye, MD and CEO, Aditya Birla Capital Limited. Thank you, and over to you, ma'am.
Vishakha Mulye (Aditya Birla Capital Limited): Thank you so much. Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q2 of FY 2024. Joining me today are senior members of my team, Bala, Rakesh, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Deep and Subhash. I will cover our strategy, financial, and business performance, followed by discussion on the performance of our key businesses by our business CEOs. The Indian economy continues to do well despite the heightened global uncertainty, elevated commodity prices, and tighter monetary conditions. Domestic demand remains healthy, supported by strong investment activity, robust credit growth, and continued momentum in the service sector.
Vishakha Mulye (Aditya Birla Capital Limited): At Aditya Birla Capital, we continued to focus on driving quality and profitable growth by leveraging data, digital, and technology. Now coming to our financial performance during the quarter, we delivered a robust growth in the revenue and profitability. The consolidated profit after tax was ₹1,288 crore, up by 38% year-on-year and 10% quarter-on-quarter. The total consolidated revenue grew by 31% year-on-year and 12% quarter-on-quarter. The quarter reflects the strength of our diversified business model, disciplined execution and the ability of our businesses to deliver consistent performance. Talking about our growth across businesses. Our NBFC AUM grew by 26% year-on-year to be driven by healthy growth across all our segments. As we had discussed in our previous quarter earnings call, we have rolled out gold loan products and opened dedicated branches. Rakesh will talk about this in detail. Our HFC AUM grew by 50% year-on-year. In insurance businesses, we continue to be among the fastest growing companies and continued to gain market share. In H1 of FY27, individual first year premium for life insurance grew by 25% year-on-year as against an industry growth of 12%. And a gross written premium of health insurance grew by 43% year-on-year. In our AMC business, the quarterly average mutual fund AUM grew by 4% year-on-year. Talking about our profitability and quality. I'm delighted to share that in NBFC business, the profit after tax increased by 41% year-on-year to ₹1,008 crore. The ROA expanded to at 25 basis point year-on-year and 6 basis points sequentially to a 2.45%. In the HFC business, the profit after tax increased by 73% year-on-year to ₹261 crore with an ROA at 2.12. Despite the volatile market conditions and uncertainty in operating environment, our asset quality across both lending business remained best in class. In the NBFC business, our credit cost improved by 24 basis point year-on-year and 11 basis points sequentially to 0.92%. The gross stage 2 and stage 3 in both lending businesses continue to improve year-on-year and sequentially. In our AMC business, fund's performance remains strong with approximately 80% of our equity AUM in talk top quartile. In life insurance business, our VNB margin increased by 450 basis point year-on-year to 16.1%. The combined ratio of our health insurance business was 107%. We continued to leverage data data and technology as a growth growth drive enablers. AI is now becoming a core operating layer for us, and we are scaling up its use across various areas, such as underwriting, sales, voice calling, auditing, compliance, customer services, operations to drive better decision-making, efficiency, and customer outcomes. We believe AI will help us scale efficiently, enhance underwriting, and customer outcomes and unlock productivity across our businesses. Our business CEOs will take you through select use cases in more detail. Looking ahead, we remain confident in the long-term growth potential of the Indian economy and our ability to capitalize on the opportunities ahead. Supported by a robust strategy and disciplined execution, we will continue to strengthen customer relationships, scale our franchise, and create value for all our stakeholders. Now, I request Rakesh to talk about the performance of the NBFC business. Over to you, Rakesh.
Rakesh Singh (Aditya Birla Capital Limited): Thanks, Vishakha, and good evening, everyone. I'm pleased to report yet another strong quarter for our NBFC business. In Q2 FY27, our AUM reached ₹1,76,557 crore, registering a year-on-year growth of 26.5% and quarter-on-quarter growth of 5.4% with robust asset quality and a strong profit delivery. PAT for the quarter crossed a significant milestone of ₹1,000 crore with the ROA of 2.45%. A new business sourcing was robust at ₹24,708 crore and was nearly at par with the highest ever sourcing in Q4 last year. Quarter In Q2, we added ₹9,101 crore in AUM. In Q2, 85% of which was contributed by retail
Rakesh Singh (Aditya Birla Capital Limited): and MSME segment. This was driven by a strong traction in retail and MSME businesses which is our chosen segment for growth. Put together, these segments accounted for 71% of share in total disbursements in H1 up from 67% for the same period last year. In our personal and consumer business, our growth trajectory remains robust with disbursements growing by 18% year-on-year for quarter two to Rs. 5,877 crores. The AUM in this segment grew 7% sequentially and 37% year-on-year to 25,000- Rs. 24,955 crores. Consequently, the AUM mix improved by 108 basis points year-on-year to 14%. This growth was supported by scale-up of new programs introduced, consistent improvement in turnaround times driven by journey simplification, and process automation. Asset quality for this segment has improved with gross stage 2 and 3 declining by 140 basis points year-on-year and 10 basis points sequentially. The gross stage 3 for this segment stands at 1.3% as of September 2026. I'm excited to share that we launched our gold loan business in August last quarter which strengthens our offering in personal and consumer loans segment. During the first 70 days, we have opened 70 branches, and our AUM stands at 12- Rs. 200 crores. These are early days, and our focus is on building a resilient system and processes by leveraging technology to support future scale. We plan a phased roll-out of 200 to 300 dedicated gold loan branches by March '27 across high-potential markets with an aim to scale up the distribution to 1,000-plus branches over the next 3 years. We aspire to scale the gold loan business and strengthen our position as a lender of choice in one of India's fastest-growing retail credit segments. Our MSME business achieved a significant milestone in quarter two, crossing Rs. 1 lakh crore
Rakesh Singh (Aditya Birla Capital Limited): and year-on-year in quarter two. AUM grew at 26% year-on-year, which is faster than the industry growth. The asset quality of the segment continues to be healthy and best-in-class on
Rakesh Singh (Aditya Birla Capital Limited): on back of strong cash flows and collateral. The gross stage 3 for this portfolio stands at 1.2% as of September 2026. In unsecured business loans segment, we saw the disbursement grow at a healthy 9% quarter-on-quarter to 1,500 odd crores in quarter 2. The AUM in this segment grew 11% sequentially and was supported by scale of new product launches which now contribute nearly 28% of new business sourcing. Our proprietary MSME platform Udyog Plus further complements scale scale up by facilitating an end-to-end digitally enabled suite of trade solution solutions, establishing a strong position among NBFCs on TReDS. Quality in this segment also improved significantly with gross stage 2 and 3 down 40 basis points sequentially and 170 basis points year-on-year. Gross stage 3 for unsecured business loan stands at 1%. 46% of the gross stage 3 book in in MSME unsecured business is covered under government guarantee scheme which the if we exclude that, the GS3 is at 0.6% only. Moving now to our corporate segment, the AUM grew 3% quarter-on-quarter and 15% year-on-year and now contributes 29% of our overall portfolio. Asset quality in our corporate business also continues to improve with gross stage 2 and 3 declining by 40 basis points year-on-year. The gross stage 3 in this segment stands at 1.6% for the quarter. Coming to the portfolio quality at the entity level, our gross stage 2 and 3 stands at 2.31%, improving by 72 basis points year-on-year. The gross stage 2 for the quarter stands at 1.03, improving by 32 basis points year-on-year, and gross stage 3 stands at 1.28%, improving 40 basis points year-on-year. I further wish to highlight that about 71% of our overall loan book is secured. Our overall stage 3 book is well provided with a PCR of 48.4%, which has improved 20 basis points compared to last quarter. Our credit cost is now sub 1% at 92 basis points, which would be our best in the last seven years, and this has been an outcome of disciplined risk and cohort corrections we have taken over the last few years. Further, we continue to see a sustained improvement in collection intensity with technology, analytics, and AI capabilities driving better frontend efficiency and significant improvement in forward flow rate. Our interest rate income for quarter has increased by 25% year-on-year and 4.6% sequentially to 2,488 crores. The net interest margin, including fee, was at 6%. Off-late, the macro environment has been has seen some tightening with the RBI's repo rate action, rising interest rate and inflation. Against this backdrop, we have increased our benchmark rates by 25 basis points effective 26th October on our variable rate portfolio, which constitutes closely nearly 70% of the overall loan book. This is done as a proactive measure, which will ensure that increase in cost of borrowing is transmitted in an effective and timely manner. Our efforts to enhance productivity in retail and SME business has started yielding favorable results. The opex to AUM ratio for the quarter is at a healthy 1.84 percent, down 11 basis points sequentially and 19 basis points year-on-year. This gives us the ability to make further investments in our business, including gold loan franchise for future growth. Moving to profitability, the RoA for the quarter in- improved by 25 basis points year-on-year and 7 basis points sequentially to 2.45. We delivered profit after tax of Rs. 1,008 crores, registering a growth of 8.7% quarter-on-quarter and 41% year-on-year. Coming to customer service, we have significantly improved service responsiveness through AI-led interventions, enabling faster, more effective customer engagement. In quarter 2, self-service capabilities across channels reached 82%, 61% of contact center interactions and 71% of service
Rakesh Singh (Aditya Birla Capital Limited): process street pass through. Our conversational analytics module now delivers 100% automated analysis of voice and e-mail conversations, generating actionable insights to improve customer interaction and identify new business opportunities. We remain confident in the long-term opportunity across the retail and MSME segments where we have demonstrated our ability to scale substantially and these segments will continue to pivot our growth strategy. As we continue to enhance our sourcing capabilities, broaden our product suite, and leverage our proprietary digital platforms, we believe we are well-placed to further consolidate our position as a lender of choice. Overall, our approach remains consistent: grow responsibly, stay close to our customers, and deliver steady long-term value for all our stakeholders. With that, I will now hand it over to Pankaj, MD and CEO of our Housing Finance business.
Pankaj Gadgil (Aditya Birla Housing Finance Limited): Thank you, Rakesh, and good evening everyone. I'm pleased to share that Q2 FY27 has been another strong quarter for ABHFL, marked by sustained growth, improving asset quality, and continued progress across our strategic priorities. Let me briefly take you through the key highlights for Q2 FY27. AUM stood at 57,370 crores, registering 50% year-on-year growth and 11% sequential growth. Disbursements stood at 8,957 crores, growing 55% year-on-year and 19% sequentially. NII increased by 53% year-on-year to 641 crores. Profit before tax grew by 73% year-on-year to 335 crores. ROA stood at 2.12% while ROE was 11.47 for the quarter. The ABG ecosystem contributed 17.5% of retail disbursements during the quarter. Let me now provide an update on our strategic priorities. Distribution: Distribution continues to be one of the most important growth levers for ABHFL. Marking a significant milestone in our distribution expansion strategy, we have already launched 101 new branches in this financial year so far, across metros, Tier 1 and Tier 2 empty markets, further strengthening our presence in emerging markets. We are very encouraged by the early traction from these branches as we continue to build our sales and partner ecosystem. The objective of this expansion goes beyond increasing our physical footprint. It is about deepening our presence in high potential micro-markets, strengthening customer access and creating a scalable distribution platform for the next phase of growth. Alongside branch expansion, we are sharpening our distribution architecture through a differentiated focus on top and emerging markets. This will help enable greater localization of our product, policy, and sourcing approach, while improving our ability to address distinct customer segments across markets. The second strategic priority is AI, Data, and Analytics. Technology, Data, and AI continue to be core pillars of our strategy, with 15 AI use cases now live across the customer lifecycle. These initiatives are focused on enhancing productivity, improving customer experience, improving partner experience, reducing turnaround times, and strengthening process governance. During this quarter, we continue to build on our AI roadmap with progress across several key initiatives, namely FinnGenius, which went live, enabling AI-assisted document verification and further strengthening process efficiency and standardization. Same Finswift, our alternate journey for channel partners, has been recently introduced to enable a more seamless partner experience and strengthen digital sourcing. Collectively, these initiatives are helping us to build a more scalable and digitally-enabled operating model. The third strategic priority: Asset Quality. Asset quality strengthened further during the quarter. Stage 2 and 3 assets reduced by 45 basis points year-on-year to 0.65 while Stage 3 independently stood at 0.37. This performance reflects the discipline of our risk and collections framework supported by early warning mechanisms, predictive analytics, digital collections infrastructure, AI-enabled engagement tools, and focused pre-delinquency interventions. To conclude, Q2 FY27 has been a quarter of sustained momentum and disciplined execution for us. We've continued to scale the franchise
Pankaj Gadgil (Aditya Birla Housing Finance Limited): market share and a strong distribution engine, ABHFL remains well-positioned for its next phase of growth. As I had mentioned earlier, over the next 8 to 10 quarters, we remain focused on building a 1 lakh crore plus AUM franchise, while moving towards 15% ROE and sustaining top docile asset quality. Thank you for your courteous attention. With that, I will now hand over the call to Bala, MD and CEO of our asset management company.
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