This article first appeared on GuruFocus .
Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Consolidated profit after tax surged 40% YoY to INR 1,175 crore, with total revenue up 29% YoY.
-
NBFC business delivered strong growth with PAT up 35% YoY and ROA expanding 14 bps to 2.39%.
-
Housing finance portfolio crossed INR 50,000 crore milestone, growing 50% YoY, with PBT nearly doubling.
-
Asset quality remained robust with GS2+GS3 at 2.4% (down 127 bps YoY) and provision cover improved to 48.2%.
-
Life insurance VNB margin nearly doubled to 2.1% driven by non-par, protection, and annuity mix.
-
Health insurance turned profitable in Q1 with INR 184 crore profit versus a loss last year, and combined ratio at 106%.
-
Raised INR 4,000 crore growth capital from promoter and IFC to support future expansion.
-
AMC business saw strong fund performance with ~75% of AUM in top two quartiles.
-
Gold loan business launch planned in Q2 with 200-300 branches by March 2027, diversifying product suite.
-
AI and digital initiatives improved productivity, with 71% of contact center interactions and 74% of health claims processed straight-through.
Negative Points
-
Higher input and energy costs create uncertainty in the growth outlook.
-
NBFC net interest margin (including fees) declined slightly to 6.07% due to lower fee income.
-
Personal and consumer loan yields fell to 16.2% from 16.5% four quarters ago, pressuring margins.
-
Housing finance ROE currently at 11.29% is below the 15% target, expected to recover only in 2-3 quarters.
-
OpEx-to-AUM ratio for housing finance is expected to rise to 2.1-2.2% this year due to branch expansion.
-
Unsecured business loan portfolio has a gross stage 3 of 1.1%, with 40% covered under government guarantee, indicating some risk.
-
Corporate segment growth slowed to 16% YoY, with its share of portfolio declining to 29%.
-
Life insurance proprietary business growth was only 7% YoY, lagging the partnership channel's 25% growth.
-
Health insurance combined ratio at 106% is still above 100%, though improving.
-
Potential regulatory changes on insurance payouts could pose a risk to fee income.
Q & A Highlights
-
Warning! GuruFocus has detected 11 Warning Signs with NSE:ABCAPITAL.
-
Is NSE:ABCAPITAL fairly valued? Test your thesis with our free DCF calculator.
Q: Can you provide a breakup of how the INR 4,000 crore capital raised via preferential allotment will be utilized across businesses, and are there any plans to raise further capital in the next 12 months? A: Vishaka (MD & CEO): The majority of the capital, about 87.5%, will be allocated to the growth objectives of the NBFC business (ABCL). The balance 12.5% will be used for other businesses, including our insurance companies and general corporate purposes. We have already provided for the capital needs of the housing finance company and the NBFC for the next three years, so we do not anticipate any further capital raising in the near future.
Q: The housing finance business saw a capital infusion that impacted ROE. How many quarters will it take for ROE to scale back to the 15% mark, and is the current capital enough to reach the INR 1 lakh crore AUM target? A: Pankaj (MD & CEO, Aditya Birla Housing Finance): We are targeting an AUM of INR 1 lakh crore in the next 8-10 quarters, and we expect ROE to return to the 15% mark within that timeframe. The recent capital infusion is sufficient to support this growth trajectory, and we do not anticipate any further capital raises before achieving this target.
Q: What are the key drivers for the significant margin expansion in the life insurance business, and can you comment on the growth dynamics between the proprietary and partnership channels? A: Kamlesh (MD & CEO, Aditya Birla Sun Life Insurance): The margin expansion to 15.1% is driven by a combination of factors, including an increased mix of non-par, protection, and annuity products, better productivity, and controlled expenses. The addition of riders alone has contributed 1.5-2% to the margin. While the partnership channel (especially bancassurance) is growing faster than proprietary, we are investing in our agency network and are not fixated on the channel mix as long as we achieve our overall growth and margin targets.
Q: In the NBFC business, the personal and consumer loan portfolio yield has declined despite the segment's mix increasing. Can you explain this trend and what the current yield is on this portfolio? A: Rakesh (CEO, Aditya Birla Finance): The yield on the personal and consumer portfolio is currently around 16.2%, down from 16.5% four quarters ago. This is a result of our disciplined approach to risk-adjusted returns. We have been actively calibrating our cohorts over the last 18-24 months to eliminate riskier segments, which has led to lower credit costs (down 27 bps YoY) and improved asset quality. As the mix of this higher-yielding unsecured book increases from the current 25% to 27-28%, we expect to see margin expansion in the coming quarters.
Q: Regarding the foray into the gold loan business, what is the branch expansion plan, and will this have an impact on the operating expense ratio? A: Rakesh (CEO, Aditya Birla Finance): We are going live in Q2 and plan to scale to 200-300 standalone gold loan branches by March 2027. Over the next three years, we aim to open close to 1,000 branches. These plans are already factored into our budget and operating expense guidance, so there will be no adverse impact on our overall cost ratios.
Q: Are there any specific risk markers or segments in the NBFC portfolio that are showing signs of stress, given the strong performance this quarter? A: Rakesh (CEO, Aditya Birla Finance): We monitor our portfolio on a monthly basis at the cohort level. Whenever we identify a segment or cohort that does not meet our risk appetite, we proactively eliminate it and stop sourcing from it. This proactive approach over the last 18-24 months has allowed us to maintain strong asset quality, with GS2+GS3 at 2.4% and a provision cover of 48.2%, despite the seasonal weakness typically seen in Q1.
Q: In the health insurance business, does the better loss ratio and persistency from the 'Health Returns' program fully offset the premium given back as rewards, and is this value-accretive at the portfolio level? A: Mayank (MD & CEO, Aditya Birla Health Insurance): Yes, at an overall level, the 'Health Returns' cohort demonstrates significantly better loss ratios and persistency compared to non-participating portfolios. The benefits from lower loss ratios and higher retention more than offset the cost of the rewards, making it a value-accretive strategy for the overall portfolio.
Q: The fee income for the NBFC business has increased significantly, and the ratio to AUM has also gone up. What is driving this trend? A: Rakesh (CEO, Aditya Birla Finance): The increase in fee income is primarily driven by processing fees and higher insurance attachment rates. We expect this trend to continue as we scale up our retail and MSME businesses, which have higher fee-generating potential compared to the corporate book.
Q: Can you provide more color on the loan spreads in the NBFC business, as there seems to be a slight drop despite stable yields? A: Rakesh (CEO, Aditya Birla Finance): The yields were stable quarter-on-quarter, but there was a slight reduction in fee income by 6 basis points. However, this was offset by a 5 basis point benefit from lower cost of funds, resulting in a stable net interest margin of 6.04% for the quarter.
Q: Regarding the housing finance business, the branch expansion is ongoing. Is the operating expense ratio stable, and will the full impact of new branches be seen in the coming quarters? A: Pankaj (MD & CEO, Aditya Birla Housing Finance): The branch expansion has been spread throughout the quarter, with the first set of branches inaugurated in early July. Our OpEx ratio is currently at 2.21%, down from 2.4% previously. As we ramp up new branches and manpower, we expect the OpEx ratio to remain range-bound, ending the year closer to 2.0-2.1%, supported by productivity gains from our digital initiatives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
