Aditya Birla Capital Ltd (NSE: ABCAPITAL) Q3 2025 Earnings Call dated Feb. 03, 2025
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’25 Earnings Conference Call of Birla Capital Limited. As. 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 the call, please signal an operator by pressing star then zero on a touchstone phone. I now hand the conference over to Ms Vishaka, CEO, Aditya Birla Capital. Thank you, and over to you, ma’am. Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q3 of FY 2025. Joining me today are senior members of my team, Bala, Rakesh, Tushar, Ankaj, Kamlesh, Mayank, Pinki, Vijay, Ramesh and Sanchita. I will cover our strategy and business performance and Vijay will cover key financial highlights followed by the discussion on performance of our key businesses by our business CEOs. The Indian macroeconomic environment remains very challenging with moderating urban demand, tight liquidity conditions, high capital market volatility, slow capex offtake and depreciation in rupee. The GDP growth rate of the Indian economy declined sharply in Q2 FY 2025, while the CPI inflation cooled down marginally in December. Food inflationary pressures continue. RBI continues to maintain a neutral stance and monetary policy. In order to revive economic growth, boost consumption and demand, the government has announced various measures in the union budget such as income tax relief for salaride Individual, increased credit guarantee limit for MSMEs, along with the various other measures aimed at rural and urban development, agriculture and infrastructure growth. At Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology. We follow a customer-centric approach to build a deep understanding of the needs of our customers and provide them simple and holistic financial solutions in the seamless way. Prudent risk management practices form the bedrop of our approach, which has enabled us to protect capital and deliver risk calibrated and sustainable returns across our businesses. We also continue to strengthen our omnichannel-based distribution network Coming to the performance highlights for the quarter. One, growth and profitability. The consolidated profit-after-tax is INR708 crores in the current quarter compared to INR736 crore in Q3 last year. The total consolidated revenue grew by 10% year-on-year to INR10,949 INR949 crores. We are focused on growing our portfolio with a strong emphasis on return of capital. Given the early warning signals and challenges in the operating and macro-environment, we have had indicated earlier, we have been calibrating our NBFC portfolio by reducing our exposure to the smaller ticket side unsecured personal loans and increasing the proportion of secured business loans over the past few quarters. Further looking at-the-market opportunities, we have also accelerated the growth of our HFC portfolio. These steps have held us in a good stead over the past few quarters where we have demonstrated strong asset quality trends with an improvement in Stage 2 and Stage 3 loans. Our NBFC portfolio grew by 21% year-on-year and 4% sequentially to about INR1.19 trillion. The secured business loans to SMEs grew by 37% year-on-year and 4% sequentially. The corporate and mid-corporate portfolio grew by 31% year-on-year and 7% sequentially. The overall growth — gross Stage 2 and 3 loans in NBFC business declined by about 60 basis-points year-on-year and remained flat sequentially at 4.25% as of December end. Our gross Stage 3 PCR was 45.6% as of December end at a similar level compared to the previous quarter. Our credit cost was 1.36% in Q3, which is well within our normalized threshold of 1.5%. We will continue to calibrate our portfolio with a focus on return of capital. The profit-after-tax of the NBFC business grew by 5% year-on-year to INR600 crores. The ROA and ROE were 2.1% and 13.87%, respectively in Q3. Coming to our HSC business, we have built significant capacity over the past few quarters by making investments in digital properties, technology, people and distribution. I’m delighted to share that we have crossed the monthly disbursement run-rate of INR1,500 crores. This has resulted in our HFC portfolio growing by 62% year-on-year to INR26,714 crores as of December end. The Indian housing sector continues to offer growth opportunities and is also aided by various government measures such as expansion of PMAY and investments in affordable urban housing. We believe the investment which we have made will enable us to capture these opportunities and further accelerate our growth in the HSC portfolio. The credit quality in HFC portfolio remains robust with across Stage 2 and Stage 3 loans declining by 177 basis-points year-on-year and 45 basis-points sequentially to 1.77% as of December end. Moving to Asset Management business. Our mutual fund average AUM grew by 23% year-on-year to about INR13.83 trillion in Q3 of FY ’25. The profit-after-tax grew by 7% year-on-year to INR224 crores. Moving on to the insurance businesses. The growth in the life insurance business continues to remain strong. The individual first year premium grew by 31% year-on-year in nine months of FY ’25 and we are among the top three players in the private industry in terms of growth. We have commenced sourcing in Axis Bank counters and our mindshare in the Bank of Maharashtra and IDFC First Bank counters continue to grow. We continue to be in the top-quartile in the industry in terms of 13th and 61st month persistency. As we had mentioned in our previous quarter’s earnings call, we have taken steps to realign our commission structure, made changes in the product pricing and increase rider attachment to mitigate the impact of the new surrender guidelines. These changes along with the high persistency levels have helped us to attain a VNB margin of 10.8% in the nine months of FY 2025. Our endeavor is to close FY ’25 with the VNB margin of about 17% to 18%. In the health insurance business, we continue to be the fastest-growing standalone health insurance. Our gross written premium grew by 39% year-on-year in nine months of FY ’25, driven by our differentiated health first model and data-enabled approach towards customer acquisition. Our market-share among Sahis has increased by about 140 basis-points year-on-year to 12% in nine months of FY 2025. Two, omnichannel architecture for distribution. Our omnichannel architecture allows customers to choose the channel of their choice and interact with us seamlessly across digital platforms, branches and fostering engagement and loyalty. Our D2C platform, ABCD, went live in April 2024. It offers a comprehensive portfolio of more than 24 products and services such as payments, loans, insurance investments and helps our customer to fulfill their financial needs. Our motive behind the design of UIUX of the app has been everything finance as simple as ABCD. ABCD has witnessed a robust response with more than 4.1 million customer acquisition till-date. We are seeing a strong traction in payments with more than 2 million VPAs created till-date. We had mentioned in our previous quarter’s earning call that we will be launching a revised servicing app for our existing customers in the next three to six months. We are happy to share that this app has gone live in December. It has been built on a modular platform offering a unified and common servicing infrastructure across all our businesses and has a single sign-off with ABCD. It allows us to leverage our existing customer-base for cross-sell and upsell. Our comprehensive B2B platform for MSME ecosystem Udio Plus continues to scale-up quite well with more than 2.2 million registration. Plus have reached an AUM of INR3,300 crores and it has now contributed about 25% of the disbursement and total portfolio of unsecured business loans. We have further enhanced our integration with ABC Ecosystem to provide credit and supply-chain financing solution to our dealers and vendors. ABC ecosystem now contributes about 50% of disbursement on. We have more than 2 lakh channel partners and we deeply value vital role that they have played in distributing our products. Our B2D digital integrated platform of our channel partner, Stellar has gone live in January. It offers them a consolidated dashboard of their businesses. It helps them to manage the leads and track them till convergent and enable them to grow their business volume. It will help us to increase our product penetration among the existing customers. We have 1,482 branches across all our businesses as of December end. We are focused on capturing white spaces and driving penetration into Tier-3 and Tier-4 towns and new customer segments. About 60% of our branches are co-located across more than one ABC, 240 locations. Three, strategic initiatives. Our Board of Directors approved an amalgamation of Adity Birla Finance with Adity Birla Capital in March 2024, subject to regulatory and other approval. We are happy to share that the proposed amalgamation has been approved by the shareholders in January. We have made an application before NCIT Ahmedabad and expect the amalgamation to be completed by, 31 March 2025. Going-forward, we will continue with our approach of driving quality and profitable growth. Now I request Vijay to briefly cover the financial performance of our key subsidiaries for the quarter. Thank you, Vishakar, and good evening to all of you. The total consol revenue grew by 10% year-on-year to INR10,949 crore during the quarter. The consol profit-after-tax was INR708 crore in the current quarter compared to INR736 crore in Q3 of last year. In our NBFC business, the total loan portfolio grew by 21% year-on-year and 4% sequentially to about INR1.19 trillion. NIM including fee income was 6% for the quarter. The credit quality of NBFC business continues to be healthy with a credit cost of 1.36% in Q3. Our housing finance business continues to see strong momentum. The loan portfolio grew by 62% year-on-year to
Questions and Answers:
Operator
INR26,714 crores. During Q3 FY ’25, we further infused equity capital amounting to INR300 crore in our HFC subsidiary, taking the cumulative infusion during the year to INR900 crores. This infusion was done to support the growth momentum and maximize our share of opportunities, which Vishaka mentioned earlier. Coming to our AMC business, the average AUM increased by 23% year-on-year to INR3.8 trillion in the current quarter, of which equity AUM, which was approximately 47%. Alternate AUM also grew by 32% year-on-year to more than INR15,500 crore in Q3 FY ’25. In the life insurance business, our first year premium increased by 31% year-on-year and group new business grew by 32% year-on-year. Pleased to share that the BNV margin expanded sequentially to 10.8% in nine months FY ’25. In our health insurance business, our unique and differentiated health First model helped us to deliver a growth of 39% year-on-year in gross underwritten premium during nine months of FY ’25. Our combined ratio has improved from 121% in nine months FY ’24 to 114% in nine months FY ’25. I now hand over to Rakesh to cover the NBFC business performance in detail. Thanks,, and good evening, everyone. In our NDFC business, we saw a 21% year-on-year and 4% sequential growth in our AUM, taking into INR1,19,437 crores in-quarter three. We continue to focus on the MSME segment and the business loans to MSME grew at 32% year-on-year, which is better than the industry. This segment continues to comprise 55% of our overall portfolio and is a focus area of growth for us. In this segment, secured business loans grew 37% year-on-year. Our disbursement in-quarter three was at INR15,233 crores, of which 36% was contributed by secured business loans to MSME. More than 53% of our sourcing and business loans is done by our direct channels and we foresee this to inch upward with continued scale-up of our B2B platform for MSME. Number of MSMEs using has been sequentially increasing and we now have more than 22 lakh MSMEs registered on the platform, up from 16 lakh registration as of last quarter. More than 20% of this disbursement in unsecured business loan segment in-quarter three has been sourced through Plus platform. In personal and consumer loan segment, the industry continues to witness a slowdown in growth to 13.8% year-on-year in H1 of FY ’25 compared to near 30% growth levels for the same-period last year. This drop is largely driven by caution on high-risk segment and given the tightening measures we have pursued earlier in the year. Our growth in this segment will continue to be calibrated. Given the changes in the macro-environment, we took advantage of the market opportunity to tactically calibrate our portfolio mix by reducing our exposure to small-sized unsecured personal and consumer loans and increasing the proportion of secured business loans over the last few quarters. In fact, 80% of our disbursement to MSMEs in-quarter three has come from the secured business loan segment, which has grown by 37% year-on-year and the segment mix has improved to 83% compared to 80% last year. As a result, the overall secured portfolio at our entity level has improved from 69% last year to 74% in-quarter four — quarter three this year. During the last one year, our portfolio mix has undergone a change where share of loans to MSME has increased to 55% in-quarter three from 50% a year-earlier. Share of personal and consumer loans to overall AUM now stands at 13% compared to 20% last year. We continue to operate at a very efficient cost-income ratio level of 31%. Our OpEx to AUM ratio improved to 1.9% in-quarter three from 2.24 last year. And this has largely been driven by operating leverage as we continue to sweat the new branches opened in last 12 to 18 months-to shale distribution. The credit cost has increased by 11 basis-points quarter-on-quarter to 1.36%, which is well within our stated guidance of 1.5%. Profit-after-tax for the quarter grew by 5% year-on-year and stood at INR600 crores. We continue to closely monitor our portfolio and asset quality continues to remain strong. The gross Stage 3 loans are at 2.27, which has declined 32 basis-points year-on-year. Our Stage 3 is well provided for — with a PCR of 46% with an overall 74% of our overall loan book being secured. Moving forward, we remain focused on developing a granular portfolio and increasing the mix of business loans to MSCE. This will be supported by the scale of our platform with new product offerings and increased investment in distribution across emerging regions, aimed at driving growth in the personal and consumer segment, we continue pursuing the strategy of acquiring customers through platform-based approaches via our branches, ABG ecosystem and ABCD app. All-digital customer acquisition process on the app and Plus are designed for end-to-end control, covering everything from underwriting to collections, ensuring complete customer ownership. As we scale-up, strengthen our capabilities and invest in technology, our primary commitment remains to deliver sustainable returns in the upcoming quarters. With that, I will now hand over to Pankash, MD and CEO of Housing Finance business. Thank you, Rakesh, and good evening, everyone. I’ll now present performance for Q3 FY ’25. I’m very happy to share that we’ve achieved an all-time high disbursement for the sixth consecutive quarter, reaching INR4,050 crores. Business from ABG ecosystem has contributed 13% of its disbursement, up from 9% to 10% in the recent quarters. GNPA has now reduced to below 1%, marking a consistent decline in absolute GNPA and reaching its lowest level in the past 15 quarters. Key its for Q3 FY ’25 are as follows: we recorded highest-ever disbursements of INR4750 crores, which is an increase of 136% Y-o-Y and 18% Q-o-Q. Our AUM now stands as of December ’24 at 26,74 crores, an increase of 62% Y-o-Y and 15% Q-o-Q. Our customer-base is now at 82,300 and has grown by 36% Y-o-Y with the average ticket size of the retail segment at INR28 lakhs. We also recorded the highest-ever PBT of INR110 crores, which is an increase of 10% Y-o-Y. Stage 2 and 3 has reduced to 1.77%, which is a reduction of 177 basis-points Y-o-Y and 45 basis-points Q-o-Q. ROA for the quarter is 1.42% and ROE is at 10.6%. For more detailed financial information, please refer to Slide 28 of the presentation. I would now like to provide a brief update on a few pillars of our growth. First, on portfolio quality, as mentioned earlier, NPA has reduced both in absolute and in percentage terms, which is now at 0.99% in Q3 FY ’25, a reduction of 109 basis-points Y-o-Y and 30 basis-points Q-o-Q. For more details on portfolio quality, please refer to Slide 26 of the presentation. Focusing on digital reinvention, data and analytics, which is a core for our strategy. We will technology and data remaining central to our strategy as reflected in the growing platform adoption and initiatives like account aggregator, which now stands at 35% plus. We have successfully implemented several models across the customer journey from demand-generation to collection. Application scorecard and collection scorecard have already started delivering gains reflected in the portfolio quality. Lastly, in terms of our liability management strategy, the competitive cost of borrowing of 7.7%, the company’s borrowing profile continues to be well-diversified and cost-effective. I’m happy to share that we have successfully raised NCDs amounting to INR830 crores from IFC in December ’24. These funds will be utilized towards providing housing loans to low-income and middle-income groups with a particular focus on encouraging homeownership amongst women. A portion will also be allocated to supporting MSMEs, especially women at enterprises to drive growth and economic progress. In a sense , we continue to demonstrate strong performance across all areas, including book growth, digital transformation, asset quality and liability management. Thank you all for your attention. And with this, I now hand over to, Indian CEO of our asset Management company. Thank you, Panke. To give a quick highlight on our AMC performance for Q3 FY ’25, the overall assets under management including alternate assets stood at INR4 lakh crores, representing a 23% year-on-year growth. Our mutual fund quarterly average AUM reached INR384 lakh — INR384,000 crores, growing by 23% year-on-year and quarterly equity average assets stood at INR1,700 crores, growing by 32% year-on-year. Our SAP book grew by 38% to from INR105 crores in December 2023 to 1,382 crores in December ’24. We also added about 6 lakh 70,000 new SAPs every time increase compared to the previous year. Our total investors full-year stood at INR1 crore by lakh with around 24 lakh new full-year added during the nine months the uptick in equity investment performance-driven by improved construction and stronger has helped us gain traction in equity net sales during the quarter. During the quarter, we launched the ABSL MC congrammerate fund, which garnered about crores. We also conceptualized and launched the industry-first to see the six months Index Fund, which has garnered close to about INR800 crores and growing further this current 12 months now. On the alternate business front, to meet the growing needs of mechanized and family offices. We continue to strengthen our team and enhance our PMS and AIF offerings both in equity and fixed-income. Our PMS and AIF assets grew by 41% year-on-year to crores from INR2,71 crores. Our offshore business grew by 28% from INR9,994 crores to INR638 crores. This includes close to about INR400 crores of net inflow that we have witnessed from India dedicated funds to the platform. In-line with our vision to scale the passing business, we continue to offer a diverse product portfolio to our investors, delivering strong returns. As of December ’24, our Passi assets totaled INR3,600 crores with a customer-base of over 10.68 lakh full-year. With the 22 products currently available, we plan to expand for the refund launches in the coming quarters. Moving on to the financials for the quarter, the quarterly revenue from operation was about INR445 crores versus INR342 crores in Q3 FY ’24, up by 30% year-on-year, while quarterly operating profit was at INR262 crores versus INR184 crores in Q3 FY ’24, up 42% year-on-year. With this, I’ll hand over to Kamalesh Rao, MD and CEO as well as of now. Thank you,, and good evening to all of you. The overall life insurance industry saw a robust growth in the nine-month financial year ’25 period. Individual first year premium grew for the overall industry by 14% and for the private players by 19%. For ABSLI, during the same-period, the growth was at 31% with healthy growth across proprietary and partnership channels. Our new business policies have grown by 28% December ’24., the proprietary channel saw a robust growth of 34%, fueled by both improved productivity as well as the capacity that we added over the last year. Our new tie-ups in Bank of Maharashtra and IDFC Bank continue to have positive traction every quarter and Axis Bank is expected to touch close to INR100 crores by the year end. These combined with our existing bank partners saw a growth of 30% in YTD December 25 for ABSLI. In the Group Life Insurance segment, the private industry grew by 9%, overall industry grew by 7% and ABSLI registered a growth rate of 32%. Better growth was contributed by superior performance both in the fund as well as in the credit life business. Our Group business AUM is around INR25,880 crores and contributes to 27% of ABSLI’s overall AUM. Our total premium for the year at INR13,605 crores has registered a growth of 23% over last year with a two-year CAGR of 16%. This growth came from new business as well as renewal premium growing at 13%. Our digital collections now account for 82% of our annual premiums. We continue to work on customer lifetime value, which is reflected in our upsell ratio, which reached 28% and help productivity growth in both our proprietary as well as partnership channels. In the product mix of the individual business, traditional business, including protection contributed 65% and Europe was 35%. On the group insurance business side, in the credit light space, we have slowed down our microfinance business counter while growth is being observed in all the other retail counters. Our captive business attachments have grown significantly in the last nine months of this year. Quality parameters continue to trend better across all areas, persistency across all buckets did well with 13 months at 87% and 61st at 67%, which will make us top-quartile in the industry. Our consistent efforts on bringing cost-efficiency along with optimal investments into the business has resulted in an opex to premium ratio at 20.8% versus 19.8% last year same time. Our total assets under management now stands at INR97,286 crores, with a Y-o-Y growth of 19%, 25% of this AUM is in equity and the balance 75% in debt. We continue to outperform in our investment performance in respective benchmarks across all three categories of equity debt, our balance fund either from a one year or a five-year perspective. Our digital adoption across various areas is demonstrated in Slide 44. 100% of new business customers are now onboarded, 83% of our services are now available to GTV, covering 67% of our customer transactions and our customer self-service ratio now stands at 93%. We went live with our new service CRM powered by Salesforce from mid-November. As we move ahead, we will continue to be best-in-class in our digital infrastructure across prospecting and onboarding and sales, underwriting and customer service as well as claims. I’m happy to share that we have been awarded the Best Life Insurer by Fortune India in their Jan 25 addition for our last year’s performance in terms of both business growth as well as quality parameters like persistency and claim settlement ratios. We also raised capital via rights issue in December ’24 to the tune of INR311 crores, both existing shareholders are subscribed to this issue. Our solvency continues to remain at a healthy rate of 194%. As we said last quarter, our focus has been on distribution by increasing capacity in our proprietary channels, covering both agency as well as our direct business and investments in capacity in our newly-acquired bank partners, which helped us garner incremental mind share. Our net margins, which for the first-six months was at 7.4% has now expanded for the nine-month financial year ’25 period to 10.8% versus 15.6% last year same time. We saw significant expansion of margins in Q3 with Q4 being the largest quarter of the year, we see even more expansion of margins in this quarter and continuing to maintain our earlier guidance of 17% to 18% net margins for the year. On regulations, we have relaunched major top-selling products in compliance with the new surrender regulations in October as directed by the regulator. We have also realigned commission structures with the distributor that we shared last quarter. We do not foresee any adverse impact on new business margins on account of the. With this, I’ll hand over to for details on the health insurance. Thank you, Kamlesh. And let me now share an overview of the performance of our health insurance business. With a strong quarter three, we continue to build-on the first-half FY ’25 growth momentum. In the first-nine months of FY ’25, without the multi-year accounting norms, we achieved a gross premium of INR3505 crores, experiencing a strong 46% Y-o-Y growth. Our Q3 growth accelerated to 59% versus 43% growth experienced in Q2 and further strengthening our position as the fastest-growing player during the quarter and many previous quarter as well. The performance is further amplified given the new long-term accounting regulations introduced by the regulator in-quarter three. These long-term accounting norms, nine months ZWP with a Y-o-Y growth of 39% is at INR3,337 crores. Similarly, our Q3 GWP is at INR1167 crores with a Y-o-Y growth of 39%. Our market-share thus in Sahi has increased from 10.7% to 12%, a Y-o-Y increase of 138 basis-point. Growth continues to be driven by our retail franchise diversified across all major digital channels and the strength of our unique and differentiated business model. The proprietary channel with an adviser count of over 1.34 lakh agents experienced a 26% Y-o-Y growth. All our major bank and digital alliance partnerships have also experienced impressive growth leading to our retail franchise growing at 46% in nine months. Our flagship product Active One has now completed one year since its launch in November 2023 and the product with seven continues to be one of the most comprehensive endemity products in the industry and is enabling the organization to penetrate newer underpenetrated customer segments, nice the H&I customer-base and people living with lifestyle conditions. The product continues to inspire other competition industry products as well. The corporate business experience has physically controlled 47% Y-o-Y growth, driven by our sharp focus on profitability through careful customer segmentation and our leading industry-leading outpatient business. We are strategically concentrating on mid-corporate and SME segments to continue to build a sustainable and profitable corporate business. The recent II guidelines on revenue recognition for long-term policies represent an important regulatory shift. The yield economics of the business remain unchanged. However, the new accounting regulation do impact accounting financials in the short-to-medium term until we migrate to IFRS. Despite these regulatory adjustments, we are pleased to report our net loss for the nine-month period improving to INR195 crores compared to INR270 crore in the same-period last year. We reported core at 114%, significant improvement over last year’s number at 121%. But for the change in accounting norms, our nine-month cost would have ended at 110%. Our health first model continues to scale and mature. The outcomes of some of the intervene cohorts are now visible and presented in Slide 55. The percent of customers influenced by participating in the behavior has now reached close to 25% on an enlarged customer-base and they continue to exhibit lower loss ratios up to 40% at various cohort levels. Similarly, customers experiencing positive and behaviors-based incentives also experienced loss ratio of 13% lower than the baseline. We’ve invested in-building these capabilities and managing customers with high health risk through a combination of product offerings and human digital capabilities to manage the disease burden of these set of customers, which does help in managing the long-term health risk of aging portfolio. Through a combination of in-house coaches and partners, we have now intervened in more than 120,000 high-risk lives to improve their to leading to lower claim ratios. Our promise of insurance is centered on providing industry-leading experience and our investments in use of our data and ML-driven water adjurication engine continues to witness encouraging results. We continue to invest in our industry-leading Active Health app and the app now provides an opportunity for non-policyholders also to experience our comprehensive app ecosystem. Our Y-o-Y app downloads have increased by 183% with the Y-o-Y MAU increase by 157%. Looking ahead, we remain optimistic about the long-term growth prospects of the health insurance sector and also given our differentiated and resilient business model. Our vision will be to aggressively expand our franchise with maintaining best-in-class unit economics and a clear focus on profitability. I now hand it back to Vishaka for a closing remarks. Thank you. Thank you, Mayank. This concludes our remarks from our side. We are very happy to open the floor for any questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from Chintan Shah from ICICI Securities. Please go-ahead. Yeah, hi. Thank you for the opportunity. A couple of questions. Firstly, ma’am, on the HFC growth, a question to Pankat, sir. We have seen a robust growth of 62% probably Y-o-Y basis. So what are the potential drivers? And so where should we see the growth over the medium-term or what could be the sustainable growth and what are the key drivers for such a robust growth? Yeah. Firstly, on that. So I’ll ask together or separately. So you may go-ahead, Shintan, you can give all your questions and we’ll answer them one-by-one. Sure, sure. Yeah. Secondly, on the PCR on in the NBFC segment, on Stage 3, it is around 46.5%. So probably it has — it is stable Q-o-Q, but seems to be declining. So now since we are moving to the secured segment, so how should we see this PCR going ahead? So any — what could be the stable number there? And also the Stage 2 has seen some inch-up. So any thoughts there? And then it is on the ROA front for the NBFCP, so it is 2.1% ROA. So if you look at the margins over the last one year, margins have compared around 90 bps Y-o-Y since probably we are moving to a secured mix versus the unsecured portfolio and running down the unsecured fees. But then the credit cost has all not in — is declined only like around 10 bps Y-o-Y. So the ROA has seen a massive hit. So what are the levers probably to expand? And so apart from starting the growth in the personal consumer segment, any other news or how could — how should we see the ROA over the medium-term? Yeah, that’s it from my side. Chandan, hi, Pankaj here. I’m taking the question on housing finance and then I will leave Rakesh to handle that next question. I think if you see the disbursements, so this is a combination of several consistent quarters on growth that we’ve seen in disbursement. In this quarter, we saw 18% Q-o-Q disbursement. But if you see the last six to seven quarters, you will see a similar trajectory. Now, of course, the trajectory is even more accelerated. So it’s a pretty consistent approach in growing the disbursements. It is coming on the back of three or four important things. I think over the last calls that we’ve had over the quarters, I’ve been speaking about it, but I just reemphasize those. I think over the last 18 to 24 months, we have made investments in widening our distribution. So the number of people that are there in sales trade operations and the entire governance structure, I think that has been struggling quite meaningfully. So that of course, by creating capacity is leading to higher disbursements. Second is we have invested quite significantly in digital platforms, both in terms of our sales processes and we have the best-in-class customer that we’re using for ensuring that our sales processes are best-in-class. The second is, you know, we are also speaking about, which is an end-to-end platform that we have launched from prospecting new disbursements. And I’m very happy to share that not only is being used by our teams for sourcing applications, even our channel partners are also directly login to — directly logging in our business on filmers. That is clearly helping in decongesting the entire file flow and is giving FaceTime for our teams to focus on meeting customers and also channel partners. So productivity is also one thing that we have seen significant growth. That’s both on capacity and also productivity. The last thing that I want to share is that we also speaking about the contribution of our disbursements coming in from the and ABG ecosystem. And in this quarter, you would have noticed that 13% of this disbursements actually are coming in from the EBC and APG ecosystem. So there are huge set of opportunities which are coming in through to also our EBC-led partners and also the EBG group ecosystem. I think in the combination of the digital platforms and also the capacity that we’ve been able to build, I think we are also accelerating disbursement on that side. I think all this put together is resulting in growth across the prime and also the developer finance business for us. When it comes to the guidance, I think we’ve been speaking that we will be seeing similar trajectories of growth in the next few quarters and that is where we are. I’ll leave it to Rakesh for the next question. So, your first question was on PCR that year-on-year the PCR has come down by 3%. That’s primarily on the backdrop of change in the product mix. If you see secured book has gone up from 67% to 74% and that is the result that PCR is at 46%. So this PCR is quite stable. We have 74%, three-fourth of our loan book is secured by collateral, real-estate collateral, securities and all and that’s the reason even in the unsecured business, we have CGTSME guarantee as well. So that’s the reason our PCR looks very, very comfortable. Your second question was on Stage 2, that Stage 2 has gone up marginally. If you look at year-on-year, it has come down, but yes, compared to the last quarter, it’s gone up marginally. But by end of Jan, we have been able to pull-back all these loans, which had moved on. As you know, the definition of Stage 2 is 30 plus. So even a customer goes up to 31 32 days, it moves into Stage 2, it all has been pulled back. The third question was on margin in terms of that we have seen 28 basis-points lower-margin compared to the last quarter and 90 odd basis-point compared to last year. This is Chantan again on the backdrop of change in the product mix. Our yield and NIM are a function of product mix. And our AUM as I mentioned earlier, secured business has gone up from 67% to 74% And that’s the reason why you see also if you see our personal and consumer business, which we had started in terms of tightening and dialing down post RBI’s intervention on small-ticket unsecured loans and some bit of partnership, that’s now started stabilizing and we would expect that to grow in the next couple of quarters. So that should help us. Also on the unsecured business, which has similar yields and margin, that piece also, if you see has gone up, it’s grown 12% year-on-year and 2% quarter-on-quarter. That should also start scaling up in the next couple of quarters. So that should help improve and stabilize our margins. And that should really result in the ROE. Your question on credit cost, credit cost is in the range as we had always guided that it will be below 1.5%. It’s at 1.36, so it’s in the range. And yes, over a period of time, we will like to see that credit costs remain stable, margin expanding, that should help us improve our ROEs. Sure. I think Al, thank you for a very detailed one. So probably, but any sense on the product mix. So if I may ask what could be the product mix from 67 to 74 we have moved to secured. So any ballpark number which we are looking beyond which we won’t move the secured mix or it could — it is that there is no such number in mind, yeah. So if you look at today, our personnel and consumer have come down from 19 odd 19% 20% to 13%, we would like to grow it back to, 18% 20%, not immediately, but in the in the medium-term. And also on the business unsecured business segment, if you look at, that’s grown 12% year-on-year. We would like to grow that further. And so that’s how we are really looking at managing — managing the margins,. Sure. And so any ballpark number on the margin so could it decline further from here on or should we expect some stability around current levels of 6%? Yeah, that’s the last one. Thank you. I think we should see stability around these numbers before it improves. So that’s — that is very helpful. Thank you, team. Thank you. Thank you. Next question is from Anuj Singla from Bank of America. Please go-ahead. Yeah, thank you. Good evening, everyone. So I’ll start with the housing finance business. So a question for Pankaj, please. Firstly, if I look at the Y-o-Y growth, a lot of that has been driven by the non-housing segment LAP and construction finance. Housing is down by around 850 basis-points as per my calculations to 57%. Can you give us some sense of where this can settle down? And you also have that criteria for the principal business. Where are we in that and how much scope we have for further reducing the housing proportion in the overall mix. So Anaj hi, Pankaja. So at the end of Q3 FY ’24, if you look at what we have also in the slide, we had a 65% which is showing on the housing in the that is there in the trade. It is now showing at around 58%. So your observation is right on that side. Having said that, I think like we’ve also maintained that we are a full stack player who is operating in the housing, HL and also develop our finance portfolio of the three. So I think opportunities exist in all the three and we’ve been able to successfully ensure that we’ve a presence across all the three segments. I think that there are two things that we’ll have to keep them in mind is, first the quality mix across segments is it appropriate. I think the numbers speak for themselves on the portfolio quality that we have been able to get to. So we are very, very conscious and my earlier question was being asked where disbursements have grown. But I think we are very focused and we use analytics. So right across the chain, right from onboarding, you look at the onboarding scores and also bureaus proprietary ticket for ourselves, which gives us a very good indication of our cut area. Also, we use deep analytics also on management and also on flows, which is keeping us in the right set-in order to manage the entire portfolio. Coming to your question on, what are the percentages for housing loans? The minimum threshold is 50% in our overall housing, the 60% criteria is the criteria. So on both the criterias, I think they’re comfortable right now. On the dual housing loans, we are in that range about 53 to 54 kind of range and well-above the 60% month. So I think the opportunities are still there. But at the same time, we have to keep looking at both HL and lab and across all the segments to see the growth. So will the mix change materially from here or it can settle down in the same level which we’ve seen for 3rd-quarter because 50% and want to remain in that 53% to 55 percentage kind of. Okay. And secondly, can you can you give us some sense on the margin risk from the rate cut if it comes through, how does on the liability side, what kind of flexibility you have on the variable-cost thing and on the asset side as well? So overall, if you see on the side of the asset side, 95% is variable — 5% is fixed and on the this side of liability side, 39% is fixed and 61% is variable, another 9% broadly 6% in NHB and 3% in entity. That is the broad breakup of the liability. But currently you see and you are there in the markets you will know that there is a widespread in the term loans and the NCDs. So there is clearly a factoring rates at which we are borrowing on NCD versus term loans are significant business. That’s not with us, but with the market. So I think we’re very pleased on that side and we’ve been able to factor that when we are managing our assets. Got it. Got it. Okay. Second question is on the life insurance business to Kamlesh. So you did talk about changes on the distribution commission side as well as product structure because of the surrender value regulations. Can you give us an idea if there is some impact of that surrender value regulation in this quarter margins as well or were you able to recoup everything out of that? And when we look at the product level margins because of the new products which you have launched, have you changed the IRR or is there a significant change in the product level margins, which have happened after the cylinder value regulations put intake? Thank you so let me answer your question in two-parts. So obviously, when the new regulation all products had to be refiled and relaunched on 1st of October. So there would have been some timing mismatch between first ensuring all the products are on the table and then, of course, whatever we had to do with the center regulation incorporation. So some loss of time would have got incorporated in that, which is why I said that quarter-four will look better because some bit of that we would have lost in-quarter three from timing point-of-view. So it will only get better. I must say that margins have gone down on account of both. Impact would be on surrender regulations changing. We also on guaranteed products, the is lower than what it used to be. That impact also comes in. But for the second one, the appropriate reduction in customer IRRs have been passed on-again during the quarter. And again, there would have been some timing lost in that process in the quarter, which is like fully established right now for the quarter that we speak about, which will be Q4. So broadly on fully taken care of on account of Gseg incorporated through the quarter and you will see the expansion of margin story that I was saying will fully reflect in Q4 of this year apart from the 500 volume that. So is it possible to quantify the independent impacts like for the surrender value if it were not there, what could be margins for 3Q would have been high by, let’s say, 15 20 basis-points or whatever the number is. And for similarly for the repricing impact on the non-par side, is it possible to quantify these two in independent buckets? Possible, but like I said, it will — we’ll have to get through every period of one month because like I said, when 23 products get launched, we have to launch that first before deciding the drop-in the rate, but I can reach-out to you separately for details on that separately. Yeah, sure, thank you very much. Thank you. Thank you. Next question is from Abhijit Tibrewal from Motilal Oswal. Please go-ahead. Yeah. Good evening for taking my question. The first question is on NBFCs. I’ve got two sub-questions there. First one is, if I look at our presentation, there has been a deceleration in the disbursements in this quarter . So I remember hearing in our opening remarks, we’ve been talking about calibration in our unsecured businesses and growing our secured business. So — but if I look at the segments in the presentation, I see there is very broad-based in this quarter. So how should we read that? And the related question here in NBFCs again is that there have been NBFCs who have reported earlier during the quarter and who have been talking about completely dialing down their partnership businesses. So I mean, just wanted to understand how are we thinking about our basically consumer loan business that we do through partnerships. That is on NBFCs. I have one more question. The second one is on the ABCB app. Again, I see on your slides, you’ve talked about introducing credit line on UPI from the next quarter. So just wanted to understand if you can give some color of how we are thinking about that product? And lastly, out of our disbursements in the HSC, in the 3rd-quarter and nine months, what proportion of disbursements came from mid-teens? Those are my questions. Thank you. From there, sorry, can you repeat the third-part? The balance transfer in BTM what proportion of this business came from BT? So Abhijit, first question on disbursement slowing down in-quarter three. As you know, there are different cycles in terms of the business through the year. So yes, quarter two was stronger, but if you compare year-on-year, I think primarily the de-growth is coming from first consumer segment, which is 47% down year-on-year. Again, the quarter-four will be better. So we should be able to catch-up on disbursements. So that’s your first answer. On consumer loans through partnerships, as I mentioned in my opening remark, we have built capabilities in terms of sourcing through branches. So now we have almost 450 branches through which we source consumer and MSME business. Also, we have built our own digital journeys for consumer loans, which is our own direct consumer journey. So that’s another piece which we are really building up and we have stage ABG ecosystem is another one through which we are trying to build scale. And third — fourth one is ABCD app. So that’s another platform through which we are sourcing. And on the MSME side, the Plus. So all of these four, five things is what will help us in terms of driving our consumer and small-ticket MSME loans. So clearly, that’s how — so strategy is clearly to own the customer, own the journeys and clearly end-to-end ownership of the customers and the journey. So I did the second and third question, here. So the first question-answer is a bit newer. So great line on UPI is just that to you. So when a customer opens an ABCD app and he is creating a handle, which is a brand with your mobile number. Currently, there are two options which come in for the customer. One is that you link your account, so you link your existing bank which are there. That’s one payment mode. The second is, of course, if you got a credit card, then you’re able to connect a card. What UPI means is that currently line on UPI is live with all the issuing banks. So if you are a customer and for your respective account, if a bank has given you a credit line on UPA then when you are creating the UPI handle, the third option also which will come is that first option in bank account, second option could be credit card, if you have it. Third option will be the credit line which has been given you by issuing bank, which you can link. Once you link it on the, then you can make payments from all the three. So that’s the first part of the story. So we will be going-live with that functionality. So if let’s say a customer is an ICI Bank customer example and he has already got a credit line for ICI Bank and it’s also having credit line. When he opens up the app, he will be able to — he or she will be able to link-up the cred line. That’s one. Second is, we are also going one-step further. There could be some customers who may not have the credit line from the bank. It’s not pre-authorized. We’re working with the banks to ensure that this can actually go that further bank and they can put a credit line and then instantly, we should be able to it up on credit line on UPI facility. Credit line on UPI is not there open for NBFCs. So in times to come, we have also put in our request, you know this here to make sure that also gets done. And that happens, then that line could also be an ABFL line, which could make this completely in-house. Coming to your third question, which is BT in. So like you rightly are asking, we also track disbursements which come to us, you know, which is the first time and also the BT. So broadly on retail disbursements, that number end is between 8% to 10% of the total business on the can you repeat that please? What was in? Yeah, it is disbursement that we do, that proportion is between 8% to 10% of that we do. Got it. And just one clarification to — on the NBFC when we asked that the deceleration is coming primarily from the personal and consumer loan segment. I’m just trying to understand there is nothing in the macro today that is worrying you because I see that even secured segments Q-o-Q, there has been some deceleration. So nothing in the macro today, right, which is just worrying you is what I’m trying to understand. No, also as I mentioned, there are cycles throughout the year. If you look at there are four quarters and there are some quarters which are stronger and some quarters which are slightly muted. So that’s the reason. Yes, if you look at our portfolio performance over and through-the-cycle has been very, very strong on the MSME side and the secured portfolio side. So we don’t have any concerns there. We don’t see that as a derailer. We want to continue with the growth opportunity. And I think if you look at the budget — the recent budget also from a consumer side and the income tax benefit, which has come below 12 lakhs and also the MSME guarantees and enablers which have come for the MSME. I think these are strong opportunities for a player like us got thank you for answering your questions and I wish you and your team. Thank you. Thank you. Next question is from Avinash Singh from Emkay Global Financial Services. Please go-ahead. Yeah, hi. Thanks for the opportunity. A couple of questions. The first one on your lending businesses against of what I want to understand, I mean, if I look from the profitability perspective and go back, say, four quarters, in the NVFC you were kind of delivering nearly 2.4 odd percent kind of ROE. Now at this juncture, of course, that you own a secured — unsecured business winding down that had an impact. But today kind of you are at 2.1% odd percent ROE. Now from here to say 2.5% because I recall even at a 2.4% odd percent, the ambition was to further improve or eventually I mean or more towards three. But now from this 2.1 if you are aiming for say 2.5 odd percent, I mean how this road is going to be because if I look at the — from interest-rate perspective, by and large, I mean on the asset and liability side, fixed and floating are matched. So I mean the rate cut cycle is also, if at all, not going to help there. So rather improvement has to come from, I mean, largely I would expect for the margins because on the opex side, you are already reasonably good. So how this journey and how long will this take again, say, maybe 2.1% to 2.5% journey or that’s on the NBFC side. On HSC side now, of course, I mean, you have been investing a lot in capacity building and that is delivering growth. But that is also all leading to sort of a currently opex ratios being elevated. So at what scale, what timeline I mean you would expect and what is that optimal your opex to AUM or cost-to-income? I mean, currently you’re you are running more closer to 2.9% kind of opex to AUM and for HFC to be kind of a reasonably, I would say, respectable profitable or you need to significantly lower it down. So what could be the timeline at what scale probably you would be hitting that and what is that desired sort of opex to a yield? Or these are sort of a question for lending and just one data keeping kind of a question, if you can just provide some color on the ERC transactions that you have done in this quarter in NBFD? I mean, what was the underlying asset, what sort of you know recoveries cash or like what the structure with ARCD? Thanks. My first question was on your — on ROA, which is From 2.4, it has come down to 2.1 and that’s primarily a result of the margin compression, which we spoke earlier. As we change the product mix and improve our disbursement and growth in-person and consumer and also the MSME unsecured, I think that margin expansion should happen. Also, if you look at the overall product mix at this point in time is almost 74% to 75% is secured. That should also help us at least in the near-future in terms of bringing down the credit cost. So I think these are the two levers which should help us to go from 2.1% to 2.4%, 2.5%. So that’s a question you had on NBFC. Yeah. I’ll go next. So I think the question that you had raised was what is the long-term, how do we see the ROAs moving up. So if you see the numbers, I think currently the NII for us 4.94 and as you had mentioned, the opex to average was is 48%, the credit cost 90 million. I think we’ve been speaking about this that has the book will grow and to your question at what capacity is the operating leverage will come in disbursements to book has the proportion of new disbursements to overall book keeps reducing because the book becomes larger. The current opex to average loan book 2.8% is about to get to in the range of somebodies to 12.9% in the next months, which is 110 basis-points, basis-points reduction, no one. We also expect that the 494 both this competitive intensity, the cost of borrowing also changing a bit to be in the range of between 4.8 to. So if that is the number, if 4.2 is the NIM, 4.65 is the NII and 165 to 170 basis-points is the opex in a similar kind of a credit cost, the ROA post-tax will be in the range of between 2 to 2.1. That is the guidance probably that we are working towards. And those numbers should get achieved between the next 18 to 24 months, that is where we are on this. And I think the growth I already spoke about, we want to a continual trajectory of growth. So can attack in the next 18 to 24 months where the book size will be. So that is where we are done. On the ARC front, there is no new transaction we have done. It’s — the profitability is due to the increase in the net asset value of the assets we are holding. So that’s the reason for the profitability. Otherwise, we have not done any new transaction in Q2. Thank you. Thank you. Next question is from Puneet Balani from Macquarie Capital. Please go-ahead. Yeah. Thanks for taking my questions. Sir, mainly on the PCR bit, you said that because you are going to — sorry, since you are going to a secured mode, the PCR is low. But as we plan to expand our personal loan business, is it fair to assume we’ll be adding back towards the 50% PCR levels or what’s the plan there? And accordingly, should we bake in maybe some 10 to 12 bps credit cost? Also on — when I look at the unsecured business, the Stage 2 and Stage 3 has increased by around 30, 20 bps. So what’s — like are there any forward-flows? Is there any cause of concern here in this business? And thirdly, on the overall Stage 2 — like Stage 2 has increased, but the Stage 3 has declined. So while you clarified that then Stage 2, you have managed to pull it off in January, but is the Stage 3 decline because of higher write-offs or is it any other reason? Yeah. Those are my three questions. Thank you. So first question on PCR, when we grow consumer and personal loans, whether the PCR will go back to 50% see the PCR is an outcome of the ECL model. And if unsecured business grows, yes, the PCR will grow. So to answer your question is if personal and consumer and unsecured business grow, PCR will grow. The second question which you had on the forward flow of the unsecured business. So if you look at our personal and consumer, that has been quite stable. In-spite of book not growing and degrowing, I think that is quite stable, both Stage 2 and Stage 3. On unsecured business, there is a marginal increase in Stage 3, Stage 2 and Phase-3, but that’s on account of if you look at, see, the forward flow-in that segment is anywhere between INR40 crores to INR60 crores on a quarterly basis. And last quarter also the forward flow is INR50 crores. And so there is nothing — nothing new or nothing worrying which is which we are seeing is because of the denominator effect, you are seeing the percentages looking slightly higher. Got it, got it. And the — since this is credit guaranteed like what is the timeline? I think last quarter we had highlighted that 12 to 15 months, we get the recoveries and all. Is that also maybe a reason that the recoveries once they come in the new account and the number swings down, something like that? Yeah. So this is a question of a cash-flow of and when and how this — and once the new financial year, I think there will be release of funds and also should be yes, but to answer your question, there can be a question on the cash-flow. It’s only a timing issue. Got it, got it. Thank you very much. Due to time constraints, we’ll have to take that as the last question. So I would now like to hand the conference over to Ms for closing comments. Thank you everybody for joining us. If there are any more questions, please feel free-to reach-out to any of us and we look-forward to answering all your questions. Thank you so much. Thank you very much. On behalf of Aditya Birla Capital Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines