Aditya Birla Capital Ltd (NSE: ABCAPITAL) Q3 2026 Earnings Call dated Feb. 03, 2026
Corporate Participants:
Unidentified Speaker
Vishakha Mulye — Managing Director and Chief Executive Officer
Rakesh Singh — Executive Director and Chief Executive Officer
Pankaj Gadgil — Managing Director & Chief Executive Officer
A. Balasubramanian — Managing Director and Chief Executive Officer
Kamlesh Rao — Managing Director and Chief Executive Officer
Mayank Bathwal — Chief Executive Officer
Vijay Deshwal — Chief Strategy Officer and Head of Investor Relations
Analysts:
Unidentified Participant
Chintan Shah — Analyst
Gaurav — Analyst
Nitesh Jain — Analyst
Presentation:
operator
Sam sa. Sat sam. Sa. Ladies and gentlemen, good day and welcome to the Q3FY26 earnings conference call of Aditya Birla Capital Ltd. 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 conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishakha Molye, MD, and CEO Aditya Birla Capital Ltd. Thank you. And over to you, ma’.
Am.
Vishakha Mulye — Managing Director and Chief Executive Officer
Thank you. Good evening everyone and welcome to the earning call of Aditya Birla Capital for Q3 of 2026. Joining me today are the senior members of my team, Bala, Rakesh, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Ramesh and Deep. I will cover our strategy, financial and business performance followed by a discussion on performance of our key businesses by our business CEOs. The Indian economy has maintained a strong growth momentum despite of challenges and challenging external environment. Rural consumption has benefited from a good monsoon and improved agricultural output While urban spending surged during the Pestis season which has further facilitated the rationalization of GST rate inflation remains well contained.
The government in its union budget has announced investments for electronic, textiles and many other industries to boost the manufacturing, tourism, youth skilling and medical tourism. To further improve the economic growth at Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology. Now let me talk about our financial and business performance. Consolidated profit after tax excluding the exceptional and one off item increased by 41% year on year and 15% sequentially to 983 crores. The total consolidated revenue grew by 30% year on year and 14% sequentially to 14,181 crore on a standalone basis.
The profit after tax excluding exception and run off Items grew by 24% year on year to 749 crores. We saw a strong momentum in our lending businesses. NBFC Portfolio grew by 24% year on year to 1.48 lakh crores. And HFC portfolio grew by 58% year on year to 42,204 crores. We continue to see strong asset quality trends in both our lending businesses with an improvement in GS2 and GS3 ratios. In our AMC business, we continue to see an improvement in the fund performance along with a healthy growth in AUM in insurance businesses remains among the fastest growing companies the individual first year premium for the life insurance business grew by 19% and the gross written premium of the health insurance business grew by 39% year on year.
Despite the changes in the GST, we saw an improvement in the profitability of our insurance businesses. In life insurance businesses our BNB margin expanded by 380 basis points year on year to 14.2% and in the health insurance business we saw an improvement in in our combined ratio from 111% to 114% for the nine months. I am happy to share that the Board of Directors of ABC and Aditya Birla Housing Finance at their meeting today approved a proposal for primary capital infusion of 2,750 crore rupees in ABHSL from one of the entities of Advent International. Subject to the requisite approval, the transaction announced today values ABHSL at 19,250 crore rupees on a post money basis.
Upon completion of the transaction, The ABCL withholds 85.7% and Advent International will hold 14.3% stake in ABHSL. As we had mentioned in our earlier calls, we had identified Housing Finance as one of the major drivers for growth for ABCL given the opportunities in the sector over the past few years. At ABHSL we have created a full stack franchise focusing on prime and affordable segment and construction finance. We have made significant investment in technology, digital properties, people and distribution. We have built a strong distribution fully equipped for a deeper penetration. Today we are one of the fastest growing SFCs in India and among the three players in terms of incremental loan growth book.
Our monthly disbursement has grown BY more than six times so in June 2022 to more than 2,250 crore rupees in December 2025. Our portfolio has grown at a CAGR of 48% over the last three years to 42,204 crore rupees as on December 31. Our asset quality remains best in class with a gross stage 3 ratio at 0.54% and next stage 3 ratio at 0.23%. We had indicated in our earlier calls that we would be seeing the benefits of operating leverage this year and a gradual expansion in ROA on the back of strong growth in aum.
I’m delighted to share that the OPEX to loan book has improved by 51 basis points year on year to 2.37% in Q3 or FY26. The ROA has increased by 54 basis points year on year and 14 basis points sequentially to 1.96%. We believe we are now fully geared up for the next phase of our growth going forward. We believe our strength in balance sheet will enable us to sustain the current growth momentum, gain market share and improve our profitability while maintaining the best in class asset quality. Now I request Rakesh to talk about the performance of the NBSC business.
Over to you Rakesh.
Rakesh Singh — Executive Director and Chief Executive Officer
And 24% year on year taking the AUM to 1.48,182 crores in quarter three. Profit delivery for the quarter was healthy registering a growth of 8% sequentially and 29% year on year. Our strong business momentum continued in Q3 with quarterly disbursement of 21,417 crores up 41% year on year. Of the total disbursements secured and unsecured business loans to SME was 46%, personal and consumer segment was 23% and corporate and mid corporate was at 31%. We continue to see the momentum in our personal and consumer loans business for post strategic calibration for quarter two the disbursement in this segment was 4900 crores which was largely driven by improvements in branch business and scale up of direct digital business.
Through proprietary journey, The AUM grew by 9% sequentially and 28% year on year to 19,918 crores. As one of the leading lenders to the MSMEs, we continue to strengthen our position in the NBFC space and consistently outpace the industry growth in this segment. Our expansion in this segment is driven by offering carefully chosen business expansion and working capital solutions for different profiles of MSMEs. The recent measures announced in the Union Budget to enhance liquidity support for MSMEs through the Treads platform position us well to capture large and growing opportunity in this segment through our holistic suite of supply chain finance solutions comprising of invoice, discounting, channel financing, Merchant cash advance etc.
Spreading across the MSME value chain supported by a robust underwriting framework powered by a New Age scorecard and rule engines. We have enabled faster credit decisioning and reduce disbursement timelines while maintaining one of the best in class asset quality in the industry. About 56% of our portfolio comprises of business loans to MSMEs which has grown 7% sequentially and 26% year on year to 82,809 crore. Out of this 82% is secured by collateral and 18% is unsecured. The unsecured business loan portfolio grew 12% quarter on quarter and 36% year on year and comprises about 10.3% of the overall NBFC portfolio.
The disbursements for secured business loans to SMEs grew 6% sequentially resulting in AUM growth of 6% quarter on quarter and 26 24% year on year. The growth has been largely driven by scaling direct sourcing efforts through our branch network. Talking about portfolio quality in personal and consumer loan segment, we continue to see a sustained improvement in asset quality parameter. The gross stage 2 and 3 reduced by 60 basis points sequentially and 220 basis points year on year. The GS3 for this segment stands at 1.7% as of December 2025. The GS2 and GS3 of the unsecured business loan portfolio improved by 20 basis points sequentially and 300 basis points year on year.
Gross stage 3 of this portfolio stands at 1.9% of which 40% of the GS3 book is covered under the government guarantees. The asset quality of the secured loan business segment continues to be healthy and best in class on the back of strong cash flows and collateral. GS3 for this portfolio stands at 1.2% down by 50 basis points year on year. Asset quality in our wholesale business also continue to improve where GS2 and GS3 reduced by 100 basis points point year on year as a result of improving portfolio quality trends in each one of our segments.
Overall GS2 and GS3 book declined by 20 basis point quarter on quarter and 150 basis point year on year to 2.8%. About 73% of our book is secured and our overall stage 3 book is well provided with a PCR of 44.3%. Our credit costs have reduced by 13 basis points year on year to 1.23% for the quarter which is well within the guided range of 1.2 to 1.3%. Going forward, we remain confident to maintain the credit cost in the same range at the company level. Moving to profitability, our net interest income has increased by 23% year on year and 7% sequentially to 2,127 crores.
Net interest margin including fee was at 6.12% in the current quarter, up by 6 basis points sequentially and 13 basis points year on year. Our Opex to AUM ratio reduced 8 basis points sequentially despite the impact of the new labor code. In quarter three we delivered profit after tax of 772 crores registering a growth of 8% quarter on quarter from 29% year on year. The ROA for the quarter increased by 15 basis point year on year to 2.25%. Moving forward, we expect the mix of retail and MSME segments to improve and we will continue to leverage our proprietary digital platforms which is ABCD APP and UDYU class to invest in and also invest in branches to improve share of direct sourcing.
As we scale up, strengthen our capabilities and invest in technology. Our primary commitment remains to deliver sustainable returns in the coming quarters. With that I will now hand it over to Pankaj, MD and CEO of the Housing Finance Business.
Pankaj Gadgil — Managing Director & Chief Executive Officer
Thank you Rakesh and good evening to everyone on the call. Q3FY26 has been a landmark quarter for ABHFL and a defining step forward in our long term strategic journey. During the quarter we have successfully signed one of the largest capital institutions deals in the Indian housing finance sector and are pleased to welcome Advent International as a new shareholder. Advent’s investment reflects their strong conviction in ABHFL’s business model, governance framework and execution capabilities as well as the structural growth opportunity in the Indian housing finance market. The global experience, institutional depth and strategic orientation will significantly strengthen our ability to scale responsibly and accelerate the next phase of our growth and innovation agenda.
On the performance front, Q3FY26 has been yet another strong quarter marked by healthy disbursements, robust book growth and continued improvement in asset quality reflecting consistency of execution across all key business levers in line with our guidance of consistent growth leadership with best in class portfolio quality. Let me take you through the key highlights for the quarter. We recorded highest ever disbursements at 6165 crores, registering a growth of 30% YoY and 7% QoQ. ABG ecosystem contribution is now at 17.6% of retail disbursements. AUM crossed the 40,000 crores milestone to reach 42,204 crores, registering a 58% Buy and 10% QoQ growth stage 2 and 3 reduced to 0.95% improving by 82 basis points YoY and 15 basis points QoQ CBT of Rupees 229 crores increasing 109% YoY and 18% QoQ ROA at 1.96% and ROE for the quarter at 14.94%.
For more detailed financials please refer to slide 31. Let me now provide a brief update across our key strategic pillars. Digital Data and Analytics Digital and AI continues to be a core pillar of our strategy. We are witnessing encouraging traction from our AI enabled copilots across sales, underwriting, customer service and audit. Additionally, the AA usage is now at 62% from 39% in FY25. These initiatives have clearly resulted in a 1.3x increase in sales manager productivity YY I would also like to highlight that during the quarter we migrated to the ABC Stella platform which is a next generation channel onboarding and engagement platform.
This is further expected to enhance turnaround time, scalability and partner experience on asset quality. We have successfully implemented multiple analytical models across the customer journey from demand generation and underwriting to collections. Our Application Scorecard and Collection scorecard are already delivering tangible outcomes reflected in improving portfolio quality. PIN Collect Our end to end digital collection diamond platform is driving an effective collection strategy resulting in a reduced stage 2 plus stage 3 from 1.77% in December 24 to 0.95% in December 2025 which is a reduction of 82 basis points. The Liability Franchise on the liability side we continue to strengthen and diversify our funding profile.
The share of NCDS in the borrowing mix increased to 48% in Q3 from 39% in Q3 of FY25. Our cost of borrowing further improved by 11 basis points QoQ and stands at 7.41% for the quarter. To conclude, we have delivered consistent performance across growth, asset quality and profitability. Thank you for your attention. With that I will now hand over the call to Bala, MD and CEO of our asset management company.
A. Balasubramanian — Managing Director and Chief Executive Officer
Thank you Pankaj Just to highlight the quick performance update on ABC LMC Quarter ending December 25th ABC Our overall average assets and management including alternate assets now stands about 4.81 lakh crore growing by 20% year on year. Our mutual fund quarterly average AEM has reached 4.4 trila crore representing 15% year on year growth. Within this our equity mutual fund quarterly average OEM stood at approximately 2 lakh crore growing by 11% year on year. As an AMC we continue to stay focused on SAP’s billing SAP book. In standard we have about 1080crores of SAP book coming from 40 lakh SAP accounts.
Our total number of investors folio stood at about 1.08 crores witnessing 3% year on year growth, driving growth momentum, building scale through increased market traction as well as adding new customer base. Improved fund performance has strengthened market perceptions and driven higher inflows into our core products. Building on this momentum, our priority remains to scale our equity offerings through consistent SIP flows, broad based distribution participation and sustained performance and deeper market engagement. Turning to alternative business, the PMS and AIF Equity segment have demonstrated robust momentum supported by steadily expanding suit of credit offerings. We continue to enhance our refine our define our solution to address the evolving needs of the HNIS and family office investment needs.
Our PMS AIF Advisory Assets and management stood about 3843 crores from 3840 crores is more to 32673 crores which includes ESIC mandate that we won last quarter. During the quarter we also received our EPF 4 allocation letter for fixed Income Mandate appointing as one of the portfolio managers. We are now in the process of completing the regulatory formality and expect the author to be on board sometime next quarter. On the fixed income credit side we completed the Final close of ABSD India Special Opportunities Fund and we received a commitment of about 500 crores and fundraising upwards is underway in our second series of fund launch which is structured Opportunity Fund Number two, our Real Estate fund continues to build momentum supported by strong investors interest and healthy deal pipeline.
The real estate portfolio is not about 700 crores representing approximately 40% year on year growth during the quarter. Offshore we set up our only one subsidiary in Gibbs City as well as AMC International Private Limited to expand our Gibbs City operations under the process of securing regulatory approvals during the quarter. However, in the current existing fund flow that we have for inward and outward remittance, we continue to see flows coming in both for inward remittance as well as outward remittance. Our passive business continues to gain strong momentum. Quarterly average assets 30,600 crores up 28% year on year and growing customer base to about 14.1 lakh folios.
Our ETF quarterly average AEM grew by about 40% year on year, significant outpaced industry growth of 24%. Our focus remains on delivering superior long term outcomes through tighter tracking differences and lower tracking error. Additionally, Suspend Inverse is interested in precious metal such as gold and silver as reinforce the diversification value of our passive offering in this segment for the financial performance, the Q3FY26 total revenue stood at 562 crores up 16% year on year. Q3FY26 profit before tax was at 3.5 crores up 19% year on year and Q3FY23 profit after tax stood at 270 crores up by 20% year on year.
With this I’ll hand it over to Tamlesh Ajbala Sun Life Insurance MD and CEO.
Kamlesh Rao — Managing Director and Chief Executive Officer
Thank you Bala. The overall life insurance industry registered a growth of 10% in the first nine months of this year with the private life insurance industry growing at 13%. During the same period Absli clocked a premium growth of 19% with proprietary business growing at 8% and the partnership business growing at 26%. In our proprietary business we are growing in line with the market. The product mix is favorable and we are now planning to scale this business even further. During the first nine months of this year we have added 20 more branches continuing our focus on expanding the proprietary business.
With this we are now at 445 plus branches across the entire country. The partnership growth of 26% came across all our existing partners as well as the new partnerships in bank of Maharashtra, IDFC bank and Axis bank wherein we now have reasonable mindshare. In the existing bank partnerships we have gained reasonable mindshare consistently through the nine months of this year at Axis until now we were present in selective zones which contributed to 20% of their total business. We now have access to three new zones and with this we will be presenting 50% of their business going forward.
The partnership business has a balanced product mix with margins going up through the year. We now have 12 banker tie ups and like I mentioned, we will expand our presence at Axel bank going forward. In the product mix of the individual business, traditional business including protection increased to 70% and ULEP came down to 30% helping expand margins for the nine months of this year we will continue calibrating our product mix in line with customer demand as well as the need to optimize margins at the firm. In the group life insurance segment, the private industry grew by 17% and overall industry grew by 15%.
Like we mentioned in previous quarters, we have had a calibrated approach to interest rate sensitive business. We are happy to state that we have moved from a degrowth for the first half of the year to an 8% growth for nine months ytt December enabling us to reclaim the rank 4 and a large part of this growth has come from the market facing ULEF business. We continue to be at rank 2 in the ULIP AUM in the industry with an AUM size of 50. Great Life business registered a growth of 37% with attachment ratios going up in all large counters and even more significantly in our own NBFC as well as housing finance business.
On group term life insurance business, we continue to remain focused on expanding the margins. Group aum contributes to 26% of the overall AUM and stands at 28,218 crores. Our total premium for the first nine months stands at 15,471 crores growing by 14% with a 13 month persistency at 84.4. Renewal premium grew by 18% with growth across individual and group segment. Our digital collections now account for 83% of our renewal premium. We continue to work on customer lifetime value which is reflected in our upsell ratio of 32% on quality parameters. Our overall customer NPS now stands at 62 as compared to 57 last year whilst the 13 and 61st one cohorts have seen a marginal dip.
All other cohorts are growing compared to the same time last year. Our OPEX to premium ratio stands at 22.9% and adjusted for lower group business GST impact and the labor laws impact. The retail OPEX to premium ratio is progressing well in line with Planning Absli cost AEM of 1 lakh crore in April 25 and now stands at 110,048 crores with a YoY growth of 13%. 25% of this AUM is in equity and 75% in debt on YTD basis. 100% of our funds continue to outperform as compared to the respective benchmarks. Our digital adoption across the various areas is demonstrated in the deck in slide 47.
100% of the new business customers are onboarded digitally, 83% of all our services are now available digitally, 67% services are STP and our customer self service ratio now stands at 93%. Our solvency continues to remain healthy at 210%. Our net margins are now at 14.6%, 380 basis points higher than last year. Same time at 10.8 we observed margin expansion due to a controlled ULIP mix increase in protection value, accretive growth in partnership business along with rider attachment strategy. The expansion in net GST margins is despite the GST impact in the second half. As we speak we have resolved 40% of the GST impact through our commercial arrangements with the distributors and the balance going forward will be managed through both product strategy and relevant management actions.
We will continue to focus on increasing productivity across all cohorts in our proprietary business. For partnership business we will continue to invest in our bank partners to increase both our mind share and drive better productivity across all the partners that we have. Our guidance continues to grow individual FIP at a CAGR of 20% plus for the next three years. Whilst achieving this growth we intend expanding our current bnb margins of 18% plus and in absolute numbers double the value of our netvnb in three years time. With this I hand over to Mayank, MD and CEO of our health insurance business.
Mayank Bathwal — Chief Executive Officer
Thank you Kamlesh and let me now present the performance of our health insurance business with a strong quarter three we continue to build on the first half FY26 growth momentum, maintaining our track record of consistently growing faster than the market while also continuing improved profitability metrics as well. For the first nine months of the year as per all accounting regulation, we achieved a gross premium of 4956 crores representing a strong 41% YoY growth. On a one by n basis our gross premium stood at 4651 crores reflecting a healthy 39% growth vis a vis the market growth of 21%.
Our market share in SAI has increased from 12.1 to 14.2, a YoY increase of 210 basis points. We registered strong growth momentum across both retail and group businesses. The retail franchise experienced a 42% YoY growth and it continues to be diversified across retail distribution channels. The proprietary channel with an agent base of over 1.56 lakh agents registered a 35% growth. All our major bank and digital alliance partnerships also experienced impressive growth. Our corporate business delivered a strong 41% growth in the ninth month of FY26 driven by our focused and disciplined strategy to build a sustainable franchise in the segment.
We have now also taken our differentiated Health first insurance model to corporates and this will only further improve our competitive strength here. On the profitability front, our net loss for the nine months stood at 178 crores as per the new accounting regulation. The loss includes an impact of the implementation of the new labour code. As for old accounting regulation, the net loss stood at 146 crores compared to a loss of 195 crores last year. A combined ratio of nine months for nine months under the old accounting regulation stood at 108% and under the new accounting framework at 111% was 114% on a comparable basis.
These improvements underscore our continued focus on unit economics and thus overall profitability ahead of market. We believe our robust growth and superior unit economics are driven by our digitally enabled and differentiated Health first model which gives us a selection advantage with a larger share of more health conscious consumers and then based on a hyper personalized health engagement model access to a deeper understanding of the health profile of our Info grace. Our Health first model is resonating with our consumers with 40% of our customers engaging with us for their health. 9.9% of our eligible customers earn good health incentives in the first nine months up from 8.4% last year, reflecting a deep engagement with our wellness ecosystem.
These customers then contribute to 8% low lower loss ratios and 11% better persistency in absolute terms. This is shown in slides 57 and 58. Similarly, our investments in managing customers with higher health risk for more than 210,000 lives have led to an improvement in the loss ratio by more than 9% overall. These have helped us keep our retail loss ratios well under control and ahead of market. Our promise of insurance is centered around providing industry leading experience and we have made continued investments in state of the art AI ML driven claims auto adjudication engine which further enhance our customer satisfaction but more importantly also reduce claim cost.
We continue to adopt a digital first approach across revenue, engagement and claims driving higher renewals, stronger customer engagement and greater self service through our active health app. Given our data focus large data focus, we are investing consistently in data and analyst capabilities to create efficiencies across the entire business life cycle and we will continue to embed Genai capabilities across key processes sales, governance, claims underwriting, customer engagement and we’ve explained that in our review deck. Looking ahead we remain very optimistic about the long term growth prospects of the health insurance sector with our differentiated Health first model and Sharp equation focus and we believe believe ABHI is well positioned to grow ahead in the market.
Thank you and I’ll now hand it back to Shilpa for a closing remarks.
Unidentified Speaker
Thank you Mayam. This concludes our remarks on Q3FY26 performance and we’ll be happy to take any questions.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press STAR and then one on their touchstone phone. If you wish to remove yourself from the question queue you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles again. To register for a question please press Star and then one. Our first question comes from the line of Chintan Shah from ICICI Securities. Please go ahead.
Chintan Shah
Yeah, so thank you for the opportunity and congratulations on the quarter and on the deal. HFC deal. So just on the HFC deal, one thing so now what are the timelines mean? When can we expect the money flowing? Firstly on that and secondly so now HFC seems to be now well capitalized at least for the next few quarters. But in terms of NBFC or are we also looking to infuse any capital in the nbfc. Yeah, that’s the first question.
Vijay Deshwal
Thank you. Chintan Vijay here. So first on the timelines for the daily completion today both the boards and the shareholders of Aditya Birla Home finance which is 100% owned currently by ABCL have approved the transaction. It will be subject to CCI approval for the investor. That application will be filed subsequently in the next few days. We believe that CCI will take about 45 days odd to grant the approval and the approval should come by end of March. And once the CCI approval comes the transaction will be closed. So that’s on the timelines at the same time.
I mean whether it comes end of March or comes in the week of April, we are sufficiently capitalized for the time being in the housing finance company.
Chintan Shah
The second question about.
Vijay Deshwal
Yes, you’re right. The 2750 crore in the housing finance will take care of our growth capital requirements for the next two to two.
Chintan Shah
And a half years for rest of.
Vijay Deshwal
The businesses on a standalone basis. Our total cap add right now is at 17.34%. Our AMC business continues to pay dividends. Does not need any capital. In the insurance business as we have. Said earlier, we have a JV partner who is equally committed to supporting the growth needs. We will keep evaluating our capital requirements and take suitable action in due course keeping in mind the interest of all the stakeholders.
Chintan Shah
Okay, sure. Thank you. Hello.
operator
Yes sir, please go ahead with your question.
Unidentified Participant
Yeah, yeah. And on the margin space. So for the NBFC business I think yeah the overall margins have ends up including the fee income but also could you like. Margins are of almost six days but any ballpark number on what could be the yields, what could be the fee income component in the overall average yield. So excluding that have you seen an uptick? Because it looks like despite both an unsecured it is not translating into meaningful uptick in the industry. I just wanted to understand on that. Please.
Unidentified Speaker
Chintan is a product mix which will drive the yields and the margins till quarter one. We were calibrating our personal and consumer and unsecured business post that if you see the growth has come back quite strongly it will take couple of more quarters for the yield to improve at a company level and the portfolio level and that should result in the improvement in margin as well. So it will take couple of quarters before you will start seeing it. Because in a large portfolio of almost one and a half lakh crore I think it will take some time to reflect.
Unidentified Participant
Understood. And just one last thing on the credit cost. So we have seen a Benign credit cost for us as well and the environment also I think remains favorable for us. But given that in the context of the global uncertainty or the macros are we looking to make any provision buffers or. I think probably or there could be any reset in our ECL model or it looks adequate as of now. Yeah.
Vijay Deshwal
Chintan, again if you look at in our growing book, if you look at our both stage two and stage three has come down significantly. If you look at stage two has come down from almost 2229 crores to to 1819 crores, a drop of 510 crores and in stage three from 2674 crores to 2140 crores. And I think the business has scaled up quite well in the same period year on year. And our stage two and stage three have come down significantly. So I think that credit profile and the credit performance looks quite stable and good.
We don’t think we need at this point in time. And also as you know 73% of our exposures are secured by collaterals and majority of our SME loans are backed by as I mentioned in my opening remarks, 82% of our exposure to MSMEs are secured by collateral. So we don’t think we need any enhancement in provision at this point in time. So on.
Unidentified Participant
That is very much clear. I have more questions but I’ll join back in with you. Thank you and all the very best.
operator
Thank you. Your next question comes from the line of Gaurav from mlp. Please go ahead.
Gaurav
Yeah hi good evening team. Thanks for taking my question and congratulations on the housing finance deal and the quarter. I have three questions and just taking forward Chintan’s question earlier regarding margins, if I look at the yield profile, yields have remained broadly flat in the last two quarters despite the mix change being favorable. If I look at the mix of unsecured business loan and personal loan have moved up every quarter in the last couple of quarters. So when do we start seeing the impact on yields? The entire NIM expansion that we’ve seen in the last couple of quarters are largely driven by the cost of funds benefit that we’ve got.
So when do we start seeing the yield kind of moving up? Is it next quarter? Because 200 basis point of improvement in the mix have already happened.
Unidentified Speaker
So as I mentioned a couple of quarters it will take see within the personnel and consumer within unsecured business. Also we have been cutting down high risk and wherever the portfolio has not been stacking up, as you know we have been recalibrating our unsecured portfolio over the last 18 months or so. So high risk segment across our personal and consumer and unsecured business we are cutting off. So as I mentioned and the great corporate quality. And if you look at the stage one, stage two is stacking up quite well. The bounce rates and everything else is stacking up quite well at this point in time.
And that’s the reason why we are growing these segments. But it will take a couple of quarters at least to see improvement in yields and improvement in margins.
Gaurav
Sure, sure. And on the other side, cost of funds in the fourth quarter, where do we see the cost of funds moving in the next couple of quarters? Have we kind of repriced our borrowings completely or there’s still some use left?
Unidentified Speaker
Again, cost of borrowing we look at we are one of the most efficient borrowers in the market and we look at all the opportunity in terms of bringing our cost of funds down. Again, looking at the liquidity in the market and everything else, we will see how it goes forward. So can’t comment at this point in time the way the liquidity is there in terms of how much and by when the cost of funds will come down. But as you know we are, I think almost 70% of our loans is floating. So even if the cost of funds comes down, down, I think we need to pass on that to our customers.
So I think we will. As you have seen in the last two, three quarters, the cost of funds have been coming down. It will continue to, we will continue to leverage the opportunity in terms of bringing the cost of funds down.
Gaurav
Got it. And can you highlight the delta between the stock cost of fund and the stock cost of fund and the incremental cost of fund. What’s the delta. Cost of borrowing on the stock and incremental. Can I come back to you on this?
Unidentified Speaker
Sure, sure. And my next question is on the stage one, stage two and stage three ecl. Now understand you’ve given the stage three PCR but can you give me what’s the total ACL breakdown into stage one, stage two and stage three? Maybe for this quarter and in the previous quarter. This is just to understand the overall movement in ECL and perhaps back calculate the write offs.
Unidentified Speaker
So far we have not shared this and we will see at what point of time in terms of this information can be shared. But I think you can clearly see it that staging has improved in terms of and we refresh this is all basis the portfolio performance. So basis the ECL model. So that’s what.
Gaurav
Understood. So because one of the one of your competitors have taken an ECL reset and I think Chintan alluded to that question earlier. In terms of the ecl, how should we look at are there any sort of changes on PD or LVD assumptions that you are undertaking?
Unidentified Speaker
Again, if you look at our portfolio quality is very, very stable and especially the MSME segment where the issue has been raised, 82% of our exposure is secured. This is secured by cash flows and the collaterals. So we don’t expect anything at this point in time. We don’t see.
Gaurav
Understood. Just last question if I may squeeze in any growth guidance for F27 given that this year you’re already on a strong footing. The asset quality you mentioned is looking good. So fingers crossed, what kind of growth can we expect?
Unidentified Speaker
NBFC? You are asking?
Gaurav
Yeah. Yes sir.
Unidentified Speaker
NBFC. If you look at we have grown 24% year on year, our guidance is in the similar range of 24, 25% and we have all we have committed or we have guided that we will double our loan book in three years. So that means 25% growth is what we are looking at.
Unidentified Participant
All the very best. Thank you for taking my question.
Unidentified Speaker
Thank you.
operator
Thank you. Your next question comes from the line of Abhijit from Modilal Oswal. Please go ahead.
Unidentified Participant
Yeah, yeah. Good evening and thank you for taking my questions. Again. Congratulations on a good quarter. So just trying to understand, I mean you would have seen, right. The previous two participants were kind of asking you about the provision cover and particularly the unsecured businesses, your unsecured business loans as well as your personal and consumer signal. Just trying to understand. We have today earlier seen a sudden increase in provision cover from one of the peers who reported earlier today. So just trying to understand this better that at least from the regulator. There has been no nudge, right to kind of increase the provision cover especially on your unsecured business and including your personal income.
Unidentified Speaker
If you look at our personal and consumer segment, we have a provision cover of almost 70%, 68.1%. Our unsecured business is almost 45%. And here we have almost 40% of this portfolio is backed by the credit guarantee. So taking this into account, both unsecured portfolios are well provided and well.
Unidentified Participant
Got it. And this unsecured business where you spoke about this 45% cover, that is a little lower than peers predominantly because what you mentioned and what you also share in the PPT, that 40% of the state 3 book is actually covered in the different government schemes.
Unidentified Speaker
Yes, that’s the Credit guarantee which we have on this unsecured business.
Unidentified Participant
Got it. And then this just kind of observation on the disbursements. Should look at your disbursements in NBCs across different products this quarter sequentially seeing a moderation in your unsecured business. Personal loans slightly flattish sequentially. So just trying to understand is this some kind of a internal recalibration or some seasonality that you see in this quarter or how should we interpret it?
Unidentified Speaker
So Abhijit, if you look at our disbursement has grown 41% year on year. So very strong momentum on disbursement. To your question on unsecured business sequentially, I think if you look at also we should look at the AUM growth in the same segment. The AUM growth in this segment is 12% quarter on quarter and 36% year on year. The reason why frequently it’s looking slightly down is because we don’t take the line of credit products or supply chain where there is a high churn. So that is not included here. If we include that, I think our disbursement will be much higher sequentially as well.
But you should look at the AUM growth.
Unidentified Participant
Got it, got it. On the housing business, just. I wanted to understand two things. One is. I’m sorry.
operator
Sorry to interrupt, your voice was breaking. We could not understand the question.
Unidentified Participant
If you can, is this better now?
operator
Yes sir, please go ahead.
Unidentified Participant
Yes, this last question on the housing business. What is the LTV that you’re doing in the housing business today? Basically your. Your portfolio LTV in the home loan book and what are the incremental LTVs that you do? And lastly, out of total home loans that you source, what proportion of that actually comes from the construction finance business? Basically where you have given a construction finance.
Kamlesh Rao
As you will know, LTVs in the housing business are regulated, you know, for the housing purpose. And there are clear guidelines around LTVs. But overall to answer your question, we are at the average LTV of between 50 to 52% on the portfolio put together on construction finance. As you will see. You know we have also given this breakup in the slide that we have presented 15.8%, you know, of our portfolio is the construction finance portfolio in overall 42,204 crores of a right now.
Unidentified Participant
So my question was a little different. What I was trying to understand is out of the total home loans that you source across both prime and affordable, what proportion comes from those projects that you have given construction plans?
Unidentified Speaker
So currently that proportion is low. In fact that’s a potential area for us and we have more than 400 developer relationships and we are present in almost similar amount of projects. I think we’ve started this journey where trying to leverage the developers also for retail penetration. So that’s the focus area for us. Currently those numbers are in the, in the sub. You know, they’re very, very not so meaningful.
Unidentified Participant
That’s very useful. Thank you so much for answering my questions.
operator
Thank you participants. In order to ensure that the management is able to address questions from all the parties in the conference, please limit yourselves to two questions each per participant. You may rejoin the queue for any further follow up questions. Our next question comes from the line of Nitesh Jain from Investec. Please go ahead.
Nitesh Jain
Thanks for the opportunity. My first question is on sourcing mix in the NBFC book. If I look at personal consumer loan there is sharp increase in digital sourcing. So what is driving that and how are we looking to increase the share of direct sourcing? Because that still remains bit low in both personal and consumer and unsecured business loan. That is first question and second question is ROAS in housing finance we have seen pretty good ROAS of 2%. We have guided a range of 2 to 2.2%. We have already reached that number. How do you see ROA in the housing finance business going forward? And similarly ROE guidance for the NBFC business.
Vijay Deshwal
Your question on nitesh, your question on personal and consumer higher on digital. Personal and consumer business is getting completely digitized in terms of the way it’s being driven through this code card and the analytics and the campaigns which we run. So clearly that’s what is showing here that we have Insta plus journeys which we have built for our business. So that’s driving the digital sourcing here. In terms of the unsecured business you mentioned are direct here a lot of customers depend on their chartered accountants to really help them source the funding. And that’s the reason why you see the sourcing of DSA slightly higher.
Direct is lower because it’s the chartered accountant and the DSA who really help the the customers.
Nitesh Jain
Just a follow up on this sourcing thing that in the digital sourcing it is all fintech partners, right? The 66% digital sourcing that we are showing in person and consumer it’s fintech partners.
Vijay Deshwal
Have our own journeys. So we source a lot through our customer. Wherever we have fintech partners also which is selective. I think the scorecard is ours, sourcing is ours, process is ours, collection is ours. So completely it’s just the sourcing which is there and not. But this is not reflection of sourcing through the digital partners. We do a lot of business through ABCD app, which is our in house app. We have the campaigns which we run on our existing ABC customer base. All of that. So insta PL journey which we have built is not a reflection of only the partnership business.
Nitesh Jain
Sure, sure.
Unidentified Speaker
On the question that you asked on housing, I think your observation is right. In March 2025 we had all guided towards reaching our targeted ROA of between 2.1 and 2.2 in six to eight quarters. But I think given the progress that we’ve made, you know, both on scale and profitability and you would have seen the number the ROA has grown consistently. 1.46 was the ROA for FY25 and right throughout the three quarters we have been consistently moving this up and now we’ve reached 1.96% on Q3, but on an overall for the year basis at 1.8%.
But like I said earlier, I think given the progress that we made on both scale and profitability, I think we believe we could achieve this slightly earlier in the guided time frame and ROA.
Vijay Deshwal
For the NBFC business. I think if we look at excluding the one off of the labor code impact, it’s almost 2.28. We are looking at expanding it closer to 2.5 in the next four, five quarters.
Nitesh Jain
Sure. Thank you. That’s.
operator
Thank you. Ladies and gentlemen, due to time constraint. That was the last question. I would now like to hand the conference over to Ms. Vishaka Muli for closing comments.
Vishakha Mulye
Thank you everybody for joining us so late. And if there are any questions, all. Of us are available. Kindly reach to Vijay Kramoda Sri Chaumeen. Thank you.
operator
Thank you. On behalf of Aditya Birla Capital limited that concludes this conference. Thank you for joining us. And you may now disconnect your line.