Aditya Birla Capital Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chintan Shah - ICICI Securities - Analyst : Congratulations on the quarter. So the -- first ma'am, I had a question on the merger. So currently, what all approvals are pending? And how much time do we anticipate -- I think by March 2025, we expect the merger to be over. So are we through with the timeline? And secondly, related to the merger only, we have around 45% stake in AMP and around 46% stake in Health Insurance and 51% in Sun Life Insurance. So any thoughts on whether the regulator -- whether the RBI would be comfortable with our main NBFC lending arm having us almost 50% stake in other subsidiaries. Usually, we have seen in case of some banks wherein RBI restricts the stake in insurance to 20%. So what are our thoughts on that? Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2024 / 11:00AM, ADTB.NS - Q1 2025 Aditya Birla Capital Ltd Earnings Call

Question: Chintan Shah - ICICI Securities - Analyst : That is actually quite helpful. Now specific on the NBFC business, if you look at the growth in the NBFC business, it was around 2% QoQ and still we are guiding for around 25% YoY CAGR over the next two, three years? So how do we look at it? What would be the main driver? If we look at the AUM mix, it seems that we are (technical difficulty) focusing or we are going slowly on the (technical difficulty) unsecured seat and that is also high yielding. So given that the margins also have given up quite a bit in the coming quarter. So is that due to the unsecured mix change? And will that continue? Or are we again going to build the unsecured mix? Yeah.

Question: Chintan Shah - ICICI Securities - Analyst : That is quite helpful. So for FY24, we have a margin, 6.9%, so (technical difficulty) margin should stabilize around similar levels for '25 or there could be some compression in these levels?

Question: Avinash Singh - Emkay Global - Analyst : Two questions. But first one is again on NBFC. Now as you have some recalibrated growth, both in unsecured business and unsecured personal and consumer loans, now if you can just provide some color, I mean, (technical difficulty) calibration on your change in strategy more focused on (technical difficulty), how the growth in terms of AUM growth in these two unsecured business and unsecured personal is going to look? And in this calibration or running down some passbooks, how is this delinquency or GSA 3 target to go? I mean, is this number what we are seeing, particularly the GSA numbers in these two segments peak or still, I mean, as until the time the growth comes, like the full throttle, it will inch up further. So that is the first question on NBFC, I will come back with (technical difficulty) question later.

Question: Avinash Singh - Emkay Global - Analyst : Okay. So I mean you're saying that growth will sequentially start from this quarter in both the segments?

Question: Avinash Singh - Emkay Global - Analyst : Okay. Coming on Life Insurance now, in quarter 1, if you were to look at the margins, of course, the margins have dipped quite a bit, could be due to maybe product mix changes some bit and also some bit due to the relatively growth coming under -- in some banca channel. Now still you are guiding like -- for the full year, a very similar margins. And that if we try to look particularly in the backdrop that okay, from H2 you are going to sell a new variety of the nonlinked products with the new (technical difficulty) norms in place. So what is sort of giving you the confidence that you will be, by and large, able to come back to the same margin level? Is it that you are hoping for a big shift in product mix? Or is it that you are expecting growth to come big time providing (technical difficulty) better. So what is (technical difficulty). First quarter, there is a big shift, but for the full year, you are looking confident to achieving the flattish kind of -- or slightly minor decline in margins?

Question: Bhaskar Basu - Jefferies - Analyst : Good evening. I had a couple of questions. Firstly, on the NBFC side, mainly around NBFC. So this quarter also, you bought about purchasable loans of about 2%. Last quarter, there was about 2.2% of portfolio purchase. So can you help us understand which segment were these loans purchased? And what is the strategy around loan purchases going forward?

Question: Bhaskar Basu - Jefferies - Analyst : Yeah. I mean, basically, the point was it's almost 2% of the book. So it's almost like 4% of book purchased in the last two quarters. And especially given that your own channels are building up, what is the driver for this essentially? I mean, I would have probably expected more from the organic channel.

Question: Bhaskar Basu - Jefferies - Analyst : Okay. So just following up on this, essentially, the spreads you make on these pools purchased are the comparable less or higher than you organic channel?

Question: Bhaskar Basu - Jefferies - Analyst : I have two more questions. I mean, one, on the OpEx side, OpEx has been obviously lower and -- is it more seasonal? Is it something to do with more acquisition to purchases? Or do you expect some of it to normalize? So any guidance on the OpEx side?

Question: Bhaskar Basu - Jefferies - Analyst : Yes, NBFCs, yes.

Question: Bhaskar Basu - Jefferies - Analyst : Okay. Just my final question, if I may. On the provision coverage, this has come down sequentially. So is there a recalibration of PD-LGD or you expected it through. What would be the steady-state provision coverage you expect from this book? And the related question is also around the write-offs this quarter, please.

Question: Bhaskar Basu - Jefferies - Analyst : Yeah, sure. I take your point. And just the write-off number, please.

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Yeah, hi. So I just had a question on your ROA targets in the medium term, right? So -- you had earlier guided that in the NBFC business, we wanted ROA to be 2.7% to 3%. Now -- that's on an AUM basis. And as of now, the number is like 2.4% flat on that for the past couple of quarters. Now you're guiding for stable margin, stable credit cost -- are you confident that you can meet this 2.7% to 3% range? When it will happen? What are going to be the drivers? Because really it looks like we are not going to see that number happening anytime soon. So any clarity on that would be great.

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Forgot to ask one more question which is on capital. You're growing at 25%, your ROE is at 15%, 16%. And your capital adequacy is just at 16.5%. So -- just wanted to understand what is your thought process here? Because it is very precipitously close to that 15% mark, right? And I think you need to keep some margin of safety. So are we looking at any capital raising? What could be the amount? Any clarity on that, please?

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Okay. But the stake in NBFC will go up, no? Again, you come back to the free float ratio, if that is the case.

Question: Suresh Ganapathy - Macquarie Capital - Analyst : So because you will have to infuse money. The holding company infuses, the stake in NBFC further goes up, right?

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Okay. Sorry for that.

Question: Sameer Bhise - JM Financial - Analyst : So the Stage 3 inch up in the P&C is quite expected. Can you just elaborate what's causing the unsecured business loan delinquency inch up and some thought there while it is guaranteed for yourself and should not cause any major credit issues, but I just wanted to understand.

Question: Sameer Bhise - JM Financial - Analyst : But any specific reason that you are saying, I mean, on a gross basis, even if we don't include guarantees?

Question: Sameer Bhise - JM Financial - Analyst : Any specific reason you wanted to highlight that why would one see inch up in the delinquencies for the unsecured business loan book?

Question: Sameer Bhise - JM Financial - Analyst : Yes, overall, it's less. This is helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2024 / 11:00AM, ADTB.NS - Q1 2025 Aditya Birla Capital Ltd Earnings Call