Aditya Birla Capital Ltd Q2 2025 Earnings Call Transcript

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

Question: Punit Balani - Macquarie Capital - Analyst : Yeah. So on your PC R has declined while the credit costs have also declined. PC R has declined and especially when I look at secure segment, they are like close to 30% now. So what's the reason you know, any guidance where we are comfortable with these levels. And second is on stage two assets they declined. But has your stage two coverage also declined based on that? Yeah, that's it from my side.

Question: Punit Balani - Macquarie Capital - Analyst : So, so we can expect these levels to continue right once you're going to secure book as well. So we can expect the PL levels around these to continue. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 11:00AM, ADTB.NS - Q2 2025 Aditya Birla Capital Ltd Earnings Call

Question: Punit Balani - Macquarie Capital - Analyst : Okay. Okay. Got it. Thank you so much. Yeah.

Question: Avinash Singh - MK Global - Analyst : Right. Again. Please use your handset mode.

Question: Avinash Singh - MK Global - Analyst : Yeah. Yeah. Okay.

Question: Avinash Singh - MK Global - Analyst : Yeah. So again on PC R I mean if you see the movement, I mean, again, the two businesses, right. The housing finance and your finance, on one hand, a little bit of P three PC R has been taken down to all40 it is one PC R down to 46% particularly stop drop in six. We are, of course, there is no sort of changes, are there no government guarantee scheme? But on the housing finance side, we are taking it higher to a close to 40%. I mean, that's a secure. So what is sort of, I mean, the key that you know, your model is growing just in a quarter, but we are kind of a divergent move if you compare secured with secured, so I mean, housing going to 40% whereas I mean, in the secured piece of your NBC, it's REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 11:00AM, ADTB.NS - Q2 2025 Aditya Birla Capital Ltd Earnings Call going to 31%. So it's a bit of, I mean divergence to move. And on NB also related that, you know, that your book in the quarter remains originally, I mean closed. Oh, so when you're giving your credit, the filter and what kind of a comfort you have? Typically, if I understand this, you typically any lab work and a kind of a mother or holding period. So what's the comfort you have on this book? Pankaj Gadgil - Aditya Birla Capital Ltd - Managing Director and Chief Executive Officer of Aditya Birla Housing Finance Limited So your first question was on the provision cover in the NDFC, I will address that and maybe an can add on the housing one, the reason in, in NDFC, what happens is what is the security? We have E ad exposure at default into LGD loss given default, which is based over last 5, 10 years of our recovery rates on the security. So it depends on what is the security cover I have. And that is the basis on which the provision is created. So if my provision, if my security cover is two X or 2.25 X, the provision will be lower because the LGD will be lower. So that's the logic with which the, yes, both of the, both of the businesses are secured. But on one side, then in the housing, the TV might be different, different customer segments. So I can add there. But in the NBFC one, it all depends on what is the security cover which we have. So that's the, that's the reason why the PC Roc will change. Your second question was on, on the acquired book.

Question: Avinash Singh - MK Global - Analyst : If I can just have one follow up. Oh, sorry, one more question. That on Life insurance, I mean, a part of the, and the margin 7% you are hoping the margin of list of 10 or percent of by year end. Now, if I see this kind of a margin of spending a 523 then the situation was different that you had a kind of a a strong sale of, you know, that nonpar product in the month of March 23. But here it will look big time. You continue to remain clear of the season. And in 82 the new product, you know, the new surrender of it also comes into picture. Now, what is it that I mean, you are still hopeful of taking of margin from 7 to 17 because it has not happened last year. It does not happen all the time in 22. It can only happen in 23 and there REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 11:00AM, ADTB.NS - Q2 2025 Aditya Birla Capital Ltd Earnings Call was a particular reason this time. The reason is just not me. But if I thought there could be some negative impact on the time, so I can give you the confidence that the margin can go up by 10% in the second half. Pankaj Gadgil - Aditya Birla Capital Ltd - Managing Director and Chief Executive Officer of Aditya Birla Housing Finance Limited If you look at the last two or three years time, I think you were validly raised the point saying that in one year, there was an update also on account of the new regulations setting in. But prior to that, you would have instances of a BSL, I would be in the range bound margin of 7% to 8%. And we have gone even actually, to 23% in that year. But a fair point made that is on the growth and, but like I said, so all the new products that are getting launched in the second half of the year are non unit products protection. We have launched a suite of two new products which actually happened in the month of September. So that will flow into the second half of the year, significantly better. Typically, the margins which approve from our agency business is significantly higher. And between the first half of the year, the second half of the year, the investment in capacity that we have done in the agency business has been about 40% 50% more. It takes time for that to 45 which we think will happen in the second half of the year. So all of this would combined. And of course, like you rightly said, the business will need to get moderated as compared to the unit business that happened in the second quarter. And we actually did that as part of a strategy because in some of our large bank counters, you wanted to garner additional mind share. Normally when you get additional mind share in the bank counter, when you substitute your products, your mind share typically remains the same, but you get your combination of suite of products and that's the strategy that we have played. And that's the reason why you, once you see significantly larger growth rate in the second quarter, we want to use whatever we have created with a combination of products that we will launch in the second half of the year. And like I said, in agency, you will see traction in the second half of the year. More than in the first half is where the uptake of the model is expected from seven and a percent level to about 1,718 that we are projecting for the end of the.

Question: Subramanian Ayer - Morgan Stanley - Analyst : Thanks for the opportunity. I just had one data keeping question. Can I get. The total ECL for both, for the NDC, for both. The quarters? A. Balasubramanian - Aditya Birla Capital Ltd - Managing Director and Chief Executive Officer of Aditya Birla Sun Life AMC Limited So we can share that. I don't have readly available. I can share that.

Question: Chintal Shah - ICICI securities - Analyst : Yeah, thank. You for the. Opportunity and congratulations on a good set of numbers. So firstly, on the capital allocation, so of the when we have, after the latest hundreds of roughly 3,000 courses we have completed also how much of that has been allocated to N DC and KC. Gentle out of the total, we raised about 3,000 Kora of capital in June 23. And after that, we also got about 570 Kurs of capital from the A MC OFS during March and June of this calendar year. And about 167 Crores recently from the A Bibl stake sales. So far, we have invested close to about 2,100 Crores in the NBFC and about 600 Crores housing Finance. Okay. Okay. And how much of that would be into the digital arm? Sorry. How much of this would have gone into the digital arm Digital company. Mayank Bathwal - Aditya Birla Capital Ltd - Chief Executive Officer and Whole Time Director of Aditya Birla Health Insurance Co. Limited As we had mentioned during March that until March, we had spent about 100 K and we would have additionally spent about 50 to 75 during the year in the digital.

Question: Chintal Shah - ICICI securities - Analyst : Okay. So, no, I just, I wanted to understand this because in the last quarter also, we have seen a steep decline of the dispersement. And this quarter, despite the environment, this person have been quite strong. So anything that has changed very much, the cohorts and the tightening of the filters that has happened in this quarter itself or how is it. Mayank Bathwal - Aditya Birla Capital Ltd - Chief Executive Officer and Whole Time Director of Aditya Birla Health Insurance Co. Limited The time tightening has happened, it has been happening over the last three quarters or 34 quarters. So if you look at and that the reason the the disbursement has been coming down from, we used to do close to 5500 Crores of disbursement that came down to 2000. And so it's been coming down and we have been tightening our underwriting norms over the last 3 to 4 quarters. And all the branch branch led disbursements and our own digital journey, the ABC D app on which through which we acquire customers. Those are the things which is growing at this point in time.

Question: Chintal Shah - ICICI securities - Analyst : Sure. So I think on the total. So if you could just give the total sovi on the book for this quarter and the last quarter, I think that data is not handy. So if you can share that with that with me as well, that would be 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. OCTOBER 30, 2024 / 11:00AM, ADTB.NS - Q2 2025 Aditya Birla Capital Ltd Earnings Call Mayank Bathwal - Aditya Birla Capital Ltd - Chief Executive Officer and Whole Time Director of Aditya Birla Health Insurance Co. Limited Because now as well, sorry, the we call was closed earlier. This is not, well, not for this quarter. That is the incremental is there and on, on PC R anyways, if you want to know on the PC L as well, and we can share that with you subsequently.

Question: Chintal Shah - ICICI securities - Analyst : Okay. Sure, thank you. Thank you. That's it from my side and all the best.

Question: Kishore Agarwal - Bajaj AMC - Analyst : Yeah, hi. Thank you for the opportunity and congratulations on a good quarter. I have two questions, one on the margins. On the NVFC side, we have seen the second quarter of sequential decline in margins. So, is it primarily because of the increase in secureness? And where do you see the margins set? And my second question is on asset quality. Do you think that you can this improvement in asset quality can continue even the second half? A. Balasubramanian - Aditya Birla Capital Ltd - Managing Director and Chief Executive Officer of Aditya Birla Sun Life AMC Limited What's question? Yeah. So margins, if you look at that on the backdrop of change in the product mix, our secured business going up from a 67% to 74%. And also on the other side, the unsecured business declining or de growing from 20 odd percent to 14%. So that's the reason because of the change in the product mix. Why the margins have come down? As I mentioned in our, in the earlier reply, we are building our own acquisition channels and switches and we want to build up the personal consumer segment through our own channels and which is what and also the MS ne small, small ticket, MS ne loans, the business loans, which we call it. I think these two things, we should be able to offset the E compression which is happening on account of the secured business growth, but it might take a quarter or two because I think the shift will have to because the product mix is still in terms of also looking at the environment. If you the small ticket loans in unsecured, we have completely stopped doing it. Less than 50,000 unsecured loans, we are not doing it. We have tightened all underwriting norms. So that's the reason why the margins have. But once that starts picking up and also our business loans picks up on our B two B plus platform. We should be able to mitigate the margin. And to your second question, in terms of whether we will be able to sustain the asset quality and the ECL yes. It will be range bound. Our guidance has been that the credit cost will be around 1.5%. We, we have come down to 1.25. We expect it to be in the same range And we don't see this going up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 11:00AM, ADTB.NS - Q2 2025 Aditya Birla Capital Ltd Earnings Call

Question: Kishore Agarwal - Bajaj AMC - Analyst : Yes, thank You