Aditya Birla Capital - A complete Financial Inclusion

Stock Opportunities
173

Posting an extract from their latest concall -

Q- On the NBFC side the credit cost any guidance on that front?

A- So long-term guidance we have been giving this I think we will if you see last quarter, it was 1.13 was our credit cost. We will stay in this range as of now because a lot of retail growth is coming through. Yes, the credit cost will come down on the corporate side but as we grow the retail segment it will range in this 1.2 is what the guidance which we had given or we had discussed earlier and we will stay in that range.

Can someone throw some light on wether they are taking about annualised credit cost of 1.13 pc or it it a quarterly figure.

Thanks in advance.

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6 months later. Value investing paying off…

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disc. Invested & biased. Not a buy/sell recco.

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Has anyone got the 5 rs dividend credited? They were saying that it will get by 10th of April.

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Note :
6a0aab12-caf1-4191-af7c-c2eeed99a96a.pdf (2.2 MB)

Aditya Birla Sun Life has declared 5rs interim dividend and not Ab capital.

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AB Capital Q4 and FY 23 concall highlights -

Full yr highlights-

NBFC loan book @ 80k cr, up 46 pc yoy
NIMs @ 6.84, up 60 bps yoy
PBT- 2090 cr, up 41 pc (despite doubling NBFC branches)

HFC loan book @ 13.8k cr, up 14 pc yoy
NIMs @ 5.08, up 76 bps yoy
PBT - 309 cr, up 22 pc

AMC’s AUM @ 2.86 lakh cr, down 4 pc yoy
PBT - 794 cr, down 11 pc yoy

Life Insurance Individual first yr premium up 37 pc yoy
Net VNB margins at 23%, up 800 bps yoy
PBT- 196 cr, up 12 pc yoy

Other businesses ( broking - insurance and stocks, ARC )- PBT at 236 vs 176 cr, up 34 pc

Health Insurance - Gross premium up 57 pc yoy
Combined ratio at 110 pc vs 127 pc LY
PBT- (-) 218 vs (-) 310 cr

Asset quality -

NBFC -

87 pc loans to customers with CIBIL score> 700

Stage 2+3 book at 5.86 pc vs 8.98 pc yoy

PCR of 46 vs 39 pc for stage 2+3 book

HFC -

94 pc loans to customers with CIBIL score > 700

Stage 2+3 loans at 4.99 pc vs 8.75 pc yoy

Stage 2+3 PCR at 33 pc vs 31 pc yoy

AMC -

SIP book at 1003 cr vs 895 cr yoy
Total SIPs at 33 vs 32 lakh yoy
Count of SIPs -
Over 10 yrs old - 82 pc
Over 5 yrs old - 91 pc

Life insurance -

Total premium collected at 15.07 k cr, up 24 pc yoy

Growth at 2X of Industry

Third fastest growing life insurer in FY 23

Persistency ratios -

61M @ 54 vs 52 pc
37M @ 67 vs 67 pc
25M @ 72 vs 73 pc
13M @ 87 vs 82 pc

AUM@ 70k vs 60k cr (24:76 pc Debt:Equity)

Health Insurance -

GWP @ 2717 cr, up 57 pc yoy. Industry growth @ 26 pc
Mkt share @ 10.4 pc, up 208 bps ( SAHI )
Fastest growing health insurance player

Other Fin services ( insurance and stock broking ) -

Revenue @ 1100 cr, up 2 pc
PBT @ 238 cr, up 26 pc

Management commentary -

Added 75 AB Capital branches in Q4. Total branches now at 1295

Company announced board of directors approval to raise 3000 cr for business expansion

Loans to Retail, SME, MSME, HNI constitutes 69 pc of loan book

Company focusing on granualisation of loan book

Avg ticket size in HFC business @ 25-30 lakh. HFC branches at 128

Health insurance claim settlement ratio at 96 pc (one of the highest in the Industry )

Capital raise in expectation of pick up of growth in Indian Economy

To be used for growth of both lending and protection businesses

A heavy chunk of company’s lending business comes from Fintech partners like Paytm. However, company has a direct connect with the customers while disbursing and collecting EMIs, also has access to their data etc

This was a concern that I also had. I think the management’s clarification on the same was satisfactory

Has launched a lending app - Udyog plus to capture micro SMEs. Company believe that this may be a big growth engine in the future

70 pc of NBFC book is secured

Management continues to be cautious wrt credit quality despite very high growth rates. Most lending happening to customers with credit score > 700

Company will target various Aditya Birla group employees, SME and MSME vendors for additional growth

Avg tenure of unsecured loans at 15-18 months for consumer loans, 18-24 months for SME loans

40+ pc customers are repeat customers in unsecured business

Keep proactively monitoring customer data on a monthly and weekly basis for any stress in the system

Despite rapid branch expansion, company continues to maintain healthy return ratios. Intend to continue on this path going ahead

Breakup of individual life insurance wrt Traditional vs ULIPs at 81 vs 19 pc

Disc: hold a small tracking position

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Most of AB Capital’s subsidiaries have declared Q1 results. Very strong Q1 and the growth trajectory continues to be far ahead of expectations.

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Note: ABC doesn’t own 100% of all subs so consolidated profit will differ from above.
Disc: Invested and biased.

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181

Why is EPS of company growing at a considerably lower rate than net profit? From 2015 to 2023 net profit grew by 16 times while eps became only 5 times? While in this quarter also net profit has increased but eps has decreased q on q basis.

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Well, if you look carefully at the number of shares, you will see that it keeps on increasing almost every quarter…the company keeps giving out huge esop shares on regular basis thus diluting equity base and that’s why eps did not grow at same pace. They also did preference share allotment recently… Birla group :wink:

FYI, right now it’s having 259.5 crore shares and in 2019, it was having 220.1 crore shares. In 2017, it was having 123.2 crore shares.

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If this is not siphoning off of funds then what is?

I am invested, sitting on good profits but still, this hurts.

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How will a NBFC will raise funds? Commercial paper or preferential allotment, QIP is always better than debt for more stable ROA.

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I was aware of them doing esops every now and then, m talking about those.
Anyways m a noob, would you mind elaborating how is it better than taking a debt? I know you dont have to pay interest, still throw some light.
Thanks in advance.

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Equity issuance is a feature, not a bug for lenders. The March 2017 share count you quoted is not relevant since that is pre-IPO. Dilution since IPO is around 18% while EPS has increased 6x and ROE has continuously improved too. This is better than its peers - check Bajaj Finance for e.g. Specifically on ESOPs, dilution in FY23 was 0.07% - how is this large?

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This stock is too much, this itself won’t pay dividend but whenever one of its subsidiaries pays dividend, it will open lower. Frustrated thoroughly.

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Results announced. Source: Trendlyne

Consolidated Financial Performance:

  • Revenue: Increased by 29% YoY to Rs 9,997 crore in Q3FY24.
  • Profit Before Tax (PBT): Grew by 38% YoY to Rs 1,050 crore in Q3FY24.
  • Profit After Tax (PAT): Rose by 39% YoY to Rs 736 crore in Q3FY24.

Lending Portfolio:

  • Overall Portfolio: Saw a 34% YoY increase to Rs 1.15 lakh crore for NBFC and HFC.

Asset Management:

  • Mutual Fund Quarterly Average AUM: Grew by 11% YoY to Rs 3.12 lakh crore.

Life Insurance:

  • Individual First Year Premium (FYP): Increased by 8% YoY to Rs 1,974 crore for 9M FY24.
  • General Written Premium (GWP) for Health Insurance: Improved by 29% YoY to Rs 2,399 crore for 9MFY24.

B2B Platform for MSMEs:

  • Udyog Plus AUM: Reached Rs 100 crore as of December 31, 2023.

NBFC Business Highlights for Q3FY24:

  • Disbursements: Up by 26% YoY to Rs 16,550 crore in Q3 FY24.
  • Loan Portfolio: Increased by 35% YoY to Rs 98,601 crore.
  • Net Interest Margin (NIM): Stood healthy at 6.88%.

Housing Finance Highlights for Q3FY24:

  • Disbursements: Saw a 45% YoY growth to Rs 2,016 crore in Q3 FY24.
  • Loan Book: Grew by 27% YoY to Rs 16,538 crore.
  • Profit Before Tax: Increased by 28% YoY to Rs 100 crore.

Asset Management Business Highlights for Q3FY24:

  • Equity Mix: Constituted 43.7% of the Mutual Fund Quarterly Average AUM.
  • Passive AUM: Grew by 36% YoY to Rs 29,299 crore.

Disc: invested

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189

Aditya birla finance will get merged with aditya birla capital

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190

Results are down q on q, it seems it is a consistent theme in this quarter among all lenders, those who were growing aggressively are all down q on q, does this happen in every election quarter or MSME loans go down in monsoon or something else? Does anyone has any idea?

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Latest Investor presentation

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Subsidiary merger a +ve for Holdco

The RBI released scale-based regulation for NBFCs (October 2021) classifying them into four categories (Base, middle, upper, and top layers). In September 2022, it identified 15 NBFCs, including ABFL, as upper-layer NBFCs. As per the scale-based regulations, upper-layer NBFCs require mandatory listing within three years of identification. Accordingly, ABFL was required to list by September 2025.

The rationale behind amalgamation scheme is:

  • a) to comply with RBI’s scale based regulation which mandated ABFL to list as a
    separate entity by Sep’25.
  • b) simplification of organizational structure (less legal entities),
  • c) to set up one large finance hub with direct access to capital for the whole
    organization (ABFL had to depend on ABCL for raising funds), and
  • d) business consolidation to offer operational synergies.
     The amalgamation is subject to regulatory and other approvals. The process will result in
    transfer and vesting of all assets, liabilities and entire business of ABFL with ABCL which
    would take ~9-12 months.
     Upon the scheme becoming effective, equity investment in ABFL by ABCL (which stands
    at INR ~70bn) shall stand cancelled. There will be no change in shareholding,
    management and/or control of ABCL. ABCL would continue to hold existing investments
    in subsidiaries and associates subject to requisite approvals. Proposed amalgamation is tax
    neutral for ABCL and ABFL. The amalgamated entity will have a CRAR ~150bps higher
    than the standalone entity.

Source : Jm Financial Company update

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Aditya birla sun life insurance

17% VNB CAGR for Insurance arm 15x multiple

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Q1FY25

AB Capital In Focus - strong numbers by subsidiary

Aditya Birla Housing Finance Q2FY25 Earnings
NII up 22% QoQ to Rs 281 cr
PAT up 22% QoQ to Rs 80 cr
Profit beat of 11% vs. Morgan Stanley estimates

Aditya Birla Housing is a subsidiary of Aditya Birla Capital

Subsidiary accounts for 10% of consolidated profit and ~8% of SOTP value

Profit up 22% QoQ mainly because of higher revenues

Gross Stage 3 (-30bp QoQ) and Net Stage 3 (- 28bp QoQ) improved significantly

Balance sheet loan assets grew 46% YoY

#AdityaBirlaCapital #AdityaBirlaHousing

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