Aditya Birla Capital Limited (ABCAPITAL.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '26 Earnings Conference Call of Aditya Birla Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Vishakha Mulye, MD and CEO, Aditya Birla Capital Limited. Thank you, and over to you, ma'am.

Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q2 of FY 2026. Joining me today are senior members of my team, Bala, Rakesh, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Ramesh and Deep. I will cover our strategy, financial and business performance, and Vijay will cover key financial and business highlights, followed by a discussion on performance of our key businesses by our business CEOs. The Indian economy continues to exhibit resilience with a strong GDP growth in an uncertain global macroeconomic environment. Headline CPI inflation has remained benign. The government has rationalized GST rates with an objective of stimulating consumption and growth. We are starting to see some benefits of these measures in terms of record automobile and high food sales since the last week of September. The growth outlook for the second half of FY 2026 remains strong, driven by implementation of structural reforms, including streamlined GST rate, above normal monsoon and rising capacity utilization. However, ongoing tariff and trade policy uncertainties will impact external demand and need to be monitored closely. At Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology. Our customer-centric approach enables us to provide simple and holistic financial solutions in a seamless way. Prudent risk management practices from backdrop of our approach, which has enabled us to protect capital and deliver risk calibrated and sustainable returns across businesses. We also continue to strengthen our omnichannel-based distribution network coming to the financial and business performance for the quarter. One, growth and profitability. During Q2 FY '26, the consolidated profit after tax increased by 3% year-on-year to INR 855 crores. The total consolidated revenue grew by 4% year-on-year and 10% sequentially to INR 12,481 crores. In our NBFC business, disbursement increased by 39% sequentially to INR 21,990 crores in Q2 of the current year. The NBFC portfolio grew by 22% year-on-year and 6% sequentially to INR 1.4 trillion. We had mentioned in our previous quarter's earnings call that given the uncertainties in the operating environment, we have taken various proactive interventions in personal and consumer loan and unsecured business loan segment, such as tightening the underwriting norms, strengthening our internal sourcing channels and teams and recalibrating the sourcing from digital partners. The credit environment in the personal and consumer loan segment has settled since March and remains stable. We continue to build on the growth momentum in personal and consumer loans seen in Q1 with the disbursement growing by 52% year-on-year and 26% sequentially to about INR 4,970 crores in Q2. The personal loan portfolio grew by 15% year-on-year and 11% sequentially to INR 18,218 crores and comprised 13% of our total portfolio. We're also seeing signs of environment stabilizing in the unsecured business loan segment. Disbursement in this segment grew by 32% year-on-year and 37% sequentially to about INR 1,500 crores. The unsecured business loan portfolio grew by 24% year-on-year and 11% sequentially to INR 13,663 crores and comprises 10% of our total portfolio. The secured SME and corporate and mid-market segments continue to show steady growth. The secured business loans to SMEs grew by 22% year-on-year and 6% sequentially. The corporate and mid-market portfolio grew by 23% year-on-year and 4% sequentially. I'm happy to share that our asset quality continues to remain strong. The credit quality indicators such as bounce rates, forward flows and delinquency rates across all segments are stacking up very well. Gross Stage 2 and 3 loans declined by 121 basis points year-on-year and 67 basis points sequentially to 3.03% as of September end. During the quarter, we have sold gross Stage 3 assets from our business loan portfolio, which Rakesh will cover in detail later. Our provision coverage on Stage 3 loans has improved from 41.2% as of June end to 44.2% of September end. Our credit cost in the current quarter is 1.16%, and we expect the credit cost to be in the same range of 1.2% to 1.3% in FY '26. The profit after tax of NBFC segment grew by 14% year-on-year to INR 714 crores in Q2 of FY '26. The ROA of NBFC segment was 2.2% in the current quarter. Coming to our HFC business, we have created a full stack franchise focused on growth, prime and affordable segments. In Q2 FY '26, we continue to deliver on a strong growth momentum and gained market share. Our disbursement grew by 14.4% (sic) [ 44% ] year-on-year to INR 5,786 crores during the quarter. This has resulted [ in our ] HFC portfolio growing by 65% year-on-year and 11% sequentially to INR 38,270 crores. The credit quality in HFC portfolio is among the best in class with Stage 3 loans declining by 69 basis points year-on-year and 2 basis points sequentially to 0.61%. The net Stage 3 loans were 0.26% of September [Technical Difficulty]

Ladies and gentlemen, the line for the management has been disconnected. Please stay connected while we reconnect.

We continue to see the leverage kicking in because of the investments made in distribution, data, digital and emerging technologies over the past 2 years. The OpEx to assets improved by 62 basis points year-on-year and 20 basis points sequentially to 2.39% in the current quarter. The ROA of HFC business increased by 23 basis points sequentially to 1.82% and ROE increased by 168 basis points to 13.95%. Moving on to the Asset Management business. During Q2 of FY '26, our average AUM grew by 11% year-on-year and 5% sequentially to more than INR 4.25 trillion. Equity AUM increased by 7% sequentially to INR 1.92 trillion. We continue to see an improvement in the performance of our funds with 70% to 75% of our equity AUM in the top 2 quartile for 6 months and 9 months returns. The operating profit grew by 13% year-on-year and 6% sequentially to INR 270 crores. The profit after tax was INR 241 crores in Q2 of the current year. Moving on to the Insurance businesses. The growth in the life insurance business continues to remain strong. We were the fastest-growing private life insurer with an individual first year premium growth of 19% year-on-year in H1 of FY '26. Our market share increased by 55 -- 50 basis points year-on-year to 4.9%. We continue to be the top quartile in the industry in terms of 13th and 61st month persistency. We are well calibrated product mix, increase in the rider attachment and favorable movement in the interest rate has led to 420 basis points year-on-year increase in the net VNB margin to 11.6% in H1 of FY '26. In the Health Insurance business, we continue to be the fastest-growing stand-alone health insurer. Our gross written premium grew by 31% year-on-year, driven by our differentiated Health First model and data-driven approach towards customer acquisition. Excluding the impact of the multiyear guidelines, the growth in the GWP was 41% and our combined ratio was 112% in H1 of FY '26. In the landmark and a citizen-centric move, the government has recently waived GST on all individual life and health insurance products. This progressive reform is expected to enhance affordability, stimulate demand and drive growth and increase penetration in the long run. We are assessing the impact from unavailability of input tax credit on our profitability and are in dialogue with the various stakeholders to mitigate the same. Taking into consideration the above, in the life insurance business, we remain confident to achieve a net VNB margin of more than 18% in FY '26. In the health insurance business, we remain confident of improving our combined ratio in the current year from 105% in the previous year. Our omnichannel architecture allows customers to choose the channel of their choice and interact with us seamlessly across the digital platform, branches, VRMs and fostering the engagement and loyalty. Our D2C platform ABCD went live about a year ago. It offers a comprehensive portfolio of 26 products including the payment, loans, insurance, investment and help customers to fulfill their financial need. ABCD has witnessed a robust response with more than 7.6 customer acquisition till date. Our comprehensive B2B platform, Udyog Plus continues to scale up quite well. It has reached an AUM of INR 4,400 crores. Udyog Plus now contributes about 32% of AUM of our unsecured loan business. ABG ecosystem now contributes 30% of the disbursement of Udyog Plus. We added around 22 branches during the quarter, September ended 2025, we are focused on capturing white spaces and driving penetration in the Tier 3 and Tier 4 locations. We now have 1,028 co-located branches across more than ABC 260 locations. Going forward, we'll 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. Over to you, Vijay.

Thank you, Vishakha, and good evening, everyone. Vishakha covered the consol highlights. I'll share the stand-alone financials and key business highlights for our companies in brief. During Q2 of FY '26, the stand-alone profit after tax grew by 12% year-on-year to INR 916 crores. During Q2 of FY '26, we received a dividend income of INR 311 crores from ABSLI -- ABSL Asset Management Company compared to INR 237 crores in Q2 of last year. On a stand-alone basis, the Tier 1 ratio was 15.39% and total capital adequacy ratio was 17.98%. Stand-alone return on equity adjusted for investments in subs and associates was 14.2% in Q2 of FY '26. In our NBFC business, the portfolio grew by 22% year-on-year and 6% sequentially to about INR 1.4 trillion. NIM, including fee income improved by 9 basis points sequentially to 6.06% for the quarter. The credit quality of NBFC business segment continues to be healthy with GS2 and GS3 loans improving by 67 basis points sequentially to 3.03% as of September end. ROA of our NBFC business segment was 2.2%. Our Housing Finance business continues to see strong momentum. The loan portfolio grew by 65% year-on-year to INR 38,270 crores. During Q2 FY '26, we further infused equity capital amounting to INR 250 crores in our HFC subsidiary, taking the total infusion to INR 500 crores during FY '26. This infusion was done to support the growth momentum and maximize the share of our opportunities. We are seeing operating leverage kicking in with OpEx to AUM further improving by 20 basis points in this quarter. The ROA of HFC business increased by 23 basis points sequentially, which now stands at 1.82% in Q2 of FY '26. Coming to our AMC business, the quarterly average assets under management grew by 11% year-on-year and 5% sequentially to about INR 4.25 trillion, of which equity AUM was approximately 45.3%. In the Life Insurance business, our first year premium increased by 19% year-on-year in H1 FY '26. The net VNB margin increased by over 400 basis points year-on-year to 11.4% and absolute net VNB increased by 74% year-on-year to INR 237 crores in H1 of FY '26. In our Health Insurance business, our unique and differentiated Health First model helped us deliver industry best growth of 31% year-on-year in gross written premium during H1 FY '26. Excluding the impact of multiyear guidelines, the growth in GWP was 41%. I'll now hand over to Rakesh, ED and CEO, NBFC, to cover the NBFC business performance in detail. Over to you, Rakesh.

Thanks, Vijay, and good evening, everyone. The NBFC business grew by 6.4% quarter-on-quarter and 22% year-on-year, taking the AUM to INR 1,39,585 crores in quarter 2 of FY '26. Profit delivery was healthy, registering a 4% sequential growth in the quarter profit after tax. In quarter 2 FY '26, we disbursed INR 21,990 crores, which was highest-ever quarterly disbursement and 39% higher sequentially. Of the total disbursement: secured and unsecured business loans to SME was 42%; personal and consumer segment was 23%; and corporate and mid-corporate was at 34%. We continue to see the momentum in our personal and consumer loans business post strategic calibration. I'm happy to share that in quarter 2, disbursement in this segment registered a sequential growth of 26%, which was largely driven by improvements in branch business and scale-up of our direct digital business through proprietary journeys. The AUM grew by 11% sequentially and 15% year-on-year to INR 18,218 crores. About 50% -- 56% of our portfolio comprises of business loans to MSMEs, which has grown 7% sequentially and 23% year-on-year to INR 77,532 crores. Out of this, 82% of the loans are secured and 18% is unsecured. Disbursement in unsecured business loans grew 37% sequentially. The profit grew 11% quarter-on-quarter and 24% year-on-year and comprises about 10% of the overall NBFC portfolio. Of this, supply chain financing is about 1.5%, business loan is about 7.3% and small ticket unsecured loans is about 1%. The disbursements for secured business loans to SME grew 33% sequentially, resulting in AUM growth of 6% quarter-on-quarter and 22% year-on-year. The growth has been largely driven by scaling direct sourcing efforts through our branch network. Coming to credit quality. In personal and consumer loan segment, we continue to see a sustained improvement in credit quality parameters. The Gross Stage 2 and 3 reduced by 100 basis points sequentially and 180 basis points year-on-year. The GS3 for this segment stands at 2.1% as of September 2025. The GS2 plus GS3 of the unsecured business loans reduced by 380 basis points sequentially and 230 basis points year-on-year. Gross Stage 3 for this portfolio stands at 1.9%, of which 42% of the GS3 book is covered under the government guarantee scheme. The asset quality of the secured SME loan segment continues to be healthy on the back of strong cash flows and collaterals and is amongst the best in the industry. GS3 for this portfolio stands at 1.2%, down by 40 basis points sequentially and 80 basis points year-on-year. As a result of improving portfolio quality trends in each of our segments, overall GS2 and GS3 book declined by 67 basis points quarter-on-quarter and 121 basis points year-on-year to 3.03%. About 73% of our book is secured and our overall Stage 3 book is well provided with a PCR of 44.2%, which has increased by 300 basis points sequentially. During the quarter, we executed sale of INR 500 crores from our unsecured business loan book. This was covered under government guarantee and classified in Stage 3. These assets were adequately provided for as per our ECL policy. Following this transaction, the proportion of Stage 3 assets within the unsecured business declined significantly from 5.4% in quarter 1 to 1.9% in quarter 2. For the total book, Stage 3 assets reduced from 2.3% in quarter 1 to 1.7% in quarter 2. We have aligned our provisioning norms for unsecured business loans covered under government guarantee schemes in line with the rest of the unsecured loan portfolio. We write off all unsecured business loans when they are overdue for more than 180 days. Going forward, we remain confident to maintain the credit cost in the range of 1.2% to 1.3% at the company level. Moving to profitability. Our net interest income has increased by 17% year-on-year and 7.3% sequentially to INR 1,994 crores Net interest margin, including fee was at 6.06% in the current quarter, up by 9 basis points sequentially. Our OpEx to AUM ratio increased by 29 basis points sequentially and 5 bps year-on-year. On a half yearly basis, this ratio has declined by 9 basis points year-on-year to 2.03%. In quarter 2, we delivered profit after tax of INR 714 crores, registering a growth of 4% quarter-on-quarter and 14% year-on-year. The ROA for the quarter was 2.2%. 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 Udyog Plus and 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 upcoming quarters. With that, I will now hand over to Pankaj, MD and CEO of Housing Finance business.

Thank you, Rakesh, and good evening to everyone on the call. I am pleased to share that Q2 FY '26 is yet again a strong quarter for us in terms of disbursements growth and asset quality. We've continued to grow consistently for the last 12 quarters and percentage GNPA is now at its lowest level. The key highlights for Q2 FY '26 are as follows: Disbursements for the quarter stood at INR 5,786 crores, an increase of 44% Y-o-Y and 7% Q-o-Q. The ABG ecosystem accounted for 15.9% of retail disbursement in Q2 FY '26. AUM as of September 2025 is at INR 38,270 crores, reflecting a robust growth of 65% Y-o-Y and 11% Q-o-Q. PBT at INR 194 crores, up 87% Y-o-Y and 26% Q-o-Q. On asset quality, Stage 2 and 3 assets reduced to 1.10%, improving 112 basis points Y-o-Y and 24 basis points Q-o-Q. ROA stood at 1.82% and ROE at 13.95%. As mentioned by me earlier, the strategic investments that we made in the last 2 years are starting to deliver results. We are clearly seeing signs of operating leverage coming through. In Q1, operating expenses as a percentage of the average loan book improved by 32 basis points sequentially. In Q2 FY '26 as well, we saw a further 20 basis point improvement in operating leverage. Cost-to-income ratio also reduced further by [ 442 ] basis points Q-o-Q and ROA improved by 22 basis points sequentially. Given this consistent improvement, we are on track to achieve an ROA of 2% to 2.2% over the next 6 to 8 quarters, consistent with our guidance. Let me now provide a quick update on a few key pillars. During the quarter, absolute AUM growth is at INR 3,665 crores. The growth is well balanced across both the prime and affordable segments and our average retail ticket size stands at INR 30 lakhs, reflecting the granularity of the portfolio. On the digital front, we have achieved deep adoption of our digital platforms across the customer journey. We are already seeing strong early gains with our AI copilots across sales, underwriting, customer service and audit. These initiatives have started giving us early gains in sales [ and higher ] productivity, reduction in repeat service requests and implementation of continuous control monitoring objectives. On asset quality, gross NPAs have improved significantly from 1.3% in September 2024 to 61 basis points in September 2025, which is a reduction of 69 basis points. Our Stage 3 provision coverage ratio stands at 57.6%. Lastly, moving to the liability side. The share of NCDs in our funding mix has increased from 33% in Q2 FY '25 to 50% in Q2 FY '26. Our cost of borrowing correspondingly has improved by 17 basis points Q-o-Q and now stands at 7.52%. We have continued to deliver strong and consistent performance across all business segments and improved profitability driven by focused execution across all key pillars of digital asset quality and liability management. Thank you for your attention. And with that, I now hand over to Bala, MD and CEO of our Asset Management company.

Thank you, Pankaj. I'll give you a quick highlight on the AMC performance for the Q2 FY '26. Our overall assets under management including alternate assets stood at INR 4.61 lakh crores, growing by 50% year-on-year. Our mutual fund quarterly average AUM reached an all-time AUM high of INR 4.25 lakh crores, growing by 11% year-on-year. The quarterly equity average assets crossed INR 2 lakh crores, including alternate assets and passive. Our SIP contribution for September '25 is at INR1,100 crores with INR 39 lakh SIP accounts are contributing to over SIP book. Our SIP AUM contribute about 44% total equity AUM reflecting the stickiness of our assets. The total number of investors for Q2 -- for September '25 stood at INR 1.07 crores, witnessing 5% year-on-year growth. We're also proud to have been selected for the EPFO mandate to manage the debt portfolio for the next 5 years, pending formal confirmation. We are awaiting for a formal confirmation from the EPFO Commissioner. That is a milestone underscores the trust in our capability. The PMS and AIF assets that surged by 8 times from INR 3,852 crores to INR 30,250 crores fueled by a strong momentum in both the equity and credit segment. The ESIC mandate contributed INR 25,800 crores while excluding ESIC AUM grew by [ 20% ] year-on-year highlighting robust organic growth. We also completed the first close of our ABSL Structured Credit Opportunities Fund and are set to launch India Equity Innovation Fund. Our real estate business is gaining strong momentum with 20% year-on-year growth in the book and [indiscernible] doubled its size by year-end, doubled by robust investors' interest and solid pipeline. On the passive front, we launched ABSL BSE 500 Momentum Fund and Quality Index Fund. With this, an overall passive asset under management grew to INR 36,000 crores reflecting 20% year-on-year growth with a customer base of 13.5 lakh full users. Moving to the financials, Q2 FY '26 revenues from operations stood at INR 461 crores up 9% year-on-year. Operating profits stood at INR 270 crores up 13% year-on-year. Q2 FY '26 profit before tax stood at INR 316 crores and profit after tax stood at INR 241 crores. With this, I'll hand over to Kamlesh, MD and CEO of Birla Sun Life Insurance.

Thank you, Bala, and good evening all. I'll give you some highlights of the life insurance business. The first half of the year saw a muted growth in the overall life insurance industry at about 2%, with the private life insurance industry growing at 8%. And during the same period, ABSL Life clocked a premium growth of 19.2%. We saw aa balanced growth with our proprietary business growing at 13% and the partnership business growing at about 23%. The partnership growth of 23% came across all our existing partners as well as the recent partnerships in Bank of Maharashtra, IDFC Bank and Axis Bank, where we have increased our mind share significantly in the first half of this year. We now have 12 banks tie-ups and the most recent one, Equitas Small Finance Bank started business with us from July '25 onwards. During the half year, we added 17 branches, continuing our focus on expanding the proprietary business. With this, we are now at 444 branches across the country. In the product mix of the individual business, traditional business, including protection increased to 69% and ULIP came down to 31%, helping expand margins for the first half of the year. Our recently launched participating in product called [ Akshay Par ] contributed 15% of our overall H1 business and our protection mix now stands at 5% with the successful launch of our super term plan. In the Group Life Insurance segment, the private industry grew by 19% and the overall industry grew by 11%. As we articulated in Q1, we have calibrated the interest rate sensitive business as part of our strategy. So whilst the degrowth was 51% in Q1 for ABSLI, we have brought that down to 22% in H1. We will continue to grow the interest rate sensitive fund business in a matured manner in a low interest rate environment. We continue to be at rank 2 in the ULIP AUM in the industry with an AUM size of INR 40,000 crores plus in the group business. Credit Life business registered a growth rate of 28%. On GTL business, we continue to remain focused on expanding the margins. Group AUM contributes about 26% of the overall AUM at INR 27,058 crores. Our total premium for H1 stands at INR 8,941 crores with a 13-month persistency at 86.4%. Renewal premium grew by 18% and growth across -- 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, overall customer NPS now stands at 61 compared to 55 last year same time. While the 30-month cohorts have seen some marginal dip, all other cohorts are growing compared to the same time last year. Our OpEx to premium ratio stands at 24.6% due to the lower group [ trad ] fund business as narrated before. The retail OpEx to premium ratio is progressing as per plan. ABS Life crossed the AUM of INR 1 lakh crores in April '25, and we now stand at INR 1,04,492 crores, a Y-o-Y growth of 9%. 24% of this AUM is in equity and the balance 76% in debt. 93% of our funds continue to outperform in our investment performance in the respective benchmarks. Our digital adoption across various areas is demonstrated in Slide 46. 100% of the new business customers are onboarded digitally. 93% of all our services are now available digitally, 67% of these services are Stage 2 processes and our customer self-service ratio now stands at 93%. The recent GST exemption on life insurance premium, as mentioned by Vishakha, is a welcome step towards making life insurance more affordable and accessible to a larger segment of the population. We also believe that this move will expand the overall market in the long run, strengthen customer trust in life insurance as a value proposition and create a more sustainable growth environment for the industry. The exemption does lead to some short-term margin pressure given the inability to currently reprice the products and the loss of input tax credits as compared to before. However, we believe these are transitional in nature. Various methods are being evaluated, including distribution costs to mitigate the same impact, and all of these are in various stages of execution. Our solvency continues to remain healthy at 188%, our net margins for first half of the year are at 11.6%, 420 bps higher than last year same time at 7.4%. We observed margin expansion due to a controlled ULIP mix and increase in protection mix, value-accretive growth in partnership business and rider attachments. On the back of strong growth and quality of our book, we are reporting an embedded value of INR 14,585 crores with a growth of 18% over last year same time. We will continue to focus on increasing productivity across all cohorts in our proprietary business. Within our partnership business, we will continue to invest in our bank partners to increase our mindshare and drive better productivity across all the partners that we have. Our guidance is grow the individual SIP at a capital of 20%-plus. While achieving this, we intend expanding our current VNB margins of 18%-plus and in absolute numbers double the value of net VNB in the next 3 years time frame. With this, I hand over to Mayank, MD and CEO of Health Insurance.

Thank you, Kamlesh. Let me now share the overview of our performance of our Health Insurance business. We had yet another very strong quarter, and we continue to build on the growth momentum of quarter 1 of this financial year, maintaining our track record of consistently outpacing market growth while continuing to improve profitability metrics as well. For the first half of the year, as per old accounting regulation, we achieved a gross premium of INR 3,070 crores, representing a strong 41% Y-o-Y growth. On a 1/n basis, our gross premium stood at INR 2,839 crores at a growth of 31%. Thus our market share SAHI has now increased from 11.9% to 13.9%, an increase of 200 basis points under old regime. We registered a strong growth momentum across both retail and group. Retail business registered an impressive growth of 35% in the first half of '26 and the growth in retail was driven across all our retail channels. Our corporate business delivered a strong 49% Y-o-Y growth, driven by our focused and disciplined strategy to create a sustainable franchise in the segment. As I said earlier, we do this by playing in the very specific corporate segment and industries. We -- in the early this year took our differentiated Health First insurance model to corporate also, and we are getting very positive feedback, and this will only further improve our competitive strength here. On the profitability front, our net loss for H1 stood at INR 101 crores as per the new regulation and INR 76 crores as for the old one with corresponding number of INR 115 crores of loss last year. Our combined ratio for H1 '26 as per old regulation is 108% versus 113% on a comparable basis in the previous year. These improvements underscore our continued focus on unit economics and thus overall profitability ahead of market. We strongly believe our robust growth and superior unit economics are driven by our digitally-enabled and differentiated Health First business model. This model gives us a selection advantage with larger share of more health-conscious consumers. And then based on hyper-personalized health engagement, access to a deeper understanding of the health profile of our in-force base. In the first half of this year, 9.4% of our eligible consumers on good health-based incentives, which we call health returns, is up from 7.4% last year, again, reflecting a deep engagement within our wellness ecosystem. These consumers exhibit 8% lower loss ratios and 11% better persistency shown in Slides 56 and 57. Similarly, our investments in managing consumers with high risk through interventions with more than 80,000 lives have led to an improvement in the loss ratio by more than 6%. Overall, this has thus helped our retail loss ratios not only under control on an internal basis, but much better than the market ratio that you see. We continue to innovate to expand the scale of the differentiated Health First model. Our collaboration with a leading wearable brand has experienced very encouraging results with increasing sales volumes, helping us get even deeper access to a large pool of consumer health data. The app -- our Activ Health app now provides opportunity for non-policyholders also to experience our comprehensive health and wellness ecosystem. Given our large data focus, we have been investing significantly and consistently in our data and analytics play to consistently create efficiencies across the entire business cycle. We have given some examples for the key use cases across sales, hyper-personalized consumer engagement, claims processing in Slide 60. The recent structural GST change effective 22nd September are expected to benefit the Health Insurance sector in the medium term. The short-term impact of the GST reforms are being reviewed with various stakeholders to take suitable action. Looking ahead, we remain very optimistic about the long-term growth prospects of the Health Insurance sector differentiated Health First model and sharp [indiscernible] ABHI is well positioned to grow ahead of market in times to come as well. Thank you, and I'll now hand it back to Vishakha for our closing remarks.

Thank you, Mayank. And this concludes our remarks on Q2 FY '26 performance, and we'll be very happy to take if there are any questions.

[Operator Instructions] The first question is from the line of Chintan Shah from ICICI Securities.

Congratulations on a very strong set of numbers. So on the NBFC piece, so on the NBFC, so firstly, on the OpEx cost, so I think there is a jump of more than 25% sequentially on the operating expense front. So I just wanted to understand, is there any one-off here? First on that. And secondly, on the yields part. So yields have been kind of declining for the now almost 5, 6 quarters. Hence, now given that we are increasing focus on the unsecured business, personal and consumer loans, business and unsecured business loans as well, and it's in the second quarter of strong growth in these businesses. So when do we see this reflecting in the yields part? Yes, and that's on the NBFC business.

So Chintan, on OpEx, it's one-off. And if you look at the H1 number is 1.9% OpEx to AUM. Going forward, we will be in this range. So we don't -- since the last quarter, 1.74% was slightly muted. If you see last year, it was 2% -- above 2%. And if you look at in H1, it is 1.9%. So going forward, it should be at 1.9% in that range. So this one-off should get normalized going forward. Your second question was on the yields. If you look at our yield, in fact, when compared to the quarter 1, I think it's in the same range, 12.71% and 12.68%. So that's the range. Our margin if you look at, margin has improved by 9 basis points from 5.97% to 6.06%. So clearly, as our personal and consumer and unsecured business grows the way it has grown in quarter 2, we will see improvement in yield going forward.

Okay. Sure. So sir, if you could just quantify the amount of OpEx mix and exactly in terms of some qualitative aspect on what was it exactly? So that would be helpful. Yes.

So these will be primarily on the business side, retail operations and investment in branches, technology and all, and that's slightly one-off, which we did. So we -- I think we can take you through that separately.

Sure, sure. And so, sir, you told the margins have improved, but I think they have improved largely because of the borrowing cost, while yields have compressed even 3 bps Q-o-Q in this quarter. So any -- so basically, I was just trying to understand, so probably can we expect some -- how much -- or if you could just give the breakup of the yields into the 4 segments, segment-wise yield breakup if that would have -- if that is possible?

Segment-wise yield, if you look at EIR, I can give you for -- so it's in the same range, like personal and consumer, if you look at, it's around the 16% to 17% range is what we had. Our corporate is in the same range. We have always mentioned 10.75% to 11% so it's in that range. Secured was in the range of around 12%, and it is at around 11.96%. So that's -- I think the NIMs are quite stable, Chintan. As I said, as we grow our personal and consumer, the benefit will start -- we will start seeing the benefit in quarter 3, quarter 4 with the growth which we have seen in quarter 2. So yes, so I think the margin -- the yields will start improving in the coming quarter.

Mr. Shah, does that answer your question? Do you have any further questions? Ladies and gentlemen, we will move on to the next question, which is from the line of Avinash Singh from Emkay Global Financial Services Limited.

The first one is regarding your NPA sale, some INR 700-odd crores out of that, you highlighted INR 500-odd crores from unsecured business. So can you help us understand, I mean, the rationale and strategy behind kind of doing this ARC sale when -- particularly when the portfolio had the guarantee -- the CGTSME guarantee backing. So what sort of -- or why this change of strategy that rather than getting recovery from guarantees or sending it to ARCs? So that's one. Second question is on Housing Finance. I mean, can you provide some color on the competitive intensity there? And does that mean that in this falling rate environment, there will be kind of pressure on your NIMs. So I mean, of course, so far in the last 4 quarters, the profitability improvement has been very, very impressive. But going forward, do you see this competitive intensity kind of bringing some sort of a pressure on margins?

So Avinash, the rationale was we wanted to align whether it's guaranteed by the government guarantees or whatever. We wanted to align the ECL policy and the write-off policy, and that's the reason why we did it because there used to be a cash flow mismatch in terms of when the claim comes back and all of that, and it used to be -- it used to look elevated. That's the reason one, we have taken a onetime decision to align it with all our other businesses.

Yes. Avinash, Pankaj here. You want to continue with it? Pankaj here on the housing question that you asked on whether there's a compression in yields that is expected. So I think what we have done here is while logically, there has been a lot of competitive intensity. If you look at our EIR also, it has come down from 10.77 basis points (sic) [ 10.77% ] to 10.62%. So there's a 15 bps decrease that has happened there because we also made a change in EIR of 15 basis points that has showed up here. But as the competitive intensity moves up, I will maintain that the opportunity in the HFC segment is continuing to be very, very large. As of June, the industry was still at about INR 10.5 lakh crores, our AUM is INR 38,000 crores. So the market share is still at about 3.8%, 3.9%. So opportunity is quite significant. I think we need to find out our own space there, which we have been doing quite well, backed by our entire product range as being a full stack player, we're having best-in-class digital platforms. And also, most importantly, I think the distribution structure, which is giving us and providing us this growth. Having said that, I think, Avinash, in the last call also, I had mentioned that in the way we are looking at the business, while currently, the NIIs are looking at 5.07% and the ROA is looking at 1.82% with operating leverage coming in quite sharply in the last 2 quarters. I think the idea is that there will be naturally some reduction in the NII. So 5.07% that we're talking, realistically, we should be seeing it somewhere in the range of between INR 475 to INR 480 at the end of the year. So that's the broad range. But that will get compensated by the operating leverage that we will get. So right now, 1.82, which is the ROA. We've guided that in the next 6 quarters, this number will be close to anywhere between 2% to 2.2%. So that is where we are on the HFC business.

Yes. Rakesh, just I mean, this sale to ARC of this government guarantee backed portfolio, is kind of a onetime nature, but your kind of your reliance or your willingness to get this CGTMSE backing, that does not change. I mean, in future growth also, you will continue to take this guarantee scheme -- or is there kind of a rethink on that strategy?

Yes, Avinash, we will continue to leverage that. And the only change is that we have aligned the provisioning policy in terms of the writing off at a guaranteed portfolio also at 180 days.

The next question is from the line of Nidhesh Jain from Investec.

My question -- first question is on NBFC. So out of INR 735 crores, you mentioned INR 500 crores is unsecured business loan. What was the rest of the book? And what is the sort of haircut that we have seen in unsecured business loan book, which was by CGTSME?

Nidhesh, I think the remaining is SME -- secured SME, which was the old portfolio. So that's the remaining...

Sure. And the book that was backed by CGTSME, what is the haircut that ARC has -- that we have taken?

No, there is no haircut. As I mentioned, the reason why we have done is because there's always a claim mismatch in terms of the timing mismatch, that's the reason onetime we have taken this call to align with all our other portfolio. And going forward, we will stick to that. And we will leverage that credit guarantee, as I mentioned. But from a provisioning point of view, from a write-off point of view, we will treat it exactly the same as what we do all other unsecured portfolio.

Sure. The second question on NBFC is that how are you seeing cost of funds moving? Because you mentioned the yield should start to improve and the cost of funds if they further reduce going forward, there could be a sharp expansion in margins. So what is the trajectory of cost of fund that you see over the next 2, 3 quarters?

So cost of fund, we operate in a competitive environment. And if the cost of fund comes down, there will be -- if the floating rate interest is there, we need to pass it on to our customers. So it's a fine balance, Nidhesh, and we will continue to do that. But as I mentioned, with the change in the product mix, our yield should improve, and that should help our margins to improve.

So margin trajectory should be upwards going forward, right, in next few quarters?

Yes. I think quarter 4, we will start seeing some bit of improvement in margins because I think the way we have grown in quarter 2 and we will continue, we'll see some improvement, sure.

Sure. The next question is on Housing Finance business. Since we have witnessed pretty significant operating leverage this quarter, ROEs have already reached pretty decent numbers. So why are we guiding that we will take -- still take 6 quarters? I think if we see the similar amount of operating leverage, we should be able to reach 2% ROA in the next 3 quarters.

So I think we will not stop there on the lighter side. But what we are seeing is in any businesses -- any business that you run, actually the first impact that we saw was quite significant because the gains in operating leverage typically come in 2 ways. One it comes with increase in productivity. So that has improved significantly for us in the last 12 to 18 months. The other advantage that also comes in is that as the disbursement to opening book for that particular year keeps going down, while the overall absolute disbursement is high. But last year, you would have noticed that number was 57% of the overall books that is disbursed. So our disbursements to overall book is INR 18,000 crores and INR 31,000 crores was the overall book. That number was 57%. As the disbursement to the opening book keeps reducing, you also get operating leverage. So these are the 2 levels from where the operating leverage will actually come in. So naturally, the impact has been sharper in the first quarter and the second quarter. The impact may not be 20 basis points in the third and the fourth quarter. It will be there, but we feel strongly that when I said ROA also I said 2% and 2.2%. So 2.2%, it will take that much of time to reach between 5 to 6 quarters. So that is the way in which we are looking at the numbers right now.

Sure, sure. And the last question is on Life Insurance. What is the impact of GST on our margins that you anticipate? And what is the full year's VNB margin guidance? Because of the GST impact, what is the VNB margin guidance for the full year now?

So the VNB margins for the next 6 months will also be a function of how we'll, a, moderate the product mix. And like I said, we are in negotiations on distribution costs and all of them have not fully fallen in place at this point in time. Typically, VNB margins could range bound between 200 to 250 basis points. But like I said, depending on what we are negotiating right now and what discussions that we are doing, we continue to maintain our guidance to say that by the end of the year, we will be -- whatever we have guided above 18% margins of net VNB, we still are giving the same guidance to say we'll get there by the end of the year.

The next question is from the line of Sameer Bhise from Dymon Asia.

Congrats on a strong set of numbers. Just wanted to pick your brains on slightly medium-term picture now that credit costs are fairly under control, we are entering a period of margin expansion. How should one think on the 6- to 8-quarter margin trajectory for the NBFC piece? I think that is one.

So your question is on the margin. Yes...

And the ROA -- and the ROA, yes.

Yes. So as we improve our personal and consumer and unsecured business loan, that will help us improve our yields and margins. Also, the OpEx, which we mentioned, which is 2.03%, if that comes down to 1.9%, we will see some expansion in our ROAs.

Okay. I think that would be a fairly linear outcome. Secondly, in terms of this policy change on the CGT -- the guaranteed part, any incremental impact that you expect from a P&L perspective? Good to see that it hasn't impacted credit cost this quarter, but even going forward?

We don't see any incremental impact on the...

Okay. And the recoveries will accrue as they accrue when the payouts happen from the government side?

We'll continue to focus on the collections and claims from the guarantees.

Okay. This is helpful.

1.2% to 1.3%.

Yes. So we have given a guidance at a company level as we grow our retail portfolio, the credit cost at a company level will be at 1.2% to 1.3% range.

The next question is from the line of Suresh Ganapathy from Macquarie.

Just a continuation of the previous question on ROA. Some of the math doesn't add because for last 4 quarters, you have stuck in this 2.2% ROA range. And if I look at it this quarter, your margins went up, credit costs came down. But still you are at 2.2%, in fact, lower than the previous quarter ROA marginally. Now you had given a medium-term aspiration of 3%. How do you take it up by 80 basis points because interest rate cyclicality will also be there. Can you really structurally for this business aspire a 3% ROA because you are saying your credit cost is also not going to come down. It is going to go up from the current levels of 1.16% to 1.2% to 1.3%. So clearly not -- I mean, 2.2% to 3%, that 80 basis points gap, how are you going to bridge over the next 3, 4 years?

Suresh, we had given a guidance of 2.5%. By the end of this quarter 4, we should be closer to around 2.4%. And from there on, we will look at how do we expand the margins. But in the given environment, we had mentioned about 2.5% in the medium term. In slightly longer term, we will have to recalibrate and see how we expand the ROAs from there.

Okay. Okay. So 2.4% to 2.5% is what you're saying over the medium term. Okay, cool. The other thing is that on the SEBI regulations on mutual funds, can Bala say what could be the impact? Have you guys done any preliminary assessment? How do you going to tackle it? I know it's draft, but any deliberations here on that?

Yes. Here, what you have done, Suresh, is one of course -- when we first of all welcome what they have proposed in terms of various changes that they have made with respect to improving the compliance standards, governance, reporting, and other stuff. With respect to the change of TER calculation, making the statutory obligations out of the TER, also will make it relatively easy for the MF industry from a monitoring point of view. At the same time, given the fact that they have proposed some changes in the TER structure, we have, of course, taken it up with SEBI through the committee which is formed under the AMFI to make a holistic representation. And we are, at this point of time, a little confident that they will be quite amenable to the changes that will be proposed to the SEBI. I think their intention is not to hurt the mode of the industry, which is, of course, one of the largest supporters of the Indian capital market. But having said that, we will take it up with SEBI for proper suggestion. That's the plan.

The next question is from the line of Punit Bahlani from Macquarie.

Yes. Just one question on the margins bit. Over the past 2 quarters, your personal loan disbursements have been pretty good, but margins yields, if I might be more specific, have declined. So I know part of it has got to do with the repricing bit. But fair to assume that like this half, we are done with the repricing and now we'll directly see the impact of these increased disbursements flow into the yields from next quarter onwards? Like the increase will be -- increase in yields will be like in a significant proportion? Yes. That's the only question I have.

Yes. So as I mentioned, the growth which we are seeing in the last -- so if we look at -- we have to look at the overall mix of the portfolio. So I think with that going up, personal and consumer growing, unsecured business growing, we will start seeing improvement in yields and margins as we go along in quarter 3 and quarter 4.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Vishakha Mulye for closing comments. Thank you, and over to you, ma'am.

Thank you so much for joining us today evening. And if there are any more questions, all of us are here, and please feel to reach out to us. So thanks a lot again.

Thank you, members of the management. Ladies and gentlemen, on behalf of Aditya Birla Capital Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.