Aditya Birla Capital Limited (ABCAPITAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aditya Birla Capital Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ajay Srinivasan, Chief Executive, Aditya Birla Capital. Thank you, and over to you, sir.

Thank you, Nirav. Good evening, and welcome to all of you to this Q4 FY '21 investor call for Aditya Birla Capital. I hope all of you and your families are well, I sincerely hope so. I'm joined today by my colleagues, the CEOs of our businesses. And together, we'll take you through our results for the quarter and for the year FY '21. I hope you've received a copy of our investor presentation as we'll be making reference to that as we go along. Last quarter -- if I would start with Slide 3, last quarter, we had announced that we'd hit our highest quarterly profit number of INR 289 crores. In Q4, we have seen continued momentum and strong growth across our businesses, leading to the highest ever quarterly profit in the history of Aditya Birla Capital. Our Q4 FY '21 consolidated PAT at INR 375 crores is 2.6x what it was same time a year ago and 30% up quarter-on-quarter. We have seen significant progress across our platform, and I'll just walk you through this in some detail. We've seen a rebound in our gross disbursements, which have doubled year-on-year in the NBFC and HFC segment. Our overall loan book, including our housing finance company has grown 2% year-on-year. You will recall, we talked about growth when we spoke last quarter. And I said we should expect growth for the year. We have delivered that. Our retail and SME loan book, which has been our target, has grown by 11% year-on-year, so faster than the book growth per se. As a result of which the retail and SME mix is today the highest it's ever been at 64% for the lending book as a whole. For our NBFC, the Q4 NIM registered the highest level it has been so far at 5.98%, which is up 98 basis points year-on-year. And our Q4 PAT at INR 254 crores was almost 1.9x what it was same period last year, with an ROA for Q4 at 2.2%. Our housing finance company Q4 NIM, again, is the highest it's been at 3.85%, up 77 basis points year-on-year, with Q4 PAT at INR 36 crores, up 71% year-on-year, with ROA at 1.2%. Our AMC continued its growth trajectory, and domestic AUM, average AUM grew 5% year-on-year, with equity average AUM growing 11% year-on-year. In our AMC, we registered, again, our highest ever quarterly profit, led by improvement in our equity mix to 36%. Our PBT-to-AUM ratio at 28 basis points in FY '21 is also higher than it was in the previous year, which was 26 basis points. Our return on equity in the AMC business for FY '21 at 35%, as you will hear subsequently, is amongst the best in this industry. Our life insurance industry continued the growth that we've been talking about through the year. With FY '21 individual FYP growing by 14% year-on-year, significantly ahead of the private player growth of 8%. Our group business, too, grew 34% year-on-year, ahead of the private player growth of 20%. We've also seen a very strong surge in renewal premium, which has grown 20% year-on-year. And you'll see, therefore, as we speak later, and our persistency numbers as well has improved. Our life insurance has achieved its highest ever net VNB margin at 10.6%. If you remember the previous year, we had 6.9% for the year. We had a very strong ROEV of 13.7%. We've had EV growth of 24.2% in FY '21. So very strong growth in our margins and the profitability of our life insurance business as well. In our health insurance business, we remain the fastest-growing health insurer, with FY '21 GWP growing 49% versus the industry growth at 16%. Our combined ratio for the year was at 120%. And as we've spoken last time, our Q4 combined ratio, so we exit for last year, was 107%, which is the lowest in the history of Aditya Birla Health Insurance. And finally, we had the highest ever active customer base at ABC with 24 million active customers, up 22% year-on-year. If I move on now to Slide 4. You will note that our revenue and profit numbers for the quarter and the year are given on this slide. On the left-hand side, you will note that our revenue is up 14% year-on-year and 20% over FY '09 (sic) [ FY '19], which was, as you might recall, a pre-COVID year. Similarly, on the left-hand side, you will note that our annual PAT is up 22% year-on-year and is 30% ahead of the pre-COVID year FY '19. On the right-hand side, you will see our annual PAT by business, and I'd like to just draw your attention to 2 numbers on this slide. The PAT of our profitable businesses for FY '21 was INR 1,631 crores and you'll see in the line just below that, the losses in our health insurance businesses have sharply reduced over the year. Second, our consolidated PAT for FY '21 for ABC as a whole was INR 1,127 crores, which is the highest in our history and has been driven by the strong performance of all our businesses in what was clearly one of the most challenging years we have ever seen. On Slides 5 and 6, I would like to present the report card with a status on various metrics against the guidance we have given over the course of the year. In our NBFC, we had said we would grow our book in FY '21 after a period where the book has contracted and that this growth would be with a focus on the retail and SME segments. We stated that this would lead to an improvement in our yields and in NIM. As you would note, we have grown our book 3% year-on-year, and our retail and SME book has grown by 17% over the same period. So growing much faster than the book as a whole. Expectedly, therefore, we've seen an increase in the retail and SME mix by 6% year-on-year, and we've improved our Q4 NIM to just under 6%, up by almost 1% year-on-year and the highest we have ever recorded. We also said that we would continue to expand our branch network that we would resolve half of our gross stage 3 assets during FY '21, and that our credit cost in H2 would decline to 1.25%. As you will note from the results, we have delivered on each of these. In our housing finance company, we had said we would scale up our affordable book, which in turn would result in higher yields and NIM, and we would launch the informal business to further expand our margins. We've increased our affordable mix by 9% year-on-year and improved our Q4 NIM by 77 basis points to the highest it's been, which is 3.85%. We also launched the informal business in October 2020. In our AMC, we had said we were looking to expand our domestic equity mix and consequently improve our margins. You would note that our equity mix improved to 36% this year, and our profit margins have also expanded significantly over last year. In our life insurance business, we had said we would deliver around 10% net VNB margin, against which we have delivered our highest level net VNB of 10.6%. We had said, we would grow our protection business by 2x in the next 18 months. We were well and truly on that journey with our protection book growing by 23% in Q4 and a continued focus on building this segment as we move ahead. In our health insurance business, we had indicated our combined ratio would come in at less than 110%, and we have delivered a number well below that. Moving on to Slide 6. We had guided that we would rationalize our portfolio. And you would note from the slides that our PBT from the businesses outside the 5 businesses that we discussed at length on these calls has increased 83% year-on-year to INR 130 crores, a result of this rationalization effort that we have undertaken. We had committed a cost saving of INR 260 crore to INR 285 crore over our exit run rate for the last year during fiscal '21, against which we have delivered INR 300 crores of savings. We had indicated that the Board is looking at various opportunities to unlock value, pursuant to which we have filed the DRHP for the listing of our AMC in April 2021. And finally, we had said that we would drive digital, technology, analytics and synergies actively through the year. And I believe there are a number of wins that are already delivered and many others in the final stages of implementation that will take this agenda forward. So as you'd note from Slides 5 and 6, our continued focus on delivering our key strategic goals that drive value has meant that we continue to deliver consistent profit growth through cycles. While our year-on-year PAT growth was 22%, our 5-year PAT growth through some pretty challenging times including a credit crisis, I think, I've not seen the likes of in my career and a global pandemic. After all of this in the last 5 years, our PAT growth is still a robust 18.5% per annum. I will not walk you through Slide 7 in detail as I presented this 4-year journey of ours last quarter. I would only though reiterate the main messages of this slide, which is our focus on building profitable scale with a strong focus on retailization. Our scale is very evident whether you look at our INR 11,000 crores of insurance premium shown on the top left quadrant, and our AUM of INR 2.69 lakh crores in the top right quadrant or in the size of our lending book at over INR 60,000 crore in the bottom left quadrant. As you will hear and see today, we have grown the retail component of our book across the platform and have delivered a substantial improvement in profits in every business. I will not spend time on Slide 8. But I would like to spend some time on Slides 9 to 11, which provide an update on our tech journey. Starting with Slide 9, I'd like to lay out 12 initiatives across 4 themes, which are benchmarked against the best-in-class and are being implemented not in 1 or 2 businesses, but across our entire platform. The first theme for us is leveraging voice technology, and this is very important for us because we are present across the length and breath of the country. So let me just walk you through 1 initiative in this area, which is marked with a star. We have completed migration to a state-of-the-art call center on public cloud for both our inbound and our outbound calls. This gives us a scalable and resilient capability across all customer and distributor interfaces and allows us to innovate extensively in the voice technology space, allowing us to match and mix our voice biometrics and our voice bots with what we have in terms of the cloud -- on the call center on cloud. The second theme that I want to talk about is focused on digitally enabling our distribution partners. One use case I'll talk about here is video co-browsing, which seamlessly allows a customer to be onboarded, to be able to get advice and to be able to complete the transaction, along with the distributor on the other end of a call. This is really quite significant. And especially in times like this, allows us to continue to be able to do transactions with top advice from our distributors. The third theme is about leveraging tech for a differentiated customer experience. And I will talk a bit here about the omnichannel orchestration of our service journey, which basically means whichever channel a customer comes through, they're able to continue that service journey on any other channel that they may choose to go through, just in case one channel -- for instance, they drop off one channel. Through FY '21, we have interconnected with all our inbound service channels with an omnichannel platform which had -- with its event-based triggers. This helped us anticipate customer needs and service and proactively in a seamless manner across every channel that we have at ABC. And the fourth theme is about leveraging analytics and AI and ML across businesses, be it an important area of customer retention or in identifying the best-rated advisers for our businesses or in the extremely important areas of underwriting, claims or prevention of fraud. So really the leveraging of technology works across our platform, and I've just given you some of the use cases that we have. I want to spend some time now on Slides 10 and 11, which describes some of our key initiatives to drive synergy and customer convenience across the Aditya Birla Capital platform, which ultimately we believe will lead to more products per customer and greater revenue per customer. A lot of these, we believe, are unique to us and first in the industry and bring the advantages of the diversified one-stop shop that ABC is to its customers. The left-hand side of Slide 10, for instance, shows the first of its kind 1 ABC app, which caters to the transacting needs of all our customers. With a single log in, our customers can view and access all their product holdings across ABC and can avail of analytics-driven purchase recommendations and preapproved offers. The right-hand side of Slide 10, leverages geotagging so that customers will be able to locate an adviser nearest to them and then use co-browsing to get a transaction done instantly. As you'd imagine, this boosts the earnings of our distributors and also provides our customers a tremendous ease. Slide 12, the last in this section has on the left-hand side, a first of its type Money for Life Planner, which enables anyone to build a financial plan based on their goals and then the ability to choose an ABC product that might help them meet these goals. Over 6 lakh people have already started planning their finances based on this. And finally, the right-hand side chart is in keeping with our push to voice, which necessitates multilingual capability. We will be publishing our digital assets in 6 languages during FY '22, which will only support and help our geographic spread to the smaller towns of India in all our businesses. I will now stop here and hand over to Rakesh Singh, who will take you through our lending business's performance.

Thanks, Ajay. Good evening, everyone. In this segment, I will take you all through the quarter 4 performance of NBFC and housing segment. We are on Slide 13 and this is a summary slide, which I will take you through. There are 6 boxes, each highlights the key achievements. The detailed presentation is there in your deck, and if there are any questions, we will be happy to take it at the end of this presentation. On this slide, if we see box number one, we saw strong momentum in quarter 4. We achieved a new business disbursement of INR 6,570 crores, which is 2x year-on-year. Last year, the volumes have doubled in this quarter. Retail, SME and HNI contributed 2/3 of this new business. This helped us to grow our portfolio by 3% year-on-year, and retail and SME grew by 17% year-on-year. With this growth, retail, SME and HNI now constitutes close to 56% of our overall portfolio, which used to be 46% in FY '18. We have grown our customer base by 5x over the last 3 years, and that's a clear demonstration of building granularity. To further grow our retail and SME business, we have added 41 new semi-urban branches last year. Now I want to move to box number 2. We continue to build granularity, and in the process, have brought down the average ticket size to INR 23 lakhs. Earlier, 3 years back, this used to be INR 1 crore. We have rightsized our corporate business, and we have brought down the corporate book by INR 5,000 crores from its peak. We have reduced concentration risk and brought down top 20 exposure to 9.5%. This used to be 13% in FY '18. Our top 100 exposure now is down to 28%, down from 37% in the same period. Moving to box number 3. In line with our guidance in quarter 2, we have resolved 50% of our stage 3 assets and brought down our stage 3 asset percentage to 2.68% from 3.61% last year, a reduction of 93 basis points. We have enhanced our stage 3 provision cover to 45.2% from 33.3% last year. Beyond this, we have created additional floating provision of INR 129 crores to take care of this environment. For March, our collections efficiency was at 98.7%, which is even better than our pre-COVID collection efficiency numbers. I now move to the box number 4 and highlighting the achievement, the new sourcing yield -- because of growth coming in retail and SME, new sourcing yield in quarter 4 was at 12.9% compared to the portfolio yield of 11.85%, a clear 100 basis point difference. As we continue to grow retail and SME portfolio, yield will continue to improve. In line with our guidance, credit costs in quarter 4 has come down to 1.22% and 1.3% for H2. With improvement in margin and credit costs coming down, our quarter 4 PAT grew almost 2x year-on-year at INR 254 crores. Our ROA is at 2.2% for quarter 4 and ROE at 12.4% -- 12.5%, again in line with the guidance which we had provided. Coming to box number 5, we have one of the lowest cost of borrowing in the NBFC industry. Our borrowing costs reduced 30 bps quarter-on-quarter and 94 bps year-on-year. We have a very comfortable capital adequacy at 23%; and our ALM, again, is very, very comfortable at this point in time, and we have surplus liquidity. Moving to box number 6. We have leveraged technology -- as Ajay mentioned in his opening presentation, we have leveraged technology and data analytics for sourcing, underwriting, servicing and collections. And this is very, very critical in the current environment. As last year, we saw close to 6 to 7 months, we were under lockdown. So we have leveraged technology to onboard customers and also to serve and collect from them. Now I will move to the housing section, and I move to Slide #25. Housing business also saw a very strong momentum in quarter 4. We disbursed INR 1,131 crores of new business, which is 47% growth year-on-year and 39% growth quarter-on-quarter. Our strategy to drive affordable segment has helped us to improve affordable contribution and now the affordable constitutes 27%. This used to be 18% last year. In order to drive affordable penetration further, we have opened 21 new locations, and we have also augmented our front-line capacity to drive volumes in the affordable segment. With our focus on building granularity, the average home loan ticket size has come down to INR 26 lakhs from INR 31 lakhs last year. Quarter 4 new disbursement yield improved to 11.4%, which is 58 basis points better year-on-year. And as a result, helping the portfolio yield improve to 10.39%. In order to further build the affordable capability, affordable housing capability, we have started informal affordable segment in 41 locations. This will help us drive the retail penetration and also get into the informal affordable of the housing segment. Higher affordable business and lower cost of funds has helped the quarter 4 NIMs to improve by 77 basis points to highest ever at 3.85%. As we get scale, we will keep becoming more efficient. And in this journey, we have reduced our cost-to-income ratio by 3.7%. With improvement in margins and reduction in cost-to-income ratio, quarter 4 pre-provision operating profit grew by 30% year-on-year to INR 71 crores. Credit costs also reduced by 12 basis points to 80 bps. This has helped quarter 4 profit after tax to grow by 71% to INR 36 crores. Moving to box 4, I'm talking about the quality and collections efficiency. The gross stage 3 has come down to 1.83% from 1.89% in quarter 3. The provision cover on stage 3 has been enhanced to 36.3%, and this was 32% last year. Beyond this, we have further created a floating provision of INR 42 crores to deal with the current environment. Collections efficiency was back to the pre-COVID levels. Like NBFC, housing business also has one of the lowest cost of borrowing, and we optimized our borrowing cost by reducing it 83 basis points year-on-year and 21 basis points quarter-on-quarter. We have a very comfortable ALM and our capital adequacy is at 21.73%. So we have surplus liquidity and capital to meet the future growth. Moving to box number 6, like NBFC, we have leveraged technology and data in terms of sourcing, underwriting, self-servicing customer and really reaching out to the customers for collections. So I would stop here. And if there are any questions, I will take it at the end of the presentation. Now I hand it over to Balasubramanian to talk about AMC business.

Thanks, Rakesh, and thanks, Ajay. Good evening to all of you. As we have been saying, our effort to build our retail AUM and overall assets under management in terms of building a scale, improving our profitability by improving our mix coming from equity and also build our SIP to have a sticky AUM growth and building our equity assets under management, all of them have actually yielded good results in the year 2021. And overall profitability contribution also have seen an improvement in the current financial year. I'll talk about this each of these task in awhile. Box number 1, if you look at for maintaining leadership position and market share, clearly, we are -- we remain the fourth largest AMC on the basis of the quarter-on-quarter average assets under management with a 9.2% to market share. In fact, we are the largest nonbank affiliated AMC in the country, with a dominant position of fixed income assets under management about 10.86%. In fact, in the same box, if you look at the individual monthly average assets under management, touching about INR 1.3 lakh crore is about 19% year-on-year growth, contributing 47% of the AUM of the overall assets under management coming from individual assets under management. Moving to the box number 2, which is nothing but building a momentum. As Ajay mentioned about in his presentation that we grew our assets by 9% on a year-on-year basis. If you all look at the same number on the basis of closing assets under management, we grew by 28%. In fact, our equity assets on year-on-year basis grew about 47% and fixed income asset class grew on a year-on-year basis about 32%, leading to an increase in asset mix of about 36% contribution coming in the -- overall assets under management coming from equity as against the previous year of about [ 35% ], as we had guided in the last call. More further our affordable retail franchises have continued to help us in maintaining a 7.1 million customer base. And while building, our B-30 AUM has grown by about 30% a year-on-year basis, SIP as a contribution to the overall assets under management grew by about 66%, contributing about 43% of the overall assets under management equity coming from SIP as an asset class. While SIP has been a big focus area for the last many number of years build sustenance and sticky AUM for us and building our equity assets under management, although I want to just bring your attention on the tenure for which the SIP have been booked. While the year 2019, we have assets of about -- 17% of our SIP account is to come for more than 10 years. That has improved about 76% as of March 2021, the assets coming from SIP on some of accounts for more 5 years about 80%, has improved about 86% as a contribution. So this again goes to show that how sticky our SIP AUM has been. In fact, it is one of the highest in the industry. More on the basis of this strong financial performance that we have delivered, first of all it's highest ever quarterly profit that we reported at INR 208 crores. And PBT as a contribution has improved about 28 basis points. On a full year basis, INR 696 crores of PBT is one of the highest ever profit that we are reporting, leading to a PAT of about INR 526 crores, which is 6% year-on-year growth. And both the things have happened on the base of high focus on keeping our OpEx costs under control. We have seen a reduction of 11% year-on-year basis and leading to improvement in overall ROE to be one of the top 3 AMC to deliver highest ROE with a high dividend track record for last many number of years. While doing that and delivering good performance as well as building our equity assets and SIP, and one of the big areas of focus that we continue to maintain as the leadership position, in engaging with the distributors and investors on a continuous basis even last year as well where many events that were conducted across the country as part of our engagement program to have higher mind share. In fact, on the same year, we also added about 2,500 -- 2,400 mutual fund distributors to work for us, which again remains one of the big area of focus in building our distribution channel across the country. And finally, the overall growth momentum, as Ajay mentioned about in his presentation, the technology, how it has played a role in building us overall ABC ecosystem using data analytics as well as artificial intelligence and machine learning methodologies we have adopted, we have seen a surge in volume in our digital transaction. Close to about 80% of our overall transactions have come from online platforms. [indiscernible] have been created through the digital platforms. Though in the same period, we also relaunched our FINGO app, which is an [ innovative ] app with a new design and better ease of operating for the customers also have been done in the -- during the same period. As a result of all these things, our own engagements have led to an increase in net promoter score, improving on a month-on-month basis which is nothing but voice of distributors, voice of customers have seen a significant improvement, which I -- which we feel happy about the customer feedback as well. With this, I'll end my presentation on the AMC. Now I'll hand it over to Kamlesh Rao who is the MD and CEO of Birla Sun Life Insurance.

Thank you, Bala, and good evening to all of you. The last year for the life insurance industry actually started with a de-growth of 40% in quarter 1. But we ended the year with an industry growth of 3% and private industry actually growing at 8%. Box #1 will talk about the ABSLI numbers, where we managed to grow 14% in our individual business and 34% in our group business. And in both these businesses, we gained market share through last year. Our renewal premium grew by healthy 20% and out of which the digital collections that we did was 65% of the total renewal premium that we collected last year. It basically means that our total gross premium stood at INR 9,775 crores. So the growth of about 22% over last year. While our business grew robustly, all our quality parameters also showed marked improvement over last year, and you'll see that in box number 2. 13-month persistency is now at 84%, it's up by 6%. 61 month persistency is also at 51%, up by 6% as compared to last year. We reduced our OpEx to premium ratio to 13.9% for financial year '21, which is lesser than the previous year at 15.9%, and our financial year '21 surrender ratio stood at 6.1%, which was last year at 9.8%. All this new business came at very healthy margins, which is there in box number 3. Our gross margins for last year were at 38.6% compared to 33.8% the previous year. As Ajay stated, we set out this -- our net VNB margin, and we got our highest ever net VNB margin at 10.6%, which is about 370 basis points higher over last year. And with this our embedded value for the life insurance business now stands at INR 6,441 crores. We had a very healthy growth of 24.2% and a very healthy ROE at 13.7%. There are 2 major contributors to our new business last year, which is there in box number 4. We launched about 5 new products last year, and we managed to get about 24% of our contribution of business scale through these products. We also launched first of its kind pre-approved sum assured business, which we did through the whole of last year and ended at contributing 15% of our premium that we did in 2020/'21. With this, we have a healthy sourcing mix between our proprietary and partnership channels, which now stands at 45% on proprietary and 55% on partnership, and our units are at about 30%, which is the lowest in the last 3 years. The box number 5 is on risk management, and there are 2 areas. One is on protecting our policyholders' guaranteed benefits. So 100% of our expected maturity and survival benefits of our policyholders, we hedge through effective instruments like FRAs. And of course, last year, COVID, we made adequate provisions and whatever got impacted due to that was within our plan. And as we look at the COVID second wave, we've also made sure we've made adequate provisions for next year, and we'll review that on a regular basis. I think in the year of the pandemic, we managed to ensure that 95% of our business was sold digitally. 95% of our customer services are now available online and our new business now comes at 85% pay -- auto pay adoption, which basically will ensure that our future collections on renewal premium will continue remaining healthy. Now I'll shift your focus to Slide #53. And we've compared ourselves on some key parameters to the top 8 players, including us, in the life insurance industry on certain parameters. To look at individual first-year premium, we seem to have done better. Last year 2-year CAGR is at 27% against industry at 9%. And of course, this year of 2021, we're already growing at 14%. Our renewal premiums are growing healthily as compared to all the top players from last year was 20%. Persistency at 13 months of 84% and 25th month of 71%. We've moved significantly over the last 2 years to reach where bulk of the top players are. I'll bring your attention to OpEx ratio. OpEx ratio in a year of the pandemic actually went up for entire industry and also the nonbank players in life insurance, but for ABSLI, it actually went down from 15.6% to 14%. And EV, which I spoke about, both for the year at a growth of 24.2% or ROEV at 13.7% is very healthy as compared to all the top peers. So with this, I'll stop on life insurance. And now hand it over to Mayank, who will talk to you about the health insurances.

Thank you. Thank you, Kamlesh, and a very good evening to everyone. I'll take you to Slide 56, which talks about the performance of the health insurance business. We had another good quarter, Q4. And based on that, we ended the year at a very strong overall growth rate at 49% vis-à-vis industry at 16% and SAHI at 32%. Our overall premium crossed INR 1,300 crores for the year, which is -- makes us a very healthy overall business level. Our retail mix was at about 72%. And both retail and group grew at 150%. I must say that we don't focus on the large corporates, which is where the bulk of pricing pressure is. We have very large -- rural MFI business embedded in that group portfolio. We took the total lives covered to about 13.4 million lives, which cuts across different customer segments, geographies, which we are able to leverage because of our very large distribution reach. The high growth [Technical Difficulty] complemented by very strong financial management. As you see, our combined ratio went down to below 120% vis-à-vis 134% in the previous year. As we had guided that we will be at below 110% in quarter 4, we actually ended up at 107%, which is a lowest for us at ABHI. Just to give you a sense of the absolute amount, the loss came down to INR 23 crore in the last quarter vis-à-vis INR 58 crores in the same quarter in the previous year. Just to give a sense that our indication of -- on a steady-state basis, Q4 breakeven is possible in this as well. On -- our model, as you know, is very differentiated, where we are a very health-first insurer. All our offerings have some element of health enablement for our customers apart from just funding. We launched a very unique product in this quarter, which actually probably the first of its kind globally, where we promise the customer up to 100% of the premium back in case they show commendable health -- demonstrate their health behavior. Because we believe that this will help us in attracting the right profile also to our risk pool. And over a period of time, we can create a relatively better health risk pool vis-à-vis competition. Because we have so many health engagement, we gather a lot of health data. And over a period of time, based on that, we have now launched a very personalized health score for our customers, as I had mentioned last time. We've now been able to take it to about 0.5 million retail customers. The early success is very evident because our engagement levels with those customers have gone up clearly based on those personal scores that you see and accounts for the impact on other aspects of our business. The fact that we need to take this offering to a large mass of Indian consumers is well enabled by a very scale, but more importantly, diversified distribution strategy. We have a very large bancassurance presence, about 65% of our retail business comes from that. But at the same time, a very fast-growing agency. Within bank also, we are very well diversified and not concentrated on one bank, which is a challenge for many players, as you know. The other areas that we have actually proven our capability is beyond the traditional route of distribution. We are a very large player in the rural-based MFI, which actually is not just large in business volume and customer acquisition, but also in profitability. And the other area is working with large digital players who have very large customer base to work with. There, we are working with a very large cab aggregator for ride assurance, a travel company for short-term travel insurance, first of its kind in health space, which is telco assurance. All these are potentially very large customer acquisition not just for us, but to -- in the long-term leverage even at ABC level to sell our other offerings. Because we gather a lot of data and our strong digital capabilities today, the entire life cycle, as we have mentioned continues to be highly digitally enabled. We virtually do everything digitally, whether it's issuance or retention as well as engagement where we are using hyper-personalized engagement mechanism based on what customers prefer. We use data to do -- in health insurance it's a first of its kind preapproved offers. We specifically use [Technical Difficulty], but also cross-sell on our other businesses based with our different partners like HDFC. And we also use propensity-based renewal journeys, et cetera. Now because we are large as you see in the sixth block, it's important that we have very strong risk management practices to manage both operational risks, where we leverage our existing frameworks at ABC level very strongly. But at the same time, the entire life cycle of right sourcing to managing our provider network very effectively to creating right protocols, et cetera, and also fraud based and abuse management on a very real-time basis because that's a real problem in our business. We believe that we have created a very fundamentally very strong business, which should be able to leverage the opportunities of growth in the future as well as be able to deal with any short-term pressures, which may be induced by COVID. So with that, I'll pass it back to Ajay for taking the presentation ahead.

Thank you, Mayank. Just the last couple of slides. I want to move on to Slide 64. This covers the other businesses that we've not covered really so far. These are all exciting, profitable and high ROE businesses for us. The top half of this Slide 64 will show you the turnaround we have got about since FY '19 when these businesses collectively were losing money. To this year, where they together earned INR 130 crores of profit. At the bottom half, we have some details of these businesses. And to walk you through our GI booking business, it's a diversified player with a dominant position in what is otherwise a fragmented market. We cover reinsurance, we do corporate insurance and retail. And we have scaled this business strongly with a 68% growth in profit this year, delivering a 52% ROE. Our stock booking business, too, has done well, with profits growing by 36% year-on-year and a 40% ROE. And our newest business, our ARC, has had a strong start with a 52% growth in profits and a 17% ROE in only its third year of operation. The last slide I'll cover today is Slide 65, which really deals with the environment we are working through currently. And I think some sense of its implications for our business and its people. So starting with the top in terms of macroeconomics, what we've seen in terms of high-frequency indicators is roughly a 30% to 35% drop in economic activity since Feb-March. Clearly, if you're asking where they're going to be headed in the future. That trajectory is going to be based on what happens with lockdowns around different parts of the country, especially where economic activity is higher. And that in turn is linked to the pace of vaccination. So I think anything in terms of determining what's going to happen in the future, I think it's going to be based on these 2 variables. But in the meantime, we have prepared ourselves digitally as you've seen through the presentation. We continue to be digitally prepared from origination to servicing in all our businesses and are ready to work even in a complete work-from-home situation. These markets tend to throw different risks at different points in time. And therefore, we need to continue to monitor this closely, and we'll always take proactive actions whenever and wherever required. While collections have been hampered a bit due to lockdowns simply because physically movement has been restricted, our bounce rates have been holding up, and we will clearly intensify collections as things normalize. In claims as well, as you would expect, health-related claims are slightly higher in the second wave, and we're keeping a very close eye on this and will mitigate the impact to the extent possible. We have a very strong business and a very strong franchise, and we are sure we'll be able to deal with this as we go forward. In the lending business, as Rakesh mentioned earlier, we've taken adequate floating provision on the balance sheet in both our businesses, and this is based on our stress testing and the results of that, which gives us confidence that this provisioning should be adequate to deal with any stress that we may face as a result of what might happen in the environment. Clearly, this is a time for us to be focused in a big way in terms of our employee health and safety. And both at the Aditya Birla Group level and at Aditya Birla Capital Limited, we've done everything that we can to provide help lines to our employees and their families. We have a 24/7 hotline that is regularly used by either employees or their families for any help they have across the country. And we've set up camps to vaccinate our employees and their families because we believe that is the best thing to do to be able to provide some safety for our employees and their near and dear ones. And finally, given that we are still an essential service and have to operate, we have stringent operating protocols. And for business continuity, we have set up protocols to ensure our offices can run as per the guidelines announced by the local authorities. So I'd like to just draw this presentation to an end by thanking you for your attention. It's been a 40, 45-minute presentation and reiterating to you once again the strength of our platform through different cycles. I think resilience is a very key attribute for successful businesses, and I do believe that our people and businesses have demonstrated that quality in abundance in this last year, which is probably the most challenging we've ever had in our history. While there is a fair amount of uncertainty in the environment, our aim will continue to be to deliver results that are better than the industry, and we will keep our focus on the key metrics that we are targeting for FY '24 as we shared last quarter, and as we updated you during the course of this presentation. So thank you very much for your attention and your audience, and we're very happy now to take any questions that you may have.

[Operator Instructions] The first question is from the line of Dipanjan Ghosh from Kotak Mahindra.

Congratulations on a good set of results. Just 2 questions from my side. One is on the life insurance business. If you can shed some light on the type of claims that we have seen, both in life and health? And what are the sort of provisions you are built in for next year? And if you can give some breakup of the operating variances and assumptions out there? And 1 more question on the lending side, both for NBFC and HFC, if you can...

Let us just answer these 2, then we'll answer the third otherwise we may not remember all your questions. So Kamlesh, do you want to just answer the question on claims?

Yes. So Dipanjan, last year, both on the individual business side as well as on the group business side, the claims have been as per the provisions that we've made. You've roughly seen about 14% to 15% of our claims basically on account of COVID, but no impact on the bottom line or for the provisions that we made. And basis that experience, and this is our own provisioning norms, which are very prudent, we've also kept the second wave in mind, and we put adequate provisions for next year for the claims per se, specifically keeping the COVID second wave in mind. Your second question was on variance. So if you see at a growth that we are getting close to about 24% or 25%, net VNB contribution, but we have a reasonably positive variance on operating and assumptions also there in the deck. And that has contributed to the growth in the EV that we've had from the number to INR 6,442 crores.

Okay. No. So basically, I was just trying to understand, is this from better persistency or excellent management or is it a combination of all the factors out there?

It's a combination of all the factors. Due to the operating and assumption variance, basically, when you get a positive, it comes from elements like mortality, persistency, maintenance expenses, these are the broad heads under which you get. And we had favorable ones across them to get a positive variance on that.

Just a related question since you're deflecting on the EV work. Can you highlight as to why the unwinding rates were higher during the year compared to some previously?

That's a function of size because I think finally, that's what you built in upfront and during the year, you actually unwind it. So as the size keeps going up, you'll have some proportion of that going up. I think it's just in the normal course of the size. But it would be a range bound. I don't think it will be significantly higher. Bulk of the contribution apart from unwinding would come from the net VNB, the variances and of course, the economic variance that you get.

Okay. And just last question on the lending businesses on the NBFC and the HFC front. If you can just highlight in numbers on the stage 2 or the [indiscernible] and how was it last year or maybe the third quarter of last year?

Yes. Rakesh?

No. So March ending stage 2 in housing was 2.1%, 2.2%. And in our NBFC is around 7.5% March ending. And now that has come down to around 6.2%, 6.3% on stage 2.

Okay. And the housing is broadly stable?

Yes. So as I mentioned, that it's around 2.2%.

The next question is from the line of Kunal Shah from ICICI Securities.

Yes. Congratulations for a great set of numbers. So firstly, in terms of this -- so on asset quality side, on the lending business, 2 trends, particularly on the unsecured side, when we look at the stage 3, that's definitely going up. So are we done with the larger part of the recognition on the unsecured and provisioning for the same?

No. So if you look at -- on the unsecured, first of all, we have a small portfolio on unsecured. 80% of our portfolio is secured in nature. The retail unsecured is a small portion. And of that also, it's covered -- the MSME unsecured is covered by CGTMSE, the credit guarantee provided by SIDBI. So we have a small unsecured portfolio. And there, if you look at the credit performance has been quite -- and if you refer to Slide 19, the retail unsecured GS3 is INR 232 crores, yes. So it's quite well under control at this point in time. And we went through a very challenging year, very difficult year. And things are looking fine. It all depends how things pan up now, but things are -- so we have taken a very balanced approach in terms of the retail growth. 50% of our retail business comes through secured business, and that shows in our slides also. And if I can refer you to Slide number...

15.

15.

Yes, yes. So I was just looking at in terms of the quarter-on-quarter movement. Okay. So from, say, INR 177-odd crores, that's up to almost like INR 232 crores. So I think almost like INR 50 crores kind of an addition. So just wanted to get the sense like, okay, it's more or less recognized now, and we don't see -- obviously, the portfolio is small. But just in terms of the -- and as you mentioned, like out of this in terms of the MSME, what proportion would be under this CGTMSE and so maybe very well provided for?

60% to 70% of our MSME unsecured is covered by CGTMSE. And if you look at INR 232 crores on a portfolio of close to really 2.5% or so.

Yes. That's small. Yes, yes, yes.

For retail unsecured, I think that's a very, very good performance.

Yes. And secondly, in terms of the corporate, so again, on the same slide, when we look at it in terms of [ INR 690 crore to INR 521 crore ]. So obviously, we have mentioned INR 175-odd crores of resolution additional compared to INR 550 crores, which was there in Q3. Sir, this is, again, the chunkier one that a couple of accounts, which would have got resolved over here.

Yes, Kunal.

Okay. Good. And strategically, when we look at it in terms of this entire cross-selling, so last time we have highlighted in terms of the product per customer so incremental growth, if we have to look at it, say, on the retail side as well as on the housing side, how it has been across the other business segments as well. How have we moved on the cross-sell part of it, that would be really helpful if you can highlight here?

So Kunal, last time, we've spoken about 3 buckets under which the whole cross-sell initiative was running. And today, I took you through things we're doing at ABC level, which should only promote that. So last time, we talked the product per customer about 1.6% has only been a quarter, but it's moved about 1 to 1.62. So in a quarter, I don't expect there to be that much of a jump in the product per customer. But we've also launched several pilots in different businesses to be able to drive cross-sell in different databases. But what I'd like to do is just ask Mayank to talk to you about an interesting exercise we've done with Voda and then maybe Kamlesh can talk to you about the preapproved sum assured stuff that we're doing and some of the work we're doing through our distributors to cross-sell. So I think that will give you a sense of the number of initiatives that are being taken for cross-selling. So maybe Mayank first and then Kamlesh, if you can just add on PASA and Select.

Thanks, Ajay. So with Vodafone Idea, given the fact that they have a very large customer base and the health is definitely a theme that is very relevant and contextual for customers. So we have actually bundled a very relevant and something that the customers need a hospital cash benefit with the SMS and the other -- the packages that VI sells to its customers. And we just did a small pilot with a small base across the country. And we've already seen very good success with about close to 10,000 coverages being done till date. And that is just less than 1% of the customer base that we did this pilot. So if you can actually find a way to first expand it to the larger base and also to kind of create other offerings, so this is just 1 of the offering that we have brought in, I think the opportunity at ABC level to create a very large customer acquisition engine, which can then be used to cross sell the more -- the larger products, not just for health, for other offerings, is very, very large. So we are very excited with this opportunity that we have just started with. Kamlesh, over to you.

So like Ajay mentioned, actually on PASA, it gives us 2 opportunities. One is the under insurance sold. So through PASA, you are able to tell what you bought -- eventually, what insurance that you need more. And b, of course, is the best product that you will buy, next best product that you will buy. And therefore, like Ajay said, we started with about 2% in April last year. In March of '21, we reached about 20% of our business coming through this. And also with some of our partners, like say, HDFC, who is our common partner for both health and life, we are doing now a pilot in terms of saying all those people who bought health can also buy the term and vice versa. And that's also run on very, very efficient data, which means the offer is very simple, quick and the digital journey on -- even though on the net banking platform, they are just 1 click or 2 click for consumption. So you will see some progress through this year, but we are really looking forward to on an excited basis.

[Operator Instructions] The next question is from the line of Prashanth Sridhar from SBI Mutual Fund.

If we look at the NBFC, where there's an SME and retail exposure, that entity has better collection efficiency and lower restructuring than the HFC, where 70% would be home loans. What explains that?

So if you look at, Prashanth, we are focused on self-employed segment. And the self-employed segment got impacted last year. And that's the reason why you see this kind of -- so in NBFC, you have different customer segments and there, we saw the collections efficiency was slightly better. But across last year, it was very similar in both the businesses. Only in March, it slightly dipped. But that's also on account of -- we had a lot of resolution, and I've mentioned that in my presentation also, we brought down our stage 3 from 1.89% in quarter 3 to 1.83% from 1.89%. So a lot of resolution we did in quarter 4. So as I mentioned, it's primarily because of the self-employed segment.

Sure. Sure. The NBFC would also have higher disbursements than the HFC. So is there some sort of disbursement to existing customer support and what would be the policy around that?

No. So that is as per you're saying top-up or something like that?

Right.

No. So I think we have -- until unless we evaluate every transaction and basis the cash flows and the viability of debt servicing, that's how we evaluate every transaction, whether that's a top up. Even the emergency credit, and last time I had explained that in the earnings call also. For emergency credit also, we look at the cash flows and ability of the customer to repay us. So clearly, we look at the underlying is the cash flows and ability.

And just look at the drop in ticket size across the board as well, right? That's another indication of the fact that...

Sure. Just 1 data point. If you could give us the ECGLS disbursement in the HFC for FY '21?

ECGLS, let me just come back to you. That's not too much, but I can come back to you.

Next question from the line of Vikas Khemani from Carnelian Capital Advisors.

Congratulations, sir. All-round performance across the board. I think, a great job in difficult times. A couple of questions. If you can give me a little bit more color on what is the kind of approach we have, especially when we are looking at unsecured retail lending? That would be really helpful. What kind of profile, what kind of geographical spread. And also at the NBFC level, what kind of -- because we are fairly capitalized, I'm assuming there's no capital raise required at this point in time or over the next couple of years. What kind of ROE targets you would have where you -- sort of you will be shooting and what kind of time frame you would have for that?

Vikas, the ROE target we had set for the entity as a whole for the NBFC in the last quarter, I don't know whether you've seen that, but we've talked about a target ROE for the NBFC, we're moving towards that. And like we said last time, that is going to come by change in mix, which we will lead to change in yield, change in NIM, which is what the story is this quarter. I'll get Rakesh to just brief you in terms of unsecured retail and the strategy around that.

Can you say what's the target? Sorry I missed last quarter, I did not attend. Sorry, if it's possible for you to sort of share?

Yes. Rakesh will give you that number as well.

Okay. Sure. So if you look at the retail sourcing also, we are very in terms of mindful of the risk, and I think that's a priority for us. So if you look at unlike most of the NBFC, our retail 50% is coming from secured and 50% or close to 47% is coming from unsecured. And this is there in our Slide 15. And out of that 47% also unsecured, our MSME unsecured is backed by the credit guarantee. Also, in terms of we have digital acquisition, we have tied up with different partners and all, and we are acquiring customers. And a lot of partnerships, we have first loss given default. So clearly, that is the focus for us in terms of managing the risk. So well calibrated in terms of approach, it's -- yes, we are looking at growing the unsecured to the MSME and all. And that's backed by -- and we have approval -- a large approval from SIDBI to cover that. So we pay -- every year, we pay 75 basis points as the credit guarantee premium. And our portfolio, 75% of the principal is protected. So that's the approach and very well balanced retail growth, which we are trying to do at this point in time, and you can see that in our -- in the slide. And in terms of ROE target, we had given 16% to 17% is what we are looking at.

What time frame?

Since you were not there last time, I'll just give you, we said for FY '24, which is 3 years out at that time pre the second wave, we had said ROE target for the NBFC was 16% to 17%; for housing finances 14% to 15% ROE; for the asset management company, ROE between 35% and 40%; life insurance net VNB of 16% to 17%; and health insurance premium of between INR 3,200 crores to INR 3,500 crores. We had set out all these metrics as our targets for FY '24.

Okay. Great. And Rakesh, if I can ask that on unsecured, you mentioned that you are paying a 75 basis point trade value premium. So in that sense, it is right to assume that your entire unsecured portfolio technically insured. Is that how one should understand?

No, no, no. Not entire. There is a part of it, the MSME, the personal loans is unsecured. And the MSME unsecured business loans, as we call it, there, we provide -- we take the credit guarantee premium every -- so it's like premium which you pay -- insurance premium, which you pay every year. So 75% of the principal is protected.

[Operator Instructions] You next question is from the line of Nilesh Jethani from Envision Capital.

So my first question is around the disbursement side for the NBFC business. We have seen a strong growth as far as disbursements are concerned for Q4 but starting April and May, there has been a lot of lockdowns announced across India. So I wanted to get a sense on what is our outlook for the same as far as FY '22 is concerned.

Nilesh, honestly, a little early to call because we still don't know how this whole lockdown scenario is going to play out and what is going to happen in terms of the pace of reopening. As we'd expect, disbursements have been slower since the second wave. So they have been much slower in both April and May. But I think we just have to wait and watch to see when things actually open because most parts of the country are under different kinds of lockdown at this point in time. So I'm sure that's the case for most people in this industry.

Understood. Sir, second question is on the NIM side. So what I've seen, we have exited Q4 with NIMs of around 5.98% for the NBFC business. Just 1 question on this side. Although for the full year, we had seen some decline in the NIM broadly -- largely because it came from the reduction in the cost and not from the averages. So despite our mix improving towards retail and SME side, our average leads have declined for FY '21. So what could be the reason for the same?

Rakesh, do you want to take that?

So I'll tell you, they are quite a bit of one-offs. Also last year, there have been reversal on stage 3 assets and all. So that would have impacted, interest on interest is another factor. There are quite a few of the factors, which are also there. And also, we have to keep it in mind, this is a declining interest rate scenario and the customers' expectations. So if you look at our cost of funds has come down significantly. And customer expectations also is on a lower rate. But if you see, our margin is well protected and margin has improved. So yes, the yield has come down marginally because of, I mentioned 2, 3 reasons, but our margins have improved, and that's what we have to keep it in mind.

You should look at margins because honestly, when rates come down or go up, you end up passing most of it to customers. The fact that your NIM is actually expanded in spite of that happening in spite of cost of borrowing coming down, as you said, is really because of the mix change.

So sir, going ahead, let's focus on the SME and the retail side, so we see some expansion opportunities from Q4 levels of 5.98%?

Yes. Again, I'll draw your attention to what we said last quarter, where we said that we expect NIMs to get to about 6.25% due to change in mix, which is what would drive the ROE that Rakesh mentioned earlier.

The next question is from the line of [ Sravan Vora ], an individual investor.

Hope all is well with the team at ABCL.

Sir, sorry to interrupt you. Sir, may I request you to speak a little louder?

Sir, hope all is well with the team at ABCL. And I had just 1 question and 1 suggestion. Sir, I just wanted your views, like ours is large consumer-facing business and a very strong brand in terms of the Aditya Birla Groups. So like we were doing a lot of advertisements under the unified brand name, which seemed to have tempered down in the last year or so. So what is your view on taking this brand ahead as a unified brand and individually for other businesses? And just a small question on the direction for life insurance and the asset management business. We've delivered amazing numbers this year in a challenging quarter. Just a little color on how do you see -- do you see this growth like we've had this year continuing ahead of the competition? Do you think we can manage on a sustainable basis? And yes, just that.

Thank you, [ Sravan ]. I think your first question on branding, I think a lot of our brand spend has moved to digital. And I think you'll probably see it much more in that space than in the TV and outdoor space where we first launched our brand. So the brand spend is still on, but it's just in a different channel and still continues at the -- at both the umbrella level as well as individual product level. As far as growth in the AMC and life insurance is concerned, like I said, when I ended my talk, I think our aim, we don't know where -- how things will pan out because there's a lot of uncertainty currently. But our aim is clearly to be -- to try and do better than the industry. In all our businesses. And I think that's what we've demonstrated in FY '21 and prior, and that will be our endeavor going forward as well.

[Operator Instructions] The next question is from the line of [ Sravan ], an individual Investor.

I have already asked my questions.

The next question is from the line of Prashanth Sridhar from SBI Mutual Fund.

Yes. So just 1 more follow-up. If we look at the stage 2 in the NBFC, I think in FY '20, it was around 2.5%. And if I heard you right now, it's around 6.5%. Any color on what contributes to that incremental increase?

What are things change in definition, that is what he's asking.

Yes. Yes. Yes, Ajay. So in May last year, we changed our definition. Earlier 60-plus was stage 2 now 30-plus is stage 2. And if you look at the current environment, Prashanth, even 1 EMI and the account moves to stage 2. So that's quite a tough definition. But as I mentioned, we are in touch with all these customers. And completely on top of these exposures, and we have baked in terms of only a question of a mismatch in terms of -- and a lot of it we collected in April and May. So it's only a question of time, we should be able to collect this. We don't see a very significant barring a few. I don't think we have a big concern there. We should be able to pull this back. So change in definition is 1 of the reasons why it has gone up significantly.

Sure. So just to clarify, FY '20, what we see stage 2 60 plus? And right now, on a 30-plus basis, it is 6.3?

Yes.

Yes.

Yes.

[Operator Instructions] The next question is from the line of Rikin Shah from Crédit Suisse.

Just a quick data keeping question. Can I get the write-off numbers for the quarter and also for the full year, both for the NBFC and HFC?

Rakesh, do you have that number handy? Or else we can send it to Rikin?

NBFC, I can give you, INR 113.84 crores.

Is this for the quarter or the full year?

No. This is for quarter.

Okay. And can I have the number for the full year as well, please?

I cant' provide you that. We can revert back to you on this.

Sure.

[Operator Instructions] Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Ajay Srinivasan for closing comments.

Thank you very much. Thank you all for joining this call on a Friday evening. I hope you've heard and got the information that you need. If any of you need any more information or clarifications, please feel free to write in to Pramod Bohra, and we'll be happy to answer your questions. I hope you have a good, safe and healthy weekend. All the best to you and your families. Thank you.

Thank you very much. On behalf of Aditya Birla Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.