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

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 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, CEO, Aditya Birla Capital Limited. Thank you, and over to you, ma'am.

Thank you so much. Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q4 of FY 2023. Joining me today are our senior members of my team; Bala, Rakesh, Tushar, Pankaj, Kamlesh, Mayank, Pinky, Vijay, and Sanchita. I will cover our strategy and approach across businesses, and Vijay will cover key financial highlights followed by a discussion on performance of our key businesses by respective CEO. The Indian economy continues to remain resilient amidst a volatile global macroeconomic environment. The growth momentum is visible in increasing industrial output and capacity utilization, strong improvement in services and manufacturing PMI and rise in GST collection. Indian financial sector remains healthy and stable, so inflation remains alleviated, it has moderated from its peak. We expect these positive trends in industry to continue and Indian economy to perform well in FY 2024. At Aditya Birla Capital, we follow One ABC, One P&L approach to focus on quality and profitable growth by leveraging data, digital and technology. The 3 pillars of our approach are one customer, one experience and one team. We have a strong presence across Protecting, Investing, Financing and Advising that is PIFA offerings. We have adopted a one customer approach to build the understanding of our customer profile and provide them best-in-class solutions across PIFA. Our endeavor is to provide a one experience across channels and enhance a unbanked seamless delivery of our product. We follow an omnichannel architecture for distribution and provide complete flexibility to our customers to choose the channel through which they wish to interact with us. We focus on working together as one team by leveraging synergies to drive cross-sell and deliver complete and comprehensive solutions to our customer. We have also aligned the incentive structure of our senior management team to reflect this approach. This approach has helped us to accelerate our growth trajectory with scale and increase market share across our businesses. We continue to expand our branch network. We added 75 branches during the quarter, and our total branches count was 1,295 as on March end. We have 584 co-located branches across 155 One ABC locations where customers receive assistance to achieve their financial goal. We will continue to increase our presence on One ABC locations. We follow a digital-first approach for product innovation, customer selection and seamless onboarding and improving service delivery. In our AMC business, about 75% of our customers were onboarded digitally in FY '23. In our Life business, 77% of the renewables were done digitally. In our Health Insurance business, 87% of the business is delivered by auto underwriting. We leverage our data, discipline and technology across our businesses and have taken various initiatives to further strengthen our proposition. We have recently formed our holding-on subsidiary, Aditya Birla Capital Digital, which will develop an omnichannel B2C platform. This platform will serve existing customers, acquire new customers and act as one-stop solution to deliver PIFA solutions to all our customers. The virtual engagement channel of this platform has already gone live in March. We are collaborating with NPCI to develop and promote digital payments, which will enhance our customer transaction experience. We have recently launched in finance, our innovative engagement program to partner with start-ups and scope real solutions for enhancing customer journeys and increasing the operational efficiency across our businesses. A comprehensive digital platform for MSME ecosystem, Udyog Plus went live in March. It offers a paperless digital journey of business loans and loan disbursement up to INR 1,000,000. Udyog Plus has been indicated with the government and private e-commerce website to provide credit facilities to the sellers on these platforms. We are seeing more than 2,500 registrations on Udyog Plus within a month of its launch. We see a favorable prospect for the Indian economy in the near and medium term. We expect India's domestic consumption and investment drivers to continue to support healthy GDP growth. A strong parentage provide a seamless access to capital, both equity and debt and extended ABG and ABCL ecosystem gives us multiple opportunities to accelerate our growth. Going forward, we will follow our One ABC, One P&L approach to continue to grow and build scale in each of our businesses. In our NBFC business, we will focus on building a granular portfolio by growing our personal and consumer loans and secured and unsecured businesses. We will build differentiated offerings for MSME and scale up our Udyog Plus to acquire new customers and tap into ABG ecosystem. In our HFC business, we will grow [ growth ], prime and affordable business segment, with a focus on quality organization -- origination. We will continue to deliver sustainable growth and ROE in the medium term in both our lending businesses. In the AMC business, we will work towards increasing equity market share. We will aim to increase our presence and passion in alternate businesses. In life insurance business, we will grow the traditional segment, its a focus on diversifying our distribution mix increasing our productivity and improving the persistency across cohorts. We will continue to deliver sustainable growth in embedded value and VNB in the medium term. In Health Insurance business, we will leverage our differentiated health force model for better risk selection and risk pool management, diversify our distribution mix and utilize our digital capabilities for hyper personalization at scale. We intend to make investments with primary objective of supporting growth in our lending and insurance businesses and to strengthen our digital offerings. Our Board of Directors have approved today raising funds of an amount up to INR 3,000 crores, subject to the requisite approval. Now I request Vijay to cover the financial performance for Q4 and financial year 2023. Over to you, Vijay.

Thank you, Vishakha, and good evening, everyone. We delivered a strong performance for FY '23 with accelerated growth momentum across our businesses. The total revenue grew by 31% year-on-year to INR 9,146 crores in Q4 and 27% year-on-year to INR 29,999 crores in FY '23. Consolidated profit after tax grew by 35% year-on-year to INR 609 crores in Q4 and 33% year-on-year to INR 2,057 crores in FY '23. The consolidated profit after tax in FY '23 excludes the sale value being related to investment in Aditya Birla Health Insurance. In our NBFC business, we continued with a strong momentum of disbursement and granularization of our book. Disbursements for the quarter grew by 19% sequentially and 58% year-on-year to INR 15,598 crores in Q4 of FY '23. This helped the loan book to grow 46% year-on-year and 10% sequentially to INR 80,556 crores as of March end. Loans to retail, MSME, SME, and HNI segment now constitutes 67% of our portfolio. ROA of our NBFC business was 2.45% and ROE was 14.76% in FY '23. In our Housing Finance Business, disbursements increased by 29% sequentially and 36% year-on-year to INR 1,790 crores during Q4 of FY '23. The loan portfolio grew by 6% sequentially and 14% year-on-year to INR 13,808 crores as of March end. ROA was 1.94% and ROE stood at 13.16% in FY '23. Coming to our AMC business, the average AUM was INR 275,204 crores of which equity AUM was about 42% in the current quarter. With our continued focus of growing assets and alternate assets segment, passive AUM about INR 28,200 crores at March end, which is about 2.8x per passive AUM as of March end last year. The growth momentum in our Life Insurance business continues with 37% year-on-year growth in retail first year premium, which was significantly ahead of the industry growth of 19% year-on-year in FY '23. Group new business premium grew by 30% year-on-year in FY '23. We achieved a net VNB of about INR 800 crores in FY '23, which was more than 2x the net VNB FY '22. Our net VNB margin increased by 801 basis points year-on-year to 23% in FY '23. Embedded value was INR 9,014 crores as of March end. In our health insurance business, our [ weak ] and differentiated Health-First model helped us to deliver industry-leading growth of over 57% year-on-year in FY '23 among stand-alone health insurance. The market share of ABHI among stand-alone health insurance increased by 210 basis points to 10.4% in FY '23. Combined ratio improved from 127% in FY '22, to 110% in FY '23. With that, I will now hand over the call to Rakesh to take us through the NBFC business performance in detail.

Thanks, Vijay, and good evening, everyone. In our NBFC business, we saw strong momentum across all segments in quarter 4 contributing to a 10% quarter-on-quarter and 46% year-over-year growth in our AUM, taking it to INR 80,556 crores. Our retail and SME segment AUM grew 57% year-on-year and our active customer base grew to 5.7 million compared to 3.6 million last year. In quarter 4, we disbursed INR 15,598 crores, which is the highest for a quarter so far. Our disbursement for the full year was double of that what we did in FY '22. Also, 72% operate is towards the retail and SME customer segments. Business loans comprised nearly 43% of our disbursement mix and was the highest contributor across product segments followed by personal and consumer loans at 31%. 58% of our personal loans were sourced digitally. With this momentum and focus on granular product segments, we ended this year with the retail and SME segment AUM mix of 67%. Also, we were able to deliver a 60 basis point year-on-year improvement in our NIM taking it to 6.84% for the year. We also significantly augmented our frontline capacity by doubling our branch footprint this year. We added 164 new branches in FY '23, taking our branch footprint to 323 branches, again, in line with our target for March '23. Despite this expansion in front line capacity, we managed to maintain quarter 4 cost-to-income ratio at a similar level as last year and this, I attribute to our continued investment in technology to digitize processes to grow sustainably. We closed FY '23 with a profit before tax of INR 2,090 crores for the full year delivering a 41% growth year-on-year. In fact, profit before tax for quarter was at an all time high of INR 604 crores growing 51% year-on-year and 12% quarter-on-quarter. The ROE for the quarter was 16.55% compared to 12.4% in quarter 4 last year over a -- 4% expansion in a year, which is purely noteworthy. I had mentioned in my last quarter earnings call the next leg of growth will be driven by our enhanced frontline distribution capacity and investment in digital and direct sourcing channels, which we will continue to invest in FY '24 as well. In business loans vertical, we launched the differentiated Udyog Plus, our unique and differentiated unified platform for MSME customers to enable digital jury for credit as well as value-added services for MSME to transact seamlessly. The asset quality has shown a consistent improvement over last year with stage 2 and stage 3 coming down from 8.98% in quarter 4 last year to 5.84% in quarter 4 of FY '23. Gross stage 3 has reduced to 3.12% compared to 3.58% in quarter 4 last year. We maintained our stage 3 PCR at a healthy rate of 46.2%, up from 43% last quarter. Credit costs for the quarter was 1.49%, which was 25 basis points lower than previous quarter, which you may recall, I had mentioned in my last call was elevated owing to the implementation of new ECL policy. Now to conclude and reiterate the quarter 4 performance, not only did we have a strong quarter in terms of the AUM growth, but also in terms of progressively driving increase in retail and SME portfolio mix. As a result, our quarter 4 NIM expanded to 6.88% over last year, and with the efficient control on cost despite investment in building scales, we delivered a quarter 4 PAT growth of 51% and return on equity of 16.55%. With this, I will now hand over to Pankaj Gadgil for our Housing Finance Business.

Thank you, Rakesh, and good evening, everyone. I will now cover the performance of ABHFL. Here, we experienced continued momentum in disbursals and book growth with a robust financial performance and focus on portfolio quality which has resulted in consistent improvement across all return metrices. Let me talk you through some of the key highlights. Disbursements of INR 5,300 crores in FY '23, which is our highest ever which is an increase of 42% Y-o-Y. Loan book as of March '23 is INR 13,808 crores, an increase of 14% Y-o-Y. NIM is 5.08%, an increase of 76 basis points Y-o-Y and our PBT for FY '23 in INR 309 crores, which is an increase of 22% Y-o-Y. Portfolio health has improved consistently and stage 2 plus stage 3 has reduced by 271 basis points Q-o-Q and 377 bps Y-o-Y. Gross stage 3 loans have reduced to 3.23% in March '23 from 3.66% in December '22. You can see that we have demonstrated consistent improvements across various key performance indicators for the third consecutive quarter, encompassing aspects of good growth, asset quality and core profitability. We witnessed accelerated growth in disbursements across all product segments. The customer base now is about 54,500 and has grown by 22% Y-o-Y. We continue to focus on granularity with a ticket size of INR 2,500,000 to INR 3,000,000. ABHFL now has the [indiscernible] presence with 128 branches located across [indiscernible] and a well-diversified portfolio. We continue to invest in talent, technology and analytics to increase capacity and enhance productivity. The cost-to-income ratio for FY '23 42% reflecting actuated investments in technology and franchise. Now coming to portfolio quality. The moratorium on all the COVID [indiscernible] cases that have ended in December '22. All the numbers which you are seeing on Slide 32 of the Investor Presentation are including the performance of [indiscernible] cases and 100% of the cases are now being [ presented ] for collections. Like I mentioned earlier, our gross stage 3 has reduced from 3.66% in December '22 to 3.23% in March '23. We are maintaining our stage 3 PCR of 33% and additionally carrying a management overlay of INR 56 crores. With a robust debt service framework and pre-delinquency management, the collection efficiency is consistent at 99% and most importantly, with a focus on quality of origination, 96% of our disbursements in Q4 FY '23 are with 700-plus CIBIL or new to credit. You can see a detailed breakup on the same on Slide 31 of the Investor Presentation. Moving on to financial performance and liquidity management. In terms of ALM, ABHFL is operating in compliance with the regulations to the [indiscernible]. We have maintained qualitive ALM ensuring other company is justified to meet its -- liquidity requirements, which can be further referenced on Slide 33 of the Investor Presentation. There it is consistently AAA for the last 6 years by ICRA, India ratings and as you can see on Slide 34 of the Investor Presentation, we've been able to maintain a healthy spread at 3.79%. With continued focus on diversified long-term borrowings, the contribution of NHB to total borrowing outstanding has increased from 14% in March '22 to 18% in March '23. Now coming to the financial highlights, the PPOP is highest ever at INR 381 crores in FY '23 with growth of 16%. The PAT for FY '23 is INR 241 crores, an increase of 22%. The ROA for FY '23 is 1.94% and ROE is at 13.16%. You can refer for detailed financial on Slide 38 of the Investor Presentation. Lastly, on Slide 35, our organizational road map is anchored around growth, service excellence, digital reinvention and distribution network. And let me cover that briefly. Firstly, we expect to accelerate growth in both the prime and affordable segments through a geographically focused micro market penetration strategy and fully leveraging the ABG ecosystem. Secondly, like Vishakha earlier mentioned, we are accelerating our digital reinvention efforts across the entire customer journey, and we have launched a seamless loan organic system in FY '23, which enables higher face time for our teams with customers. Lastly, we are very actively focusing and enhancing our analytics capabilities across areas of data engineering, data science and digital [indiscernible]. In summary, we are committed to sustain our profitability and maintain our quality portfolio while simultaneously investing in long-term growth. With this, I now hand over the call to Bala, MD and CEO of our Asset Management company.

Thank you, Pankaj and good evening to everyone. As I presented in the AMC con call, the total average asset under management, including alternate assets for the Q4 FY '23 stood at INR 283,000 crores. For the quarter ending March '23, our the [indiscernible] was a INR 200,000 crore remained more or less flattish as compared to Q3 of [indiscernible]. Our equity mutual funds assets under management was [ INR 116, 000 ] crores for the quarter ending March '23, which equity makes to that 42.4%. Throughout the year, we launched several initiatives that ended increasing the [indiscernible] book side inside the referent has resulted in our book cost INR 1,000 crores for March end '23. As part of the strategy to build the customer's competition, we added customer online portfolios, which have resulted in our overall [indiscernible] count increasing and going above INR 8,000,000 as of March '23. On the package front, our product of line grew by 3x to INR 29,000 crores as a March '23. Our existing [indiscernible] as a result of this has grown from 7 product to 41 products and overall number of foot is added is [indiscernible]. On the alternate asset billing especially on the PMS / AIF front, we have raised a commitment of INR 734 crores that to India Equity Services Fund which is CAT III AIF fund by leveraging our multi-channel distribution footprint and [indiscernible]. With reference of offshore operations, we have received referenceable approval from GIFT City, launching India ESG engagement under its own [indiscernible] GIFT City. We're also currently in the process of launching 2 more global fund under the Aditya Birla. On real estate fronts, we have time building the incremental assets, but current focus has been creating [indiscernible] opportunities fund by area of making announcements that the investment is in is in [indiscernible]. With respect to the financial numbers on a full year -- for the full year March '23, the revenue from operations was about INR [ 1,227 ] crores compared to INR [ 2,200 ] crores for the FY '22. Operating profit before tax was at [ INR 667 crores ] as compared to INR 743 crores in FY '22. FY '23 profit before tax was at INR 794 crores versus INR 395 crores in the same period last year. I'm also happy to announce as part of our shareholders' approval, we declared INR 5.25 per share as a final dividend. That takes the group INR 10.25 per share on a full year basis. With this, I'll hand it over to Kamlesh Rao, MD and CEO of Aditya Birla Sun Life Insurance Company.

Thank you, Bala, and good evening to all of you. The consistent growth journey of ABSLI in both the individual and group life insurance business continued in the financial year ended 2023. We outperformed both the overall industry as well as the life industry. Industrial Life Insurance grew by 37% compared with the other industry growth of 24%. This growth was achieved through increased productivity and capacity investments made last year. Our success in launching new products are key to our growth. We launched our industry's first major income guarantee product under the [indiscernible], which sold 5,000 policies in just 17 days. The success of our new products, combined with our PASA contribution of 25% were the hallmarks of our business in financial year '23. The individual business had a very healthy product mix with traditional business accounting for 81% and the unit business now at an all-time low of 17%, which has resulted in strong gross margin for the firm and the fact that 25% of our business came from upselling to existing customers, hence productivity growth in both our proprietary as well as our partnership channels. In the group life insurance segment, the private industry saw a growth of 17% last year while ABSLI registered a growth rate of 30%. We continue to focus on the credit wise business, it is growing at more than 100% over the last year's base. Our total premium of INR 15,070 crores has registered a growth rate of 24% over last year, with a 2-year CAGR of 24%, demonstrating the consistency of our business growth. This growth came from new business growth as well as renewal premiums growing at 14%. Like Vishakha mentioned, our digital collections now account for 77% of our renewal premium and this growth is seen across all [indiscernible] buckets from the 13th month to the 61st month, with a 13-month persistency now at 87% and a [indiscernible] 54%. We continue to maintain an upward bias in our forward guidance for these persistency numbers. Our AUM under management now stands at close to INR 70,051 crores, with a Y-o-Y growth of 15%, a 2-year CAGR, [indiscernible] 17% is the demonstration of the consistency of our growth. 24% of this area is in equity and the balance 74% in debt. Our investment performance has been better than the respective benchmark across all 3 categories of equity, debt or even balance for, either from a 1-year or a 5-year perspective. Our digital adoption across various areas is demonstrated on Slide 54. 99% of our new business customers are onboarded digitally. 83% of all our services are now available digitally, covering 60% of our customer transactions and our customer self-service ratio now stands at 88%. We continue to manage the net margins story well as seen on Slide 55. Last year, we managed net VNB of 15% and for last year financial '23, we closed the year at a 23% net VNB margin. We have shown a growth of 800 basis points in our net margin compared to last year and the absolute value of net VNB moved from INR 369 crores to INR 800 crores in financial year '23. ROEV has grown to 22.6% in financial year '23 from 15.4% level for financial year '22. We will continue to focus on quality of our book to make it better across the [indiscernible] persistency from current levels and also focus on diversified mix of both the proprietary and partnership channels within our business. We believe that the [indiscernible] guidelines introduced by the regulator will have a positive impact on the life insurance industry in the long run. These guidelines will ensure directionally that life insurance companies will improve cost efficiency in their business operations. And eventually, these efficiencies will get passed out to customers in the form of better benefits and products as well as per the spirit of new guidelines. With this, I will now hand over to Mayank, CEO of Health Insurance.

Thank you, Kamlesh. And I'm now happy to present the performance of our Health Insurance Business. We had a very successful year with an industry-leading growth of 57% Y-o-Y in FY '23 making us not only the fastest growing health insurer in the country, but in fact, the fastest-growing insurer across all lines of GI industry. We are well ahead of industry growth by 21% and SAHI growth at 26% and the growth was powered by our retail franchise expanding at an impressive 33% Y-o-Y. In FY '23, we had acquired 3 million net new customers, winning our total customers 21 million, 11% Y-o-Y growth. As a result of this growth, our market share in SAHI company stands at 10.4%, an increase of 210 basis points for last year. Our corporate business experienced an outstanding growth of 104% in FY '23 driven by our strong emphasis on cross-selling and upselling and the introduction of a new category of corporate OPD offerings, which has collectively accounted for 41% of our business in the last year. Our corporate business is modeled on the right risk selection designed to capture market opportunities, targeting new age companies and has delivered a positive combined ratio. We believe that we have set up one of the most profitable corporate businesses in industry. In terms of overall profitability in FY '23, we observed an escalated level of retail claims, which is consistent with the industry trends. The claims are largely driven by factors that are non-COVID linked illnesses and provide us inflationary pressures. To mitigate the impact of these claims, we have implemented various interventions, including underwriting, sourcing and provider management strategies. Additionally, we have increased the price of our flagship products already. We have further strengthened our FWA, which is Fraud Waste & Abuse model, and we are also collaborating with the industry, in fact, to help identify and prevent any potential fraudulent activities using the data provided by [ IID ]. But in spite of the above, our combined ratio has actually come down to 110% in FY '23, a reduction from 127% in the previous year. The full year loss stood at INR 220 crores, well below the loss of INR 311 crores in the same period last year. As the programs achieving the largest scale will enable us to generate greater operating efficiencies. We believe our superior performance is made possible by the robust foundation we've established to our unique [indiscernible] model over the past 6 years. The power of the proposition lies in its ability to leverage the fundamental principles of prioritizing the health of consumers which is regulated [indiscernible] with our stakeholders as was reflected by the success of our brand campaign, Kya Peeche Chhoda Hai, which was the story of our actual consumers sharing their experience with the markets. In order to build upon our differentiated model, we are continuously introducing new offerings to the market. Our recently launched product Activ Fit, which was an industry-first comprehensive plan for young consumers, is in line with the strategy of innovative and segmented product offerings. This included our industry-first feature of indoor product, a fit scan based good health declaration and which has been received very well by the market so far. Our industry-leading claim settlement ratio of 96% is a reflection of our commitment to prioritizing key moments of truth for our consumers. On the digital front, our digitally enabled distribution mix is the most diversified distribution in the industry with proprietary channel contributing to 27% of our retail business as of now. We now have 85,000-plus advisers across 200-plus branches. We -- as I mentioned earlier in the previous communication, we leveraged our [indiscernible] branch strategy to nearly double our branch network and a low cost last year and are also synergizing in other views in areas like common advisers. In addition, we now work with 17 plus banks, including the recently added 2 new private sector banks -- sorry, public sector banks, Punjab & Sind Bank and UCO Bank. On the digital front, our business, including traditional alliance partners grew 71% Y-o-Y becoming at fillable 15% of our total retail. We continue to invest extensively in our technology and digital capabilities, serious customer experience and, more importantly, scale hyper-personal engagements for our Health-First model. We're already in Phase 2 of our tech and digital investments to further lead in this space to leverage the emerging new opportunities fueled by the changes in regulation over the past 1 year. In addition, we are continuously enhancing our data and analytics models to make our entire customer life cycle management more efficient and personalized, include personalized product offering to leverage data, targeted health and wellness interventions and personalized service approach to enhance the overall customer experience. Furthermore, our predictive analytic model helps us to detect fraudulent claims and machine learning algorithm and analyze customer data to predict future claims and ensure accurate pricing and coverage. Moving forward, we aim to aggressively expand our franchise while maintaining best-in-class unit economics. We would like to open up chosen white spaces to increase revenue pools and also improve profit pools. Thank you. And I will now pass it back to Vishakha for closing more.

Thank you, Mayank. This concludes our comments on the Q4 FY 2023 performance. And now we will be very happy to take questions.

[Operator Instructions] The first question is from the line of Renish Bhuva from ICICI Securities.

Congrats on a good set of numbers. 2 questions from my side. So 1 is on this cash capital raising. So if you can help us through the capital allocation of this likely fund raise?

So as you know that it is expected that the Indian economy will grow at a very healthy pace. I think in the last year, one has seen a very robust credit growth in the system at around over 15%, all the other parameters and the drivers of the growth in the economy has really worked in the last 12 to 15 months and one expect that momentum to continue. We believe that the capital that we plan to raise, we intend to make investments with the primary objective of supporting the growth in our lending and insurance businesses and also to strengthen our digital offerings. And that is what it is basically for the growth in the franchise across the platform.

Okay. Any [indiscernible] you would like to highlight, let's say, how much of this would be towards lending business and how much of it would be towards digital and insurance?

That will be very difficult to articulate, but as I said, if one was to look at the growth that we have seen across our businesses has been very robust. And therefore, we believe that taking into consideration the growth that one expects in the Indian economy, we will definitely require capital for the growth, and therefore, we can ensure that the capital is available for all our businesses to have the robust growth.

Got it, ma'am. And so my next question is on the NBFC side. So as on March '23, our book mix is roughly 70% secured, 30% unsecured, but when we look at the FY '23 implemented [indiscernible] more skewed towards the [indiscernible]. So maybe in a medium-term perspective, what could be the ideal mix in terms of secure, unsecure for us?

Rakesh, would you like to do.

Yes, we will continue to really see and look at the opportunity in terms of the [indiscernible] different customer segments. So clearly, personal and consumer space, we are looking at opportunity and also on the MSME business. And as Vishakha had mentioned, we have launched Udyog Plus. So I think we'll continue to focus on these segments and depending on what the customer needs are and the product segmentation, we continue to build a balance of both secured and unsecured and we'll continue.

So broadly, it should remain at 70-30 mix or unsecured should outpace the secured mix?

As I said, I think it will depend in the customer segment. What are the opportunities, and we will continue to really leverage on that opportunity both on the consumer side and on the MSME side. A lot of MSME business is secured in nature.

The next question is from the line of Avinash Singh from Emkay Global.

Yes. Good set of numbers. A couple of questions. The first 1 is, I mean, broader on your strategy you have articulate [indiscernible] strategy but so far, one concern that remains with the overall ABC businesses. I think majority of the cases, the businesses are still kind of B2C or B2B2C. So where is you're pleased to the customer from your entity to the customer are kind of a very, very powerful third-party issued, the entities. And that is where a question comes around your sustainability of customer franchisee or growth. I mean whether I look at the lending business where you are sort of partnering with a lot of fintech and even to additional to customers on insurance, it's like the bank and all. So how, I mean, of course, you have the plan for B2C in place, but how do you see this I know sort of evolving when your business has sort of a direct connect with the customers because that is a bit differentiated than a meaningful peer. So again, some bit of more color around how this is going to change over, say, 1, 2 years, how you approach for reach to customers at the time of sort of reducing the intermediation. That's one. And second is on the lending piece on the NBFC side, that a lot of this growth at this point, I mean, is coming in this person, [indiscernible] of course, the previous question tried to address this, but do you have sort of a segment in mind which you would like to add because some of the segments where you operate. So I mean, the competition would be sort of increasing and also kind of growth would be already peaking of its identity. So is there sort of a product segment you have in mind that we sort of augment you will like to augment to enable our future growth. These are the 2 question.

Okay. So let me take the first one because this is across the platform. So first of all, if you look at it, even the partners, yes, we do work with the partners particularly the digital partners in our NBFC business. We do work in our insurance businesses, the agents as well as the bancassurance partner. We look at these partnerships as more as a channel to reach at our customers. When we reach our customers, it is most of the time our people are involved, the customers get to experience our products directly and our service directly. And therefore, we have a direct contact with the customer. Also the data of the customer and the customer ownership. And most of the channels is with the Aditya Birla Capital, and therefore, we can replace these customer data as well as the customer -- the contact for our other products as well. In few channels, of course, there would be a cost implication because we may have to pay some amount to the channels that we would have used initially. But I would say that in all the channels we have a direct contact with the customer, and the customer gets to experience our products and services directly. As you rightly said, yes, we are working in each of our businesses. to also create now in many businesses, we already have that. But also, we are creating now a specifically dedicated digital channel which we call it as One ABC, we incorporated what we call it as Aditya Birla Capital Digital, which is going to be an omnichannel platform, which will have -- which we will leverage our existing branches. We will have VRM. We will have a web platform. We will also have our app. As I said in my opening remarks, we have already launched VRM and it has gone nice in the month of March. We had said in our last conference call that we would be launching our web as well as the app in the very near future this year. So with that, of course, we will look at acquiring, we will, of course, look at servicing our existing customer of ABC as well as ABG Group. We will also look at acquiring the customers digitally through those channels. So I hope I have answered that question. And the second question, I am going to request Rakesh.

Look also if I can just add. I just wanted to clarify that it's not all business, and I'll talk about the lending business. If you look at 52% of our business is direct. Yes, we depend on the partners, but that is only on the consumer side of the business and some bit of personal loans of the business. But beyond that, the SME business, which we do, it's a relationship and direct acquisition model, which we have and obviously on the corporate side, also it's a direct acquisition. Also, on the partner, the entire ownership though the sourcing is done by the partners, but the entire ownership of the customer is with us, the entire contract is with the customer the repayment happens from the customer account. We make disbursement to retail customers accounts. So clearly, the ownership is with us, the entire data, the performance of that customer is with us, so clearly I think, yes, we do depend on some part of our business and some segments to acquire through the third party. But I think the ownership of the customer, and as I said, 52% of the customers which we acquire or the business which we have is through direct. And the second question was on NBFC in terms of the new product segments and all. So clearly, we have discussed this. We believe there is a big opportunity in the consumer, the personal space and the MSME space. And that is the reason why we have built this platform, B2B platform, which is Udyog Plus. And clearly, we want to capture the large-scale micro SMEs who are looking for a small ticket loans. And as we build a credit history of these customers, we will be able to really do business with them in a long term. So I think that's a clear new segment, a new acquisition engine, which we have built. And we believe there's a big opportunity and we need to really do justice to this before we really start looking at newer product segments.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal Financial Services.

So I mean, again, my questions are on the lending business. I just want to understand with regards to the NBFC, definitely very, very strong momentum that we are seeing across our product segments. And the last question, you were kind of trying to explain about the digital partners that you work with predominantly in the consumer and the personal loan side of things. What I wanted to understand here is, while the going is very strong now. I just wanted to understand, how are we looking at things going forward. What I'm trying to understand more specifically is somewhere are you I mean, anxious about the kind of growth that is coming in, particularly in the unsecured side of things, not just personal and consumer loans, but also the unsecured business loans. Why I ask this is when we engage with a lot of your channel partners or let's say, DSAs, what they clearly highlight is while the engagement is very, very good. At the same time, we are also very, very aggressive in terms of decisioning. So while it's a good thing that they appreciate, I mean, how are you looking at things? If you can answer this and then maybe I'll ask my second question.

Sure. So if you look at 70% of our NBFC book is secured, our unsecured portfolio comprises of personal loans to family professional with a focus on emerging income segments and checkout financing. And if you look at that total book of INR 15,000 out of INR 80,000 crores of business. About 87% of our personal consumer loan portfolio is to customers with credit bureau score of more than 700. So we clearly -- and we have built an underwriting model, the scorecards are in build over a period of time with our learning, and it's a completely agile in terms of the scorecard, which we use the credit bureau score and our own performance. Asset quality, as we mentioned, in our NBFC business through the cycle has been quite stable. And it continues to remain healthy. We also, if you look at the gross stage 2 and 3 that has declined by 315 basis points year-on-year and 114 basis points sequentially to 5.84. So clearly, we are focused on the -- all these customers, which we onboard are acquired through the scorecards, which we have build over a period of time and extract the performance on not only monthly basis in certain -- on a weekly basis, we review the performance in terms of which cohorts are performing and how are they really coming on our benchmark. So we are completely on it, and we will continue to be on it.

Just a follow-up question. If you look at your ROA tree in the NBFC business, can you help us understand what are those levers going to be going forward, which will maybe help you achieve further expansion in ROA front and just one last question for Vishakha. So this Aditya Birla Capital Digital that we have incubated now and where you also talked about having that interface. Again, 2 sub-questions here. Manish, I mean what are our plans going forward the subsidiary going to house the so-called, let's say, the super app of Aditya Birla Capital. And going forward, in addition to loan offerings, what are the other things that you plan to provide on this app?

So yes, as you know, the app will be housed in Aditya Birla Capital Digital. In addition to, of course, our endeavor there would be to have a completely customer-centric approach, we will try to be positioned our Aditya Birla Capital Digital as a one-shop solution for all the financial needs of our customers across this life cycle and therefore, in addition to the products that we have -- are manufactured by us across our lending, insurance and investment, what we call it as PIFA. There are value-added services that we will also give it to our customer in the short to medium term.

Got it. If you can address that question on the ROA in the NBFC business?

Yes. So as we have been mentioning and we have been driving the granularity of business in terms of focus on the personal and consumer and the MSME, I think that will change -- that product mix will drive improvement in margins, and that should drive the overall ROA.

In addition to the answer that Vishakha gave on the first question, on the services and the products [indiscernible]. I think we've also shared that in our debt to customer interface, payments is something that we have spoken of, and we did this collaboration with NPCI, which was announced to develop more digital solutions on payments. And that's also going to be a very important hook we're trying to offer our entire bouquet of solutions. So we always say PIFA so its Protect, Invest ,Finance ,Advice and also we are adding the Pays, which is payments. That's what we are getting to.

Thank you so much. Congratulations on a very, very good quarter.

The next question is from the line of Kunal Shah from Citi Group.

So firstly, with respect to in terms of leveraging the group ecosystem and the kind of business momentum, which we are seeing, how is the proportion of incremental lending to the group customer base? And what do we see it as a proportion of the incremental lending over a period over the medium term.

We had not put out that number as yet, but just to talk about the various customer segments, what we have seen is there is a new potential to leverage the entire group ecosystem. Whether you look at on the individual side, we have a large number of employees within the group. We also, as Rakesh said, have recently launched our MSME platform, which is Udyog Plus, which will work with the entire ecosystem of the ABG. We have large industrial companies within our group that have their own dealers, vendors, also their own partners who are linked to them, we will work with each one of them to ensure that we provide finance and really meet the needs of these customers, which are the small and medium enterprises. We also, as a group, have made foray into the consumption and therefore, really providing various of the solutions, including the payment solution that Pankaj spoke about. We would be able to now make those available to the retail franchise that we are building at a group level. So we look at synergies across the businesses that we have in the group, including our own employees at the group level.

Okay. But there wouldn't be any specific targets, which would have been internally [indiscernible] .

Internally, of course, Kunal, we have taken very ambitious targets. And but as I said, we have not yet articulated in terms of the number, but yes, each of our businesses have taken a very ambitious target internally, which we will work through.

Sure. And in terms of the digital lending, what would be that as a proportion of the overall disbursement.

Rakesh?

Overall disbursements, Kunal, we have given this. If you look at on the personal and consumer segment, out of that, how much will be digital?

Sir this INR 4,700 crores, what out of that, how much could be digital within this?

So 19-odd percent out of this will be digital.

Okay. 90-odd percent out of this.

19% digital.

19%. okay. Okay. Okay. Got that. And what would be the tenure of unsecured business loans?

So these are, Kunal, 15 to 18 months on the consumer side and on B2B side,18 to 24 months.

The only reason to ask the question was when you look at it in terms of the repayment, it's hardly 2% in this particular quarter. And even on a full year, it's hardly 20-odd percent. So when we look at it in terms of the unsecured business, disbursements are 1,300 whereas there is almost like INR 1,200 crores kind of increase in AUM as well. So hardly like 150 bps kind of a rundown and even on a full year basis, it seems to be hardly INR 1,100-odd crores kind of a rundown. So is it like a very -- because tenure should be 1 to 2 years, so I was not getting that touch to Y-o-Y.

So that's exactly the difference. So in this, the short term, the checkout financing is even lesser than that. I gave you the average of 15 to 18 months. But if the checkout financing is there, it will be 6 to 9 months. So clearly, that's where -- yes, it is the churn business. So you're right there.

No. In fact, it has to be higher. So here, there is hardly 2% repayment run rate for a quarter, which seems to be quite low.

I don't know what -- which numbers [indiscernible] we will take it offline now on that.

Sure. And just last thing in terms of the capital distribution, did you highlighting between the lending and the non-lending if we are to look at it INR 3,000-odd crores, how will it get distributed between lending and the non-lending businesses.

So Kunal, as I said, that the capital -- we see a robust growth in the segments that we are present today. And we see that growth opportunities across our segments. So depending upon the growth opportunities, we will allocate the capital to our respective businesses, but out of all the businesses, of course, the AMC doesn't require capital, both the lending businesses and the insurance business is what [indiscernible].

' But would it be fair that largely it would be towards the lending business because insurance, still we have 173% solvency.

Looking at the opportunities in the market, I think it would be fair to assume that.

The next question is from the line of [ Lalitabh Srivastava ] from [indiscernible] Wealth Management.

Thank you. And congratulations to the whole team for a great performance this quarter. So most of the questions have been answered. Just wanted to have a sense on the business growth outlook. We are leveraging our own network as well as partner channels and digital news as well, so if you can just help us understand what will be the repeat business run rate on the unsecured and the retail business where we see desirable customer credit behavior. So what is the repeat business [indiscernible]? That's my first question. And secondly, on the asset quality side, across the industry, we are seeing very encouraging terms and especially also we have seen on both stage 2 and stage 3 very encouraging performance, but if you can give some sense as to, first of all, more color on the additional tax, the credit filters that you are employing in addition to the bureau score based credit assessment. And if you take pre-COVID-19 credit filters as a threshold, where do you think we are as of now and going forward, what will be our strategy on that? These are the 2 questions and 1 third question, I would like to add what will be the sustainable credit cost outlook that you see for FY '24 and beyond?

So your first question on repeat customers, it's 40% plus is our repeat customers in our unsecured business. So clearly, the strategy is that we onboard customers who have on a smaller ticket size, shorter tenure and deeper the performance of these customers, then we give them a slightly higher ticket size and a slightly longer tenure. So that's 40% plus will be a repeat customer. What was the second question?

In terms of how are we doing underwriting and...

Yes. So credit filters, and I think Pankaj can add for home loans. But I covered this in my earlier plans, I think, in the script as well that 87% of our customers which we onboard on the consumer and personal side, they have credit bureau score of more than 700. And we track their performance in terms of on a monthly basis, in certain cases, on a weekly basis and we see which are the cohorts which are doing well, which is not doing well and completely on top of this. So clearly, we have built the credit engines, we have the entire alternate data we use in credit decisioning. So clearly, a lot of work has happened there. And wherever we see some -- anything which is not in line with our thresholds, which we have defined, we clearly stop and all control.

so I think to add to Rakesh. Pankaj here. I think [indiscernible] as well. So we have covered this in our slides as well. So for us, also 88% of our sourcing is to customers or [indiscernible]. And very interestingly, customers who have been to trade also who are really at the top of the funnel there as well, and about 8%. So all inclusive, 96% of our sourcing today is [indiscernible]. To your question on pre-COVID, I think the overall, as a credit culture in the country, [indiscernible], which has come out from [indiscernible] today that has matured people have become very conscious regarding their own credit mystery. And as Rakesh mentioned, I think there's a very consistent focus, a, in making sure the credit evaluation [indiscernible] bureau. And I think on portfolio management, on early warning signals, we also have -- I also spoke about the clear liquidity management, which is using advanced analytics to predict which are the customers who are likely to not on all their checks and then working proactively I think also makes a lot of [indiscernible] that's consistently been our focus in both new businesses.

Yes. And some sense on walking with the sustainable stranded costs you would see for FY '24, if you can share?

So I again mentioned that through the cycle, our credit performance has been very, very stable. It's -- stage 2 and stage 3 has come down by almost 315 basis points. And in terms of year-on-year 114 basis points quarter-on-quarter. So I think we are completely focused on it, and we believe that license to grow comes from the quality of the portfolio, and we will continue to really very vigilant on our portfolio quality.

The next question is from the line of Gaurav Sharma from HSBC Securities.

Couple of data point questions. So I can say that portion of [indiscernible] earnings is basically continuing growth and [indiscernible]. Can you just provide a further break up how much we [indiscernible] benchmarks, that is and for global and [indiscernible] business? And second question is when you are going for incremental borrowings. So what are the benchmarks you are [indiscernible]

So yes, thanks for the question. I think as rightly said the term loans that we take from banks are always [indiscernible] of course, the endeavor is at all parts of time to make sure that our currency is maintained, and we are optimizing costs. At the same time, we are not compromising on any [indiscernible] broadly the focus there. Of course, in the combination of some banks who lend you at [indiscernible] that is a continuous process from my end. And as I had spoken earlier in my part about housing this business, the focus clearly is also leveraging [indiscernible] because we are in affordable segment. And we also spoke about the front line contribution coming in product on the affordable [indiscernible] the business. So in the relating NHB for refinance becomes very critical. And we have spoken about our mix has gone up from 14% in last year to an NHB to 18%. So there's been a significant movement there. So this is a continuous process at our end to look at [indiscernible] on the other side and also reduce costs that the normal actually for the lending business. That's where we are.

Gaurav, do you have any further questions?

On question #1, [indiscernible] conform rate.

We are not expressingly disclosing on the breakups, but it's always going to be -- some banks will be in [indiscernible] reported normally on the tax on what is the negative typically when banks are giving to us. It will be leased to only.

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

Congratulations on a good set of numbers. So I had 1 question on the Housing Finance Business, so currently, like we are centering around 2% ROA. But so -- and like this is well above our guidance of FY '23. So any -- of FY '24, so any revised guidance which you are looking at since if you look now housing is roughly 42 percentage of the AUM and given that the affordable housing players which are listed, they are generating an ROE of more than 3% debt. So are we aiming near to that mark?

The way we've been saying, as you know, we will want always sustain the performance [indiscernible] focused on the margins. So the focus is we, anyways, want to make sure that the regulation of growth in portfolio quality and also sound and diverse management [indiscernible] always works for us. The contribution of affordable, like you rightly said, is now [indiscernible] plus, yes, is to be at 49%. So as we have always spoken, I think the opportunity is in both the brands are affordable and have to be leveraged appropriately. And leveraging maybe cost as well. I think the focus is going to be along all the 3 tenants which is portfolio management, robust management and growth. So I think we will -- our level is going to be to sustain the numbers or that you mentioned and we look at opportunities [indiscernible].

Sure, sir. And 1 more thing. On the stage 2 portfolio and affordable housing, so kind of have seen a quite sharp decline from 4.5% to 4%, so this is largely on account of recoveries or less [indiscernible]. What would be the reason?

So good question. So I think the customers who had served at COVID [indiscernible]. We observed these customers. And last proportion of them are repaying very, very heavily. So with natural in the moment, they are moving to stable and of course, we have an effort to intensify the entire collection and also the legal tender, which also helps us at all points of time to reduce the stage 2 and stage 3 particularly. And you would have seen now that stage 2 and stage 3 [indiscernible] our loan portfolio.

Okay. And just 1 last one on the OpEx -- overall OpEx in a given that we are pouring more into the digital space and making readers initiatives on the bite platform. So how do we expect the OpEx to go out -- OpEx to hold FY '24 means OpEx cost would be around current levels? Or will that see a slight bump up, that is for housing as well as lending both.

I think metrics why we would not very focus on the material immediately. I think the key focus is, like I said, maturing growth. Cost addition on its own doesn't mean that much I think the functionality of ROA is extremely important. That puts the lower element is very important. But at the same time, as I said, there is an accelerated investment in technology and digital analytics that we are doing to ensure that the appropriate growth and ROE and of course, only [indiscernible].

On the NBFC side, I'll say, if you see the cost income ratio is quite efficient in spite of 164 branches last year. we have maintained the efficiencies. So we will continue to, I think, operate in these levels.

The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

Just on the finance business, can you split the average ticket size of consumer and personal loans? I think that's around INR 28,000 between consumer and personal loans.

So consumer loans is around INR 20,000 and personal loans -- blended personal loans is around INR 300,000.

Sure. And on the secure side, the ticket price is declining despite the fact that LAP is going down, what could be the reason for this?

So clearly, we are on focused building granular business and across all our segments is what we are trying to drive, and we will continue to drive that.

And what would be the ticket size in that?

In secured business, you're saying?

Yes, that's right.

The secured business is INR 1.8 crores is our average ticket size.

Last segment of secured business.

Yes. So if you look at, this is an average. And I think this will be across the segment. But majority say it should be in a similar line.

And just 1 clarification, the bureau scores that you put out in the pie chart, this is based on number of customers? Or is it based on the value of loan book?

Number of customers.

Just moving on to health.

So it's on value -- sorry, just a correction that it's on value.

So that includes the corporate book also, is it?

No. We have mentioned this and at the top that it's personal and consumer business.

Just moving on to health. If you could kind of help us understand how does the AUM guideline affect the Health Business? And any color on pass-through profitability.

I think as Rakesh also mentioned earlier, the situation will be very similar for both Life and Health. And I think it's a very moderative step for both the entire insurance industry. We have to watch out in terms of the pace at which it gets incremented because I think, ultimately, the objective is to see how some of the benefits of this is passed off it. There are offerings by the industry. It's a more consumer kind of, I would say, more friendly for the consumers. But I think it will take some time for the whole framework to get executed by the industry. It's even the long-term in when we start seeing the full impact of this.

So we are comfortably placed on this.

Yes, yes, yes. We are very. There are enough mechanism in the guideline for all category of countries, including ours, to be able to looking.

But quickly moving on to the life side. On Slide 40, you showed us product mix channel-wise. Is this for the individual business or overall business?

The product mix is for individual business only. So 81% that you say, which is traditional and 17% on the ULIP side is largely the contemplation only of the individual [indiscernible].

Sure. And the unwinding rate for you at 9.6% in the [indiscernible] is probably more on the higher side. So the -- if you could explain maybe there is a specific reason for why it will be higher this year? Is something that you are running a large -- longer duration book?

Typically, it's a function of within the traditional order proposition. If you have a size of the guarantee commitment that you have to the customer versus the spread you're making on that portfolio is slightly better and the unwinding rate in the non-pound business tends to be better in a particular year. And that is why you will see across the listed companies at the in the range of 7% or 8%, will be about 9%. The incremental comes down all of the product mix and also a function of the admitted guarantee [indiscernible] book to the customer versus the spread that we can make on the portfolio.

And one last point. How much is [indiscernible] in the traditional mix for last year and this year -- for this year?.

Actually monetary product makes us for the opportunity in the marketplace. At one point of time for our margins, we actually had access of about [indiscernible] protection. In the increasing interest rate scenario that we saw last year, we thought the opportunity was more in the north part segment. So in the traditional business, about 75%, 80% of the business would be in the north part segment. And that's what we keep doing every year, depending on the interest rate cycle, we will move the product mix accordingly and therefore, maybe at this point of time, we have gave a need to look at the protection business more [indiscernible]. But last year, we did capitalize on the opportunity in the [indiscernible].

Due to time constraints, we take the last question from the line of Deepak Shinde from HDFC Securities.

My first question is NBFC, so the mix of retails versus [indiscernible] is already ahead of our guidance at 67% and doing it only to rapid pace. So is there any internal feeling of we are looking at where the retail [indiscernible] %, 75%, or we look at what kind of opportunities we have for growth in this business and similarly for personal and consumer loans?

[indiscernible] kind of opportunity and maximize the opportunity in terms of the risk-calibrated manner. And these segments, we will have to review it looking at the opportunities.

Right. And second on the asset quality, in our housing business, the 3.3% [indiscernible]. So what is the source of the releases for construction finance or where cost affordable housing [indiscernible] .

We have very high -- so we have a very small book value [ 13% ]. So it is very well distributed and as we have mentioned, it is coming down [indiscernible] already see from December to margins have come down rapidly. And very importantly, better now it's only [indiscernible]. You -- earlier so we are very focused on the [indiscernible] 96% of our onboarding is happening in core of [indiscernible] also a [indiscernible].

So these would be largely prime plus affordable home or less [indiscernible].

Yes, it is very [indiscernible].

Right, right. Just turning back to the NBFC growth, so our personal consumer book has been growing at a very rapid pace. So would we continue to seek opportunities or there's a time where we would like take some pause and evaluate how this [indiscernible]. So what are the [indiscernible] for FY '23 in terms of growth on the industry side.

Deepak, your voice was not very clear, if you can repeat that question?

So on the NBFC side, our personal consumer book has been growing at a very rapid pace, so is there any targeted lines where you would like to take a pause and look at how this entire portfolio has been behaving before [indiscernible] so any guidance will you like to give for FY '24 for that book?

We will continue to focus on building a granular portfolio, so clearly, on the personal and MSME side. So we will continue to build that business.

Okay. So if opportunities arrive, we will continue to grow at a high pace of growth on the personal consumer side?

Depending on the opportunities [indiscernible].

I would now like to hand the conference over to Ms. Vishakha Mulye, CEO of Aditya Birla Capital Limited for closing comments.

Thank you. I would like to thank all of you who join us today evening and look forward to keep in touch and more interaction in the future. Thank you.

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