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Aditya Birla Capital (ABCL), on its Analyst Day, exuded its tech advances over FY24 and presented its various digital platforms to mark its trajectory to double its loan book over next 3 years. ABCL’s approach towards One ABC-One P&L to offer holistic financial solutions under one umbrella is turning into reality as they launch D2C app (official launch in Mar’23). The app is designed to offer all the financial solutions viz. Insurance, loans, investments, payments, cards under a single platform. The company plans to launch new features in payments and cards during FY25. The company is also planning to launch B2D platform for distributor and channel partners to on-board connectors seamlessly and hassle-free. We believe the launch of this app would aid in scale up of businesses across all the subsidiaries and with integration of ABG (Aditya Birla Group) customers to the platform, upselling and cross-selling products would further strengthen the book going forward. We believe that the current technology upgrades would lead to a healthy run-up in the businesses from FY25 onwards and the operational efficiencies from Salesforce implementation would further kick in from FY26. We value the stock at INR 220 based on SOTP based valuation.

* One ABC – D2C app launch in Mar’23: ABCL has merged together its diversified financial franchise into a single-stop shop locations called “One ABC” which offers products across the entities i.e. loans, insurance and mutual funds all at one place. There are currently 218 One ABC locations (as of 3QFY24) and the company is inclined to aggressively expand such branches across other locations which would offer them a healthy growth momentum. ABCL is moving towards “One ABC, One P&L” approach which focuses on a business strategy that revolves around three levers: One Customer, One Experience and One Team. The company launched ABCD-D2C platform in order to offer all the financial assistance to the customer in a single app and it is about to go live in Mar’23. In addition, company is also planning to add payments and cards solutions to the app which would go live in FY25. The approach to move all the financial products under a single umbrella seems appealing as it would open up opportunities to up-sell/cross-sell products to the existing customers. Further, the app also provides an integrated platform to analyse one’s financial heal which would help them take informed decisions on investments ad=nd insurance. The launch of its B2D platform which will be applicable to distributors and channel partners would further aid in sourcing new customers. We believe these tech solutions would be beneficial to all the companies under ABCL holdings to aid in sustainable and quality growth.

* Udyog Plus - B2B platform for MSME ecosystem: During FY23, ABCL launched a unified B2B platform ‘Udyog Plus’ to offer lending solutions, using traditional and alternate data sources along with value added services for the MSME ecosystem. These lending solutions include a paperless end-to-end digital journey for business loans of up to INR 1mn with loan sanction TAT of less than 2 mins. Udyog Plus has been integrated with the government and private e-commerce websites to provide credit facilities to sellers on these platforms. Recently, it got integrated with Ultratech app and Aditya Birla Group (ABG) platform. It has 500k+ registrations so far and a monthly disbursements run rate of INR 500mn coming in from ABG ecosystem. The platform provides additional value propositions like current account with Yes bank, discount to manage accounts via Zoho, corporate travel solutions via Yatra and taxation advisory via India Filings. The platform also helps MSMEs to discover online digital stores (via Seller app) and provides customized basic and advanced business courses in partnership with MSMEx.

* Payment Lounge – off to a robust start: ABCL signed an MOU with the National Payments Corporation of India ("NPCI") in Jun’23 to develop and promote a complete stack of digital payment methods through subsidiaries to its customers. The payments handle enables new customer acquisition and would increase brand recall. The test results of the payments app since 6 months have been successful with a monthly GMV runrate of INR 5bn+ and 99.58% transaction success rate. The unique features of the payments suite include : multi-account payment (single payment from multiple accounts), multi mode receipt (QR, Link and Notification), pre-verified bank transfer, UPI international and Rupay on UPI. The payments app will continue to evolve in FY25 with new features to be added in FY25 like: merchant acquisition, PPI wallet and transit & forex.

* AI led sourcing, servicing, renewal to offer lower operating costs into insurance business: The AI led integrated lead management system and sales journey enable the company to prompt users to buy insurance. The prompts are made thrugh digital partner apps which include Phonepe, OLA, VI, MMT, etc. The AI led digital servicing through app/ website/ whatsapp/ voice bot saves a hefty employee expenses who had to manually generate leads. During Q2FY24, 8.8% of the claims were made digitally which increased to 23.1% in Q3FY24 and 83% of renewals during Dec’23 were made digitally. Thus we believe that the system is largely in place and the only way to look forward is scalability which would drive operations.

* Maintain BUY with SOTP based TP of INR 220: ABCL is evolving to be a tech savvy enterprise with Phygital presence across India. With continued development in analytics and its approch to further increase its analytics headcount to 350+ by FY25 (currently at 204) shows encouraging signs of development across the company. We assign INR 122 per share for AB Finance, INR 24 per share for AB Housing Finance, INR 30 per share for 50% stake in the AMC business, INR 37 per share for 51% stake in life insurance, INR 2 for AB Money and INR 4 per share for other businesses - Aditya Birla Health Insurance, PE Advisors and insurance brokers. This entails a total valuation of INR 220 for ABCAP.

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CIN Number : L67120MH1986PLC038784