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Healthy AUM growth sustained; NIM compression in NBFC/HFC

* 2QFY24 consolidated revenue grew 22% YoY to INR88.4b and consolidated PAT (post minority) grew 44% YoY to ~INR7.1b.

* ABCL had raised equity capital of ~INR30b in Jun’23. The company further shared that it has infused equity capital of ~INR7.5b in the NBFC.

* It added ~ 72 branches in 2QFY24, taking the total branch count to 1,403. The management has exhibited great agility and a majority of its FY24 targets have already been achieved. We estimate further improvement in operating metrics in 2HFY24.

NBFC: NIMs contract QoQ; Share of SME, HNI, and Retail stable

* NBFC Loan book grew 44% YoY/9% QoQ to ~INR935.2b. Retail and SME segment AUM grew 49% YoY and comprises ~67% of the AUM mix.

* 2QFY24 disbursements grew 32% YoY to ~INR164.7b. ? NIM contracted ~10bp QoQ to ~6.8% in 2QFY24.

* Asset quality continued to improve with GS2 + GS3 assets declining ~20bp QoQ to ~5.2%. S3 PCR rose ~170bp QoQ to ~48%.

* The NBFC continued to expand its geographical reach by adding 43 branches in 2QFY24 and now has 375 branches as on Sep’23.

No significant stress seen in Personal and Consumer loans

* Personal and Consumer Loans have an average ticket size of ~INR33K and ~87% of these loans have a credit score of >700. Ticket Size <INR50K and tenor less than 30 days is <1% of the overall loan mix for Aditya Birla Finance. The company has recently begun monitoring its customers’ leverage, and ~12% of them currently have leverage that is 1.5x higher than it was nine months ago.

* Consumer Loans are predominantly facilitated through digital/fintech partnerships. In cases where the portfolio quality with certain partners has been subpar, the company makes decisions to terminate those partnerships.

* ~40% of the new personal loans originate from upselling to existing consumer loan customers. The company has fine-tuned its underwriting processes, yet it has observed no early warning indicators within its personal and consumer portfolio.

Housing Finance: AUM growth healthy even as NIM moderated QoQ

* The company reported a broad-based growth in 2QFY24 across customer segments, with 52% YoY growth in disbursements to ~INR18.2b. Loan book grew 23% YoY to INR154b.

* NIM contracted ~25bp QoQ as well as YoY to ~4.9%. The mortgage market is competitive and yields could moderate a little further from here as well.

* GS2 + GS3 assets declined ~40bp QoQ to ~4.4%.

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