Can Aditya Birla Capital sustain its growth momentum in coming quarters?

ET Intelligence Group: The stock of Aditya Birla Capital (ABCL) has gained over 5% in the two trading sessions after the company declared its fourth quarter performance on Tuesday. The company reported double-digit assets under management and disbursement growth, lower credit cost and improving asset quality. It is expected to sustain the momentum in the coming quarters driven by improving traction in the high-margin personal and consumer loans amid falling interest rate cycle. Analysts have raised target prices by 6-9%.

In the nonbanking financing (NBFC) segment, ABCL has gradually increased the share of secured loans to nearly 46% in FY25 from 44% in FY22. A higher secured book reduces the lending risk and credit cost. The size of the secured loan book increased by 33% annually during the period to ₹57,992 crore. The NBFC division's total assets under management (AUM) rose by 32% annually to ₹1,26,351 crore between FY22 and FY24. It is expected to grow by over 25% for FY26 helped by rising traction in the company's digital platform.

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Given the company's cautious stance, the AUM of the personal and consumer (P&C) segment of the NBFC division fell by 10.9% year-on-year to ₹15,532 crore. Its share in the total AUM fell to 12% at the end of March 2025 from 19% two years ago. This impacted the NBFC yields, which fell by 60 basis points year-on-year to 13.1% in FY25 since P&C has a higher yield profile. In the coming quarters, the company expects to improve the share of P&C in total AUM to 20%, which should support the yields and net interest margin (NIM).

The asset management company (AMC) division of the company reported strong double-digit growth in revenue and profit before tax (PBT) in FY25. Also, the life and health insurance divisions reported double-digit premium growth. The company's market share in the individual first year life premium improved to 4.8% from 4.2% a year ago while the share of the health insurance expanded to 12.6% from 11.2% by similar comparison. "We see ABCAP logging steady growth with improving profitability across its key businesses in FY26," noted Emkay Global in a report.