Aditya Birla Capital (ABCL) delivered a b performance in the fourth quarter of fiscal year 2024-25, resulting in a 5% surge in its share price. The company reported a consolidated net profit of ₹865 crore, a 22% increase compared to the previous quarter, while revenue saw a 13% rise.
The company has increased the share of secured loans in its NBFC portfolio to 46%, thereby reducing credit risk. Furthermore, increasing demand for personal and consumer loans with high margins, coupled with a falling interest rate environment, further strengthened the company's profitability.
Aditya Birla Capital (ABCL) shares have recently witnessed significant growth, driven by the company's robust Q4FY25 financial results. The company announced improvements in asset quality, a reduction in credit costs, and double-digit growth in disbursements and assets under management (AUM). These positive indicators have prompted analysts to raise their target price for the company's shares by 6-9%, reflecting their confidence in ABCL's growth potential.
The company's asset management business also showed positive performance, with a 15% year-on-year growth in average AUM for mutual funds. Again, increasing demand for personal and consumer loans with high margins, and a falling interest rate environment, further bolstered the company's profitability.
Increased Scope of Secured Loans in the NBFC Sector
ABCL's Non-Banking Financial Company (NBFC) segment increased the proportion of secured loans from 44% to 46% between FY22 and FY25. The secured loan book registered a remarkable 33% growth rate, reaching ₹57,992 crore, not only reducing lending risk but also keeping credit costs under control.
Furthermore, the NBFC division's total AUM surpassed ₹1,26,351 crore, with a 32% year-on-year growth. Experts anticipate this growth rate to exceed 25% in FY26, particularly due to a b foothold in digital platforms, adding a new dimension to the sector's growth.
Current Decline in Personal and Consumer Loan Segment, but Future Prospects Remain Strong
In FY25, the AUM of the personal and consumer loan segment decreased by 10.9% to ₹15,532 crore. This resulted in a reduction of this segment's overall AUM share from 19% two years ago to 12% currently. This decrease also impacted the NBFC's yield, which fell by 60 basis points to 13.1%.
Nevertheless, the company believes this segment will make a b comeback. In the coming years, the contribution of personal and consumer loans to the total AUM is expected to reach 20%, leading to an improvement in yield and net interest margin (NIM).
Asset Management Division Showed Strength in FY25, Significant Growth in Revenue and Profit
The company's asset management division registered b double-digit growth in both revenue and profit before tax in FY25. This success of the AMC business further strengthens ABCL's profitability.
Strength in the Insurance Sector, Life and Health Insurance Showed Significant Growth
In FY25, the company's life and health insurance branches strengthened their market position, exhibiting double-digit premium growth. ABCL's market share in individual first-year life premiums increased from 4.2% to 4.8%, while its share in health insurance rose from 11.2% to 12.6%.
New growth opportunities in FY26, particularly benefiting from P&C loans.
According to a recent MK Global report, ABCL is expected to see continued growth and improved profitability across all its major businesses in FY26. Despite the falling interest rate cycle, the company is likely to experience b traction from high-margin property and casualty (P&C) loans.
