Aditya Birla Capital Ltd

NSE:ABCAPITAL

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Aditya Birla Capital Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Vishakha Mulye, MD and CEO, Aditya Birla Capital Limited. Thank you, and over to you, ma'am.

[Vishakha Mulye, executive]

Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q1 of FY 2026. Joining me today are senior members of my team, Bala, Rakesh, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Ramesh and Deep. I will cover our strategy, financials and business performance, and Vijay will cover key financials and the business highlights, followed by a discussion on the performance of our key businesses by our business CEO.

The global macroeconomic environment continues to remain uncertain due to tariff-related negotiations and geopolitical tensions. In this global backdrop, the Indian economy presents a picture of strength, stability and opportunity. CPI inflation has softened significantly over the last 6 months, and the progress of monsoon showed encouraging signs for a strong kharif output. RBI has reduced repo rate by 50 basis points, has taken various measures to improve system liquidity and simulate growth.

At Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology. Our customer-centric approach enables us to provide simple and holistic financial solutions in a seamless way. Prudent risk management practices form the backdrop of our approach, which has enabled us to protect capital and deliver risk-calibrated and sustainable returns across businesses. We also continue to strengthen our omnichannel based distribution network.

Coming to the financial and business performance for the quarter: one, growth and profitability. During Q1 of FY '26, the consolidated profit after tax grew by 10% year-on-year to INR 835 crores, and the total consolidated revenues grew by 10% year-on-year to INR 11,333 crores. In our NBFC business, disbursement increased by 18% year-on-year to INR 15,851 crores in Q1 of the current year.

The NBFC portfolio grew by 22% year-on-year and 4% sequentially to about INR 1.31 trillion. We had mentioned in our previous quarter's earnings call that we have taken several proactive interventions over the last few quarters in unsecured loan segments, that is personal and consumer loans and business loans to SMEs, by tightening the underwriting norms, calibrating the sourcing and reducing the exposure to the smaller ticket size loan.

Now talking about personal and consumer loans. The environment seems to have settled. We have put in place several building blocks to pursue growth. We strengthen our internal sourcing channels and our products, underwriting sales and distribution teams and we calibrated our sourcing from digital partners. I'm happy to share that these steps have resulted in disbursement in the personal and consumer segments growing by 28% sequentially and 65% year-on-year to INR 3,947 crores in the current quarter. We will continue to monitor the macroeconomic conditions in this segment closely.

However, there are still uncertainties in the smaller ticket size unsecured MSME segment, and we continue with that cautious approach towards the growth and tighten our underwriting norms in this portfolio. Disbursement in the unsecured loans to SME grew by 1% year-on-year and decline of 8% sequentially. The secured SME and corporate and mid-market segments continue to show steady growth. The secured business loans to SMEs grew by 27% year-on-year and 4% sequentially. The corporate and mid-market portfolio grew by 28% year-on-year and 4% sequentially.

Our portfolio quality continues to remain stable. Gross stage 2 and 3 loans declined by 75 basis points year-on-year and 8 basis points sequentially to 3.7% as of June end. About 74% of our portfolio is secured and the provision coverage on stage 3 loans is 41.2% as of June end. Further, about 53% of our stage 3 loans in unsecured SME business, loan segment are covered by the central government's guarantee scheme.

Our credit cost in the current quarter is 1.3%, and we expect that it will remain in a similar range for FY '26. The profit after tax for the NBFC segment grew by 11% year-on-year and 6% sequentially to INR 689 crores in Q1 of FY '26. The ROA of the NBFC segment was 2.25%, which is at a similar level compared to the previous quarter.

Coming to our HFC business. We have created a full tax franchise focused on both prime and affordable segments. In Q1 of FY '26, we continue to deliver on the strong growth momentum and gained market share as seen in FY '25. Our disbursement grew by 76% year-on-year to more than INR 5,400 crores during the quarter. This has resulted in our HFC portfolio growing by 70% year-on-year and 11% sequentially to INR 34,605 crores.

The credit quality and HFC portfolio is among the best-in-class with the Stage 3 loans declining by 97 basis points year-on-year and 4 basis points sequentially to 0.62%. The net Stage 3 ratio was 0.3%. We are seeing benefits of the investments made in distribution, data, digital and emergent technologies over the past 2 years in the form of operating leverage kicking in.

The OpEx to assets improved by 32 basis points sequentially to 2.59% in the current quarter. The ROA of HFC business increased by 15 basis points to 1.59%, and ROE increased by 132 basis points to 12.27%.

Moving on to the Asset Management business. During Q1 of FY '26, our average AUM grew by 14% year-on-year and 6% sequentially and crossed INR 4 trillion. Equity AUM increased by 11% year-on-year and 7% sequentially. We have seen a strong momentum in the net sales and an improvement in the performance of our funds, that 80% to 85% of the AUM in the top 2 quartiles for the 6-month return. The profit after tax grew by 18% year-on-year to INR 277 crores in Q1 of FY '26.

Moving on to the insurance businesses. The growth in the life insurance business continues to remain strong. Our individual first year premium growth of 23% year-on-year in Q1 of FY '26 was significantly higher than the private industry growth of 8%. Our market share increased by about 60 basis points year-on-year to 5.1%.

We continue to be in the top quartile in the industry in terms of 13th and 61st month persistency. The high quality of business, along with a well-calibrated product mix and product construction and an increase on the rider attachments have led to 110 basis point year-on-year increase in a net VNB margin to 7.5% in the current quarter.

In the health insurance business, we continue to be the fastest-growing stand-alone health insurer. Our gross written premium grew by 30% year-on-year and driven by our differentiated health-first model and data-enabled approach towards customer acquisition. Excluding the impact of multiyear guidelines, the growth in GWP was 40%.

Our market share among the SAHIs has increased by around 200 basis points year-on-year to 14.5% in Q1 of FY '26. Our combined ratio has improved to 111% in Q1 of FY '26. Going forward, we will continue to grow our business, driven by our differentiated health-first model and again, market share.

Coming to our omnichannel architecture for distribution. Our omnichannel architecture allows customer to choose the channel of their choice and interact with us seamlessly across digital platform, branches and BRM, fostering the engagement and loyalty. Our B2C platform, ABCD, went live about a year ago. It offers a comprehensive portfolio of more than 25 products and services, such as payments, loans, insurance, investment, and help customers to fulfill their financial needs. ABCD has witnessed a robust response with about 6.4 million customer acquisitions till date.

A comprehensive B2B platform for MSME ecosystem, Udyog Plus, continues to scale up quite well. It has reached an AUM of INR 3,658 crores in 2 years of its launch. Udyog Plus now contributes about 30% of AUM of unsecured business loans. ABC ecosystem now contributes about 37% of the disbursement on Udyog Plus. We added 67 branches during the quarter, and we had 1,690 branches across all businesses as of June end.

We are focused on capturing white spaces and driving penetration into Tier 3 and Tier 4 towns and new customer segments. We now have over 1,000 co-located branches across more than one ABC 250 locations. Going forward, we will continue with that approach of driving quality and profitable growth.

Now I request Vijay to briefly cover the financial performance of our key subsidiaries for the quarter. Over to you, Vijay.

[Vijay Deshwal, executive]

Thank you, Vishakha, and good evening to all of you. Vishakha covered the consol highlights. I'll now cover the stand-alone financials and key business highlights for ABC.

During Q1 of FY '26, the stand-alone profit after tax grew by 3% year-on-year to INR 676 crores. On a stand-alone basis, the Tier 1 ratio is 15.62% and total capital adequacy ratio is 18.11%. Stand-alone return on equity adjusted for investment in subsidiaries and associates is 14.4% in Q1 of FY '26.

In our NBFC business, the portfolio grew by 22% year-on-year and 4% sequentially to about INR 1.31 trillion. NIM, including fee income, was 5.97% for the quarter. The credit quality of NBFC business segment continues to be healthy, with GS2 and GS3 loans improving by 8 basis points sequentially to 3.7% as of June end. ROA of the NBFC business segment was 2.25%.

Our housing finance business continues to see strong momentum. The loan portfolio grew by 70% year-on-year to INR 34,605 crores. During Q1 FY '26, we further infused growth equity capital amounting to INR 250 crores in our HFC subsidiary. This is done to support the growth momentum and maximizing our share of opportunities, which Vishakha mentioned earlier. We are seeing operating leverage kicking in, with OpEx to AUM improving by 32 basis points sequentially. The ROA of our HFC business increased by 15 basis points sequentially to 1.59% in Q1 of FY '26.

Coming to our asset management business, 14% year-on-year and 6% sequential to more than INR 4 trillion, of which equity AUM was approximately 44.7%. Alternate AUM, including real estate, grew 2.64x year-on-year to INR 39,784 crores in Q1 FY '26.

In the life insurance business, our first year premium increased by 23% year-on-year. The net VNB margin increased by 110 basis points to 7.5% and absolute net VNB increased by 27% year-on-year to INR 66 crores.

In our health insurance business, our unique and differentiated health-first model helped us to deliver a growth of 30% year-on-year in gross written premium during FY -- over FY '25. Excluding the impact of multiyear guidelines, the growth in GWP was 40%.

I now hand over to Rakesh, Executive Director and CEO, NBFC, to cover the NBFC business performance.

[Rakesh Singh, executive]

Thanks, Vijay, and good evening, everyone. The NBFC business grew by 4% quarter-on-quarter and 22% year-on-year, taking the AUM to INR 131,227 crores in quarter 1 FY '26. Profit delivery was strong, registering 6% sequential growth in quarter -- the quarterly PAT. In quarter 1, we disbursed INR 15,851 crores, which is 18% higher year-on-year. Of the total disbursement secured business loans to SME was 38%; personal and consumer segment was 25%; and corporate and mid-corporate was 30%.

In the personal and consumer loan segment, we have been on the calibration journey since last few quarters. We reached an inflection point last quarter where degrowth was arrested. I'm pleased to share that the disbursement in this segment expanded 65% year-on-year and 28% quarter-on-quarter, and the AUM grew by 6% sequentially to INR 16,446 crores.

This was supported by our disciplined approach to customer segment selection, a revamped underwriting policy and proprietary journey, designed to deliver superior customer experience and maintain end-to-end control throughout the lending life cycle from underwriting to collections.

While we believe the environment is attaining stability, we will continue to monitor the trends in macroeconomic environment. As Vishakha highlighted, there are still some uncertainties in the macro environment in the small ticket unsecured MSME segment, where we continue with our cautious approach towards the growth and tighten the underwriting norms for this portfolio.

Disbursement in unsecured loans to SMEs declined 8% sequentially, the AUM for secured business loans to SME grew 4% sequentially and 27% year-on-year. The growth has been largely driven by scaling direct sourcing efforts through our branch network.

Talking about credit quality, our GS2 and GS3 book declined by 8 basis points quarter-on-quarter and 75 basis points year-on-year to 3.70%. About 74% of our book is secured, and our Stage 3 book is well provided with a PCR of 41.2%. About 55% of our portfolio comprises of business loans to SMEs. Of this, 46% is secured, while the asset quality continues to be robust on the back of strong cash flows and collateral in the SME secured segment, and is amongst the best in the industry.

The unsecured SME business loans portfolio is about 9% of our overall NBFC portfolio. Of this, supply chain financing with our underlying trade is about 1.6% of the overall loan book, business loan is 6.5%, and small ticket unsecured loans is 1.3%. The credit quality of the supply chain and business loans continues to be resilient in terms of bounce rate, forward flows and delinquencies.

As we have highlighted in our previous calls, we have taken several proactive interventions in small ticket unsecured loan segment, that is personal and consumer loans and business loans to small and micro businesses over the last few quarters, which Vishakha also highlighted in the opening remarks. We have been preemptive in making these interventions and will continue to have a cautious approach in the small ticket unsecured business loan segment, which we would like to reiterate, is less than 1.5% of the total portfolio.

The gross 3 stage in the unsecured business loan segment was at 5.4% and the provision coverage is 35.7%. Further, about 53% of our Stage 3 in this segment is covered by central government's guarantee schemes. As a result, we believe Stage 3 loans in this segment are adequately provided for.

In the personal and consumer segment, we have largely run down our legacy portfolio sourced from digital partners. The credit quality indicators such as bounce rate, forward flow rates and delinquency rates in the portfolio are now stacking up well.

Stage 3 for personal loans and consumer loan segment has improved by 30 basis points sequentially and 70 basis points year-on-year to 2.5% as of June '25. The overall credit cost has reduced by 13 basis points year-on-year to 1.3%, and we believe that credit costs for FY '26 will be in the similar range.

Moving to profitability. Our interest -- net interest income has increased by 9% year-on-year and 4% sequentially to INR 1,859 crores. Net interest margin, including fees, was at 5.97% in the current quarter.

Our OpEx to AUM ratio improved 18 basis points sequentially and 23 basis points year-on-year to 1.74%, and this has largely been driven by operating leverage as we continue to sweat out our new branches opened over the last 12 to 18 months.

In quarter 1, we delivered profit after tax of INR 689 crores, registering a growth of 6% quarter-on-quarter and 11% year-on-year. The ROA for the quarter was at 2.25%.

Moving forward, we expect the mix of retail and MSME segments to improve, and we will continue to leverage our proprietary digital platforms, which is ABCD app and Udyog Plus, and invest in branches to further improve share of direct sourcing. As we scale up, strengthen our capabilities and invest in technology, our primary commitment remains to deliver sustainable returns in the upcoming quarters.

With this, now I will hand over to Pankaj for housing finance business.

[Pankaj Gadgil, executive]

Thank you, Rakesh, and good evening to everyone on the call. I'm pleased to share that Q1 FY '26 is yet again a strong quarter for us in terms of disbursements, book growth and asset quality. The key highlights for Q1 FY '26 are disbursement for the quarter stood at INR 5,404 crores, a 76% Y-o-Y increase versus INR 3,068 crores in Q1 of FY '25.

Now we are amongst top 3 private housing finance companies in terms of disbursements. The ABG ecosystem accounted for 15.4% of retail disbursements in Q1 FY '26. AUM as of June '25 reached INR 34,605 crores, reflecting robust growth of 70% Y-o-Y and 11% Q-o-Q. Profit before tax at INR 154 crores, up 82% Y-o-Y and 27% Q-o-Q. Stage 2 and 3 assets reduced to 1.34%, improving 129 basis points Y-o-Y and 5 basis points Q-o-Q. ROA stood at 1.59% and ROE at 12.27% for the quarter.

As communicated earlier, last year was a year of strategic investments for us, and we are now beginning to see the operating leverage play out. This is reflected in a 32 bps sequential improvement in operating expenses as a percentage of average loan book. Our cost-to-income ratio reduced by 530 basis points Q-o-Q and ROA improved by 15 basis points Q-o-Q. With this, we remain well on track to achieve an ROA of between 2% to 2.2% over the next 8 quarters in line with the guidance. For more detailed financials, please refer to Slide 30.

Let me now provide a quick update on a few aspects of our growth. During the quarter, AUM growth is at INR 3,553 crores versus INR 1,979 crores in Q1 FY '25. This growth has been well balanced across both the prime and affordable segments. Our portfolio remains well diversified, with retail home loans at 55%, LAP at 30% and CF at 15%. We expect to maintain the construction finance book within this range.

Our average retail ticket size stands at INR 30 lakhs, reflecting the granularity of the portfolio. Happy to share that as of today, we have crossed 1 lakh active retail customers. On asset quality, gross NPAs have improved significantly from 1.6% in June '24 to 0.62% in June 2025, which is a reduction of 97 basis points. Our Stage 3 provision coverage ratio stands at 52.4%. Proactive predelequency management measures powered by analytics and strengthened by digital collection infrastructure continues to support improvements in asset quality.

Next, moving to the liability side. The share of NCDs in our funding mix has increased from 27% in Q1 FY '25 to 45% in Q1 FY '26. Term loans correspondingly reduced from 37% in Q1 FY '25 to 31% in Q1 FY '26. Our cost of borrowings has improved by 11 basis points Q-o-Q and now stands at 7.69%. In line with reduction in cost of borrowings, we have passed on a 15 basis point rate cut to our retail customers effective from July 2025. On the digital front, we continued to see higher adoption of our digital platforms by employees, customers and channel partners. We're also seeing early traction in adoption of AI copilots for employees, resulting in higher productivity.

In summary, we have delivered strong, consistent performance across all business segments, supported by growth in AUM, improved asset quality, advancing digital capabilities and increased profitability.

Thank you for your attention. With that, I will now hand over to Bala, MD and CEO of our asset management company.

[A. Balasubramanian, executive]

Thank you, Pankaj. And as I present the AMC analyst call, ABSL AMC have witnessed a healthy business momentum in Q1 FY '26. The net sales for the first quarter exceeded total net sales of FY '25, driven by improved fund performance across categories and various ongoing initiatives to increase the engagement with the market participants. We have maintained our overall market share over the last 2 quarters. We achieved a significant milestone by crossing INR 4 lakh crores in mutual fund AUM during the quarter with our quarterly average AUM, reaching INR 4.03 lakh crores, a robust 14% year-on-year growth that demonstrates our unwavering commitment to sustain the growth.

Our overall assets under management, including alternate assets stood at INR 4.42 lakh crores, growing by 21% year-on-year. The quarterly equity average AUM was at INR 1.8 lakh crores, growing by 11% year-on-year. Our SAP contribution for June '25 was at 1,140 crores with the 38.6 lakh accounts. Our SAP AUM contributes around 40% of our total AUM, reflecting the stickiness of the assets.

The total number of investors full year for June 2025 stood at INR 1.06 crores, witnessing 14% year-on-year growth. On the equity investment front, we are witnessing a consistent improvement with strong returns delivered across multiple categories, while fixed income performance continues to be robust across the categories. We continue to focus on expanding our product offering to meet the investment needs of our diverse and growing investors need.

On the alternate side, we are continuously enhancing our PMS and AIF offering across equity and fixed income segments to serve HNIs and family offices, strong interest in our AIF product offering and the growth summit events that we have been doing across the country, giving good opportunity to scale up these opportunities.

On [indiscernible] ESIC mandate, we commenced managing the debt portfolio and its AUM stood at INR 24,260 crores for the quarter ended June 30, 2025. Consequently, our PMS and AIF assets witnessed an impressive 8x growth rising from INR 3,360 crores in Q1 FY '25 to INR 28,657 crores in Q1 FY '26. As we present, we have completed the fast closure of our ABSL Structure Opportunities Fund Series 2 fixed income credit and also preparing to launch ABSL India Equity Innovation Fund, building a comprehensive product portfolio that addresses evolving client needs and accelerates our PMS and AIF business growth.

Our offshore assets stood at INR 10,588 crores in Q1 FY '26. Our [indiscernible] platform, we have a fundraising underway for the India ESG Engagement Fund, ABSL Flexi Cap Fund and the ABSL Global Bluechip Fund. On the passive front, we have leased at INR 36,400 crores in AUM. As of June 2025, 22% year-on-year growth, with the 12.3 lakh folios across 22 distinct products, we continue building scale through innovative ETF, index funds and fund of fund launches while driving acquisition via digital platform and distributors.

Moving on to the financials. Q1 FY '26 revenue from operations is at INR 447 crores, up 16% year-on-year. Q1 FY '26 operating profit is at INR 254 crores, up 21% year-on-year. Q1 FY '26 profit before tax is at INR 372 crores, up 22% year-on-year and Q1 FY '26 profit after tax was INR 277 crores, up 18% year-on-year.

With this, I'll hand it over to Kamlesh Rao, MD and CEO of Aditya Birla Life Insurance.

[Kamlesh Rao, executive]

Thank you, Bala, and good evening to all of you. The individual new business premium for the life insurance industry grew by 5% and for the private players by 8%. ABSLI clocked the highest individual premium growth of 23.4% in Q1 of financial year '26, among the top 10 players, and expanded market share by about 60 basis points.

Growth for the first quarter was across channels with the proprietary channel showing a growth of 9%, while the partnership business grew at 34%, with robust business growth across all our existing partners as well as the new partnerships in Bank of Maharashtra, IDFC Bank and Axis Bank, where we have increased our mind share in the current quarter.

Agency business had a slow start in April and then gradually caught up with double-digit growth in the next 2 months. Our growth was slightly better as compared to the agency performance for the entire industry for Q1, which remained largely flat during this period.

During the quarter, we have added 17 branches, continuing our focus on expanding the proprietary business. On the partnership side, we now have 12 Banca tie-ups and the most recent one, Equitas Small Finance Bank started business with us from June '25 onwards.

In the product mix of the individual business, traditional business, including protection contributed 69% and ULIP was 31%. We launched 2 new products during the quarter, one in the participating portfolio called Akshaya Par Plan, and second, in the protection segment named the Super Term Plan.

Akshaya Par Plan contributed to 20% of our mix in the individual business portfolio, while the Super Term Plan, which was launched in June took our protection mix to 4%. We have bundled all desirable features in one term plan, including health management services, and have launched our digital campaign for this product. We will continue recalibrating our product mix in line with customer demand, and our extensive product suite will ensure that the demand of the customers are well catered to.

In the Group Life Assurance segment, whilst both the private and the overall industry saw a moderate growth of 3%, ABSLI reported a 51% decline. This was largely strategic for the traditional fund business, wherein we have decided to slow down the momentum on account of the reducing interest rate scenario as large acquisitions now would bring down the YTM of this portfolio. The group fund business across the industry remained largely flat during this period.

In the group business, we continue to be at ranked #2 in the ULIP AUM in the industry with an AUM size of INR 13,500 plus crores. Credit Life business also had a growth of 20%, with attachment ratios going up in all our counters. On the group term life business, we continue remaining focused on expanding the margins and have done well in this quarter. Group AUM contributes to 27% of the overall AUM at ABSLI.

Renewal premium grew by 18%, with growth across Individual and Group segment. Our total premium for the quarter stands at INR 3,594 crores, down 10% from last year, again, on account of lower group traditional fund business as planned and mentioned earlier.

Our digital collections now account for 81% of our renewal premium. We continue to work on customer lifetime value, which is reflected in our upsell ratio of 30%. On quality parameters, our overall customer NPS now stands at 62 compared to 55 last year same time. Whilst the 13th month and 61st month cohorts have seen a marginal dip, all other cohorts of persistency of 25th, 37th and 49th have gone up. We continue being in the top tier in terms of persistency for the quarter.

Our OpEx-to-premium ratio stands at 27.6%, which is higher than last year, again, due to the lower group traditional fund business as planned and mentioned earlier. ABSLI crossed a total AUM of INR 1 lakh crore in April '25 and now stands at INR 103,817 crores with a Y-o-Y growth of 14%, 25% of this AUM is in equity and the balance 75% in debt. We continue to outperform in our investment performance with respect to benchmark across all 3 categories of equity, debt or even balanced funds, either from a 1-year or a 5-year perspective.

Our digital adoption across various areas is demonstrated in the Investor deck on Slide 46. 100% of new business customers are onboarded digitally. 83% of all our services are now available digitally. 67% of our services are STP and our customer self-service ratio now stands at 93%. As we move ahead, we will continue to be best-in-class with our digital infrastructure across perspecting and onboarding in sales, underwriting and customer service as well as claims.

During the quarter, we raised INR 200 crores via sub debt to fund our business growth. Our solvency continues to remain healthy at 192%. Our net margins are now at 7.5%, 109 basis points higher than last year's same time. We observed margin expansion due to a controlled unit mix, value accretive growth in our partnership business as well as increased rider attachment. We maintain our guidance to expand net VNB margins through this year to achieve an 18% plus for the year. We also maintain our guidance to grow individual FYP at CAGR between 20% and 25% for the next 3 years. And in absolute numbers, double the value of our net VNB in the same time period.

With this, I'll hand over to Mayank, MD and CEO of our health insurance.

[Mayank Bathwal, executive]

Thank you , Kamlesh. I will now share an overview of the performance of our health insurance business. We had a very strong start to the financial year, '25-'26 in the first quarter, maintaining our track record of consistently outpacing the market growth by sustaining the momentum on group profitability.

In Q1 FY '26, without the multiyear accounting norms, we achieved a gross premium of INR 1,461 crores, delivering a strong 40% Y-o-Y growth. On a 1/n basis, our gross premium stood at INR 1,357 crores, with a 30% growth. Thus our market share among SAHI companies has increased from 12.5% to 14.5% in the accounting basis, an increase of 200 basis points.

Including the multiyear accounting -- impact of multiyear accounting norms, we -- on an accounting basis, we achieved the highest market accretion, as shown in Slide 53, amongst all SAHI players in Q1 FY '26, highlighting our underlying growth momentum.

We registered a strong growth momentum across both retail and group businesses. The retail business registered a growth of 39% in the first quarter. The growth in retail franchise is driven across all our retail channels. The proprietary channel with an adviser count of over 1.5 lakh agents experienced a 26% Y-o-Y growth. All our major banks and digital alliance partners have also experienced strong growth in excess of 50%. To further expand our PSC distribution, we have now successfully onboarded Bank of India.

Our corporate business delivered a strong 41% growth in Q1, driven by our focus and disciplined strategy in this segment. At times, we're asked on a relatively higher proportion of group business, which I'd like to reiterate that our strategic choices in this segment are to create a very sustainable group business. We are as -- we understand amongst the very few players to have a profitable group business in the industry. We do this by playing a very specific corporate segments like mid-corporate and SME and also specific industries more so in the services sector. As we now take our differentiated health-first insurance model to corporates also, we will only further improve our competitive strength here.

We are also pleased to report that our net loss for the first quarter stood at INR 36 crores as per new accounting norm. As for the old norms, the net loss stood at INR 24 crores, which is 50% lower in the same period loss of INR 51 crores last year. Our combined ratio for the first quarter as per old accounting regulation is at 107% versus 112% on a comparable basis. These improvements underscore our continued focus on unit economics and that overall profitability ahead of market as we demonstrated last year by one of the fastest breakeven given the scale we are operating on.

We strongly believe our robust growth in superior unit economics are driven by our digitally enabled and differentiated health-first business model with our consumers experience for our flagship product Activ One. This model gives us a selection advantage with larger share of the more health conscious customers. And then based on a very hyper-personalized but scale health engagement, access to a deeper understanding of the health profile of our in-force base.

In Q1 FY '26, 9.1% of the eligible customers earn good health-based incentives, up from 6.6% last year, reflecting deeper engagement with our wellness ecosystem. These customers continue to exhibit 4% lower loss ratios and 10% better persistency. These are shown in Slides 56 and 57.

Similarly, when we invest in managing our customers with high health risk, their loss ratios improved by more than 4.9%. Overall, this has kept our retail loss ratio well in control. In our bid to expand the scale of impact of the model we continue to innovate, for example, in our recent collaboration with a leading wearable brand in India, we now have customers who get access to wearables as part of our product offering, and it is further helping us getting access to a larger pool of customers and data. The hyper-personalized scale health engagement with our customers is mainly enabled by our industry-leading customer app, Activ Health. And this now provides an opportunity for nonpolicyholders also to experience a comprehensive health and wellness ecosystem.

Given our large data focus, we have now -- we have been investing consistently in our data and analytics play to consistently create efficiencies across the entire business life cycle. We have given some examples of the key use cases across sales, customer engagement and claims in Slide 62. Looking ahead, we remain optimistic about the long-term growth prospects of the health insurance sector, which continues to have large tailwinds. A differentiated business model will help us growing well ahead of the market. As we have guided earlier, we will continue to strive for 100% core as the old accounting solutions in the current year itself.

Thank you. And I now hand it back to Vishakha for closing remarks.

[Vishakha Mulye, executive]

Thank you, Mayank. This concludes our remarks on our Q1 FY '26 performance, and we will be happy to take any questions.

[Operator]

[Operator Instructions] The first question is from the line of Mr. Chintan Shah from ICICI Securities.

[Chintan Shah, analyst]

Yes. Firstly, congratulations on good set of numbers. So yes, firstly on this unsecured MSME piece, where we have told that there are some uncertainties in the portfolio and we are seeing some kind of stress and adopting a cautious approach. So just wanted to understand, what is the customer profile here? Typically, how much would be the unsecured self-employed mix in the total pool?

And secondly, on the guarantee scheme, which we are highlighting, 53% of the portfolio is covered on the guarantee. So how does this guarantee actually work? And how much is -- what is the typical time line to get the money? And what is the final cost, which we have to bear in case of this guarantee? Yes, that's the first question.

[Rakesh Singh, executive]

So your first question on the unsecured SME. If you look at our total book is INR 12,000 crores. Out of that, 1.6% is supply chain, which is short term on -- with our underlying treat, our invoices, so very low risk. Then we have 6.5%, which is business loans, which where the portfolio performance is very, very good in terms of bounce rate of forward flows or delinquencies are looking pretty good.

The small ticket unsecured loan, we call it STUL, that is around 1.3% of our overall loan book. We had started taking actions from 2, 3 quarters prior, and we have tightened our underwriting and underwriting, collections, score cards. So all of that, we took a proactive action on this portfolio. So that's the only portfolio where we are slightly cautious at this point in time.

In terms of your second question, how much is the guarantee portfolio? So if you look at the Stage 3 portfolio in unsecured business, close to 53% of the Stage 3 is guaranteed by the CGTSME or the government guarantees, which we spoke about. How much of that gets covered? 75% of the principal gets covered by the guarantee. And time line, it takes between 12 to 18 months in terms of getting the refund and all at times. And I think our track record has been pretty good on this, and we have been getting the refund and the claims from the CGTSME.

[Chintan Shah, analyst]

Sure. And so on this portfolio, when can we see normalization of disbursement? So where do you see the kind of picking out of normalcy kicking in for this portfolio?

[Rakesh Singh, executive]

So if you look at our business loans, we will continue to grow our business loan portfolio in that segment. That's holding up very well, and it's performing. And that's quite our old portfolio. We have been doing that business for the last 8 years or so. That's holding up quite well from bounce rates, forward flows and delinquency. So we will continue to grow that business loan portfolio. We will continue to grow the short term unsecured business. What we are tightening is the small ticket unsecured loan, and we will continue to watch that and see how it really -- how it performs.

[Chintan Shah, analyst]

Sure. So the small ticket lap, how much of the total unsecured MSME?

[Rakesh Singh, executive]

So that's close to INR 1,700-odd crores, which is there on the total portfolio. And it's not that the performance is -- we are watching it. We have taken all the corrective actions in terms of tightening and we have slowed down the sourcing in that segment.

[Chintan Shah, analyst]

So basically, the risk is only on the INR 1,700 crores portfolio where we envisage some uncertainties or where we are cautious, right?

[Rakesh Singh, executive]

Yes. From a sourcing point of view, yes, in terms of portfolio, this is a rich portfolio, this would have been underwritten 12, 18 months back or 24 months back. So yes, we are watching it very closely.

[Chintan Shah, analyst]

Yes. And the tenure would be 3 years typically, right?

[Rakesh Singh, executive]

Yes.

[Chintan Shah, analyst]

Sure. And so just now on the housing part, just one last question. Actually, exceptional performance on the housing portfolio, and the growth has been quite robust. But now given the repo rate cut and probably some players have also highlighted, there are higher instances of BT out, particularly in the prime portfolio. So how are we seeing the competition panning out?

And on the -- I think the more the growth for us is also led by the developer pool rather than the prime pool. So yes, any thoughts that could growth slow down over the remaining part of the year? And what could be -- what growth kind of trajectory could we be looking at for housing portfolio?

[Vijay Deshwal, executive]

Chintan, for us, the growth is coming in all the 3 segments, affordable, prime and developer. Yes, you're right, with the repo rates going down, we saw naturally some elevation in the foreclosures that we saw in the prime segment. And those ratios overall on the prime are in the range of about 14% of the opening book.

But since we are a full stack player, the balancing act also happens in the affordable and informal. Therefore, we don't see a very significant change as far as the foreclosures are concerned, also BT outs are concerned. In fact, till the BT in that we track versus BT out ratio, the ratio remains quite similar to where we were in the month of quarter 3.

So come in to your next question, which is how do you see growth panning out? I think what we have been articulating earlier is in the last 8 quarters, I think what we have done is we've built capacity. And with the advent of 6 digital platforms that we have across the customer life cycle, we are seeing, in combination of the capacity that we have built, productivity is significantly coming up.

And as you would have noticed, 15.5% of our business that we do disbursements that are coming in are also from the ABCL and ABG ecosystem. So I think we are very well placed to take advantage here. Clearly, the market share gain is what we are getting. So riding on the 14%, 15% growth, which is there in the industry. And with the capacity and productivity moving up for us, combined with the ABC ecosystem and with the right eye on portfolio quality, I think we can see the growth momentum remaining quite consistent for us.

[Operator]

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

[Avinash Singh, analyst]

Yes. A few questions. The first one is on NIM. I mean, in the lending business, the NIM still falling. So now based on what is happening sort of on the -- your borrowing side and how you kind of business mix is changing, can you provide some kind of a guidance that if this NIM has bottomed out and what sort of trajectory so do we expect, I mean, as we exit this financial year.

And in that context, one question is that now we have kind of -- you have tried to increase or rather that your disbursement in consumer finance and PL bottomed out, you are starting to increase, but there remains some bit of a debate among various lenders that the consumer leverage is still higher. So how do you see, I mean, our path going forward in this consumer NPL?

And the second question is your current capital adequacy is, I mean, near 18%, so Tier 1 will be slightly lower. At -- what kind of a growth you are in envisaging? And at what juncture you will be looking to arrange capital?

[Rakesh Singh, executive]

So thanks, Avinash. Your first question was on the NIM. So if you look at NIM is an outcome of the product mix which we have. The mix of higher-yielding unsecured loan, that is personal and consumer loans and business loans to SME, was at 22% as of June '25. And this was at a similar level of March '25.

The personal and consumer business, as we just mentioned, has grown well in terms of in quarter 1. And the consumer segment grew if you look at 28% sequentially, and the portfolio has grown by 6%. So we expect that as this portfolio grows and our unsecured business, which is business loans grows, our margins should start improving. So in the next few quarters, you will see margins improving from here on.

Your second question was on personal loans and consumer loans and leverage at a client level is still high. So I think Avinash, we were ahead of the curve in terms of tightening, recognizing that there is a leverage, which is going up. We build the leverage in our underwriting and all our metrics in terms of tracking and unsecured inquiries. All of that, we build it over the last 4, 5 quarters, and we track customers leverage very, very closely.

And in this segment, if you look at our -- we have largely run down our legacy portfolio source from the digital partner. We have tightened our underwriting norms, as I mentioned, and reduced the exposure to small ticket size segment in this portfolio.

Given that the environment in this segment is stabilizing, and we are seeing that the credit quality indicators, which I had mentioned in my opening remarks, that bounce rate, forward flows and delinquency rates are stacking up quite well. We track in terms of FEMI, which is EMI default, second, third. So we really track this portfolio very, very closely, and we will continue to watch this portfolio as we grow our capital.

[Vijay Deshwal, executive]

Avinash, Vijay here. On the capital question, yes, our Tier 1 ratio is 15.62% and total [indiscernible] is at about 18.11%. During the quarter, we infused INR 250 crores in our HFC subsidiary, which is the only company which innovates, needs capital infusion because the asset management company returns dividend. And in our insurance companies, we have JV partners and if at all, there will be very minimal capital requirement. So I would say that looking at the overall capital plan for us, we are sufficiently funded for our growth requirements for the next 9 to 12 months, and we look at any capital situation post that.

[Operator]

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

[Abhijit Tibrewal, analyst]

Congratulations on a good quarter. Sir, the first thing is a clarification where you said that there are 3 products that we are doing in unsecured MSME, which is your supply chain finance, then we do business loans and then we called out small ticket unsecured loans. So I'm just trying to understand, it is only in this small ticket unsecured loans, where we are seeing some stress building up. Otherwise, in business loans that we do in unsecured MSME, we are not seeing any stress building up is it, which you called out is about 6.5% of the portfolio.

[Vijay Deshwal, executive]

Yes, Abhijit, you are right. We are not seeing any stress in any other portfolio. And then this portfolio also, what Rakesh mentioned, that whatever -- it's like anticipated. There is nothing which is out of the way and the portfolio is well within our control, adequately provided. So we don't see any undue worry here, it's in control. We are just -- we are being cautious.

[Abhijit Tibrewal, analyst]

Got it. And then, I mean, I think on one of the slides and also in your opening remarks, you spelled out that close to 52% of your Stage 3 in unsecured MSMEs covered in the government schemes. So at the overall portfolio level, what is covered under these government schemes?

[Vijay Deshwal, executive]

It's similar, upwards of 50% is covered on the overall portfolio on the business and STUL.

[Abhijit Tibrewal, analyst]

Got it. And then one last question. That is that if I look at your secured businesses, close to 60% of your secured business has LAP. So I was just trying to understand what are we seeing in the LAP portfolio today? Because given how things have moved, right, in the last 12, 18 months from credit cards to PL to MFI to micro LAP to unsecured MSME. Just trying to understand, is there anything that you are seeing today in the LAP segment? And sir, why I ask this is LAP as a segment over the last 12, 18 months has seen very, very strong growth across the industry. So that is one.

And the related question, in our HFC business, are we doing micro LAP or in the NBFC, are we doing micro LAP? And if yes, how big is that portfolio, micro LAP?

[Vijay Deshwal, executive]

So Abhijit, first, your question on LAP, if you look at -- touch wood, I think the performance is very, very strong, both in terms of overall performance. And this is our oldest portfolio. This is [Technical Difficulty] portfolio. So very vintage portfolio and this portfolio has seen difficult cycles, whether it was demonetization or the NBFC crisis or COVID, and it has stood the test of the time and is very, very strong in terms of the performance.

Even if you see the time period which you just mentioned, both our Stage 2 and Stage 3 has come down significantly. So very, very good. This is backed by the cash flows of the customer and the collaterals of the customer. So very good performance and has been stacking up very, very well.

[Unknown Executive]

So on the HFC question, LAP, as I mentioned, the ticket size for LAP is about INR 54 lakhs. So it is a very small proportion of that is the micro LAP. And if you see the slide, which is there, which depicts the composition of LAP that we've got, you would see that in the affordable segment, LAP is about 9.6%. So very small subset of the 9.6% will be micro LAP.

And to also speak on how we are seeing this, of course, the growth has been strong, but we monitor the portfolio both on onboarding. In terms of the [indiscernible], we monitor the portfolio. In fact, we have created our own proprietary surprise score, which ensures that right quality of customers are voted in. And then, of course, back that up with a very strong offers analysis, not only for our own portfolio, also look at what portfolio we have created as to how the customers are behaving outside. And I also spoke about the pre-delinquency management and also the utilization also on post-delinquency management, which is overall helping in managing the portfolio. So we are not seeing any different trends in the LAP portfolio of ours in the housing segment.

[Abhijit Tibrewal, analyst]

Got it. And sir, then if I can just squeeze in one last question. If you could also share what is the write-offs that we did in the quarter in NBFC and HFC? And if you could just answer that, and I had a follow-up question on this.

[Unknown Executive]

We do not disclose a write-off as of now. So I think we will stay with that.

[Abhijit Tibrewal, analyst]

Sure. And then lastly, I mean, how much have we recovered in CGTSME scheme so far? In other words, how much have we claimed so far? And how much has been the recovery?

[Unknown Executive]

I think this is an ongoing -- in terms of depending on every quarter, whatever claim which we put up, it goes through its own verification and everything and then the -- so I think we see it over the period of full year and full cycle. We can share that later with you some time.

[Abhijit Tibrewal, analyst]

Sure. And like you suggested, it typically takes between 12 to 18 months, right?

[Unknown Executive]

Yes. Yes.

[Operator]

The next question is from the line of Kushan Parikh from Morgan Stanley.

[Kushan Parikh, analyst]

Just a data question. If you could share the slippages during the quarter for the NBFC as well as the total Stage 1, 2 and 3 ECL? That would be helpful. Yes.

[Unknown Executive]

Stage 1, 2 and 3 segment-wise, we provide that, and we have provided this time as well.

[Kushan Parikh, analyst]

Sorry, I'm talking about the provisioning against Stage 1, 2 and 3.

[Unknown Executive]

That we do not -- as of now, we don't publish that. But I think what we have given, for sure is the stage wise, whatever are the Stage 1, Stage 2, Stage 3 across various segments and also the provision cover that we carry at those -- for those segments.

[Operator]

The next question is from the line of Mr. Punit Bahlani from Macquarie.

[Punit Bahlani, analyst]

Yes. Just firstly, on the NBFC bit. The unsecured business, the NPAs have increased and the PCR at 35% appears to be low. I know like over 50% is government guaranteed, but my understanding is it might require some -- yes, my understanding is it would require some level of provisioning, right, even if it's government guaranteed. So 35% for -- even the -- for the unsecured appears to be a bit low.

And over time, like if I look at FY '24, like it was at 2.9%, the NPAs, it has gone up to 5.4% now. And so what is the tenor of receiving these claims so that when we can remove this from our NPA pool as in does it take 12 to 18 months or more than that, if you could give any comment on that?

And thirdly on the housing finance bit, there has been a big improvement in OpEx this quarter. Is it primarily driven by operating leverage? Or is there any component that is like we have saved on some OpEx component? If anything, you could highlight on that. That's all.

[Unknown Executive]

Punit, your first question was on the provision coverage on the unsecured business. As I mentioned, 75% of the principal is guaranteed, so we believe that 35.7% or 36% PCR is quite sufficient in this. But at some point in time, we believe that the claim is delayed or claim is not coming in. So we will have to evaluate, we will do that. But at this point in time, because 75% of the principal is guaranteed, I think this provision coverage is sufficient.

[Punit Bahlani, analyst]

So how much time does it take for the claim to come in?

[Unknown Executive]

As I mentioned, it's anywhere between 12 to 18 months.

[Punit Bahlani, analyst]

Okay. Got it.

[Unknown Executive]

On the question on housing finance, like you rightly said, if you look at the operating expenditure for quarter 4 and quarter 1, in absolute amounts, it is INR 194 crores and INR 190 crores. So INR 4 crores additional. And as you will know that in the last year, when the book grew from [indiscernible].

The expenditure for generating the business, most of it gets booked in the year in which the disbursements happen. And as you will see, the proportion of new disbursements to the overall book as because the book is also increasing, as the proportion keeps reducing, you will start seeing operating leverage kicking in even more.

That is the reason why earlier as well when we've been speaking about how the ROAs will stack up, we've been speaking about this 2.91%, which was the earlier OpEx on average loan book in quarter 4, how that we foresee will come down to 1.6% in the next 8 quarters which is on 30 basis points of reduction. And we've already seen a shift in 1 quarter itself to about 31 -- 32 basis points. And that is how it will stack up.

[Operator]

Due to time constraints, we will take this as the last question. I now hand over the conference to Ms. Vishakha for closing comments.

[Vishakha Mulye, executive]

Thank you very much for all to join the call. And if there are any other questions, all of us are available, please do reach out to us. Thank you so much.

[Operator]

Thank you so much, maa'm. On behalf of Aditya Birla Capital Limited, that concludes this conference. Thank you so much for joining us, and you may now disconnect your lines.