Aug 8, 2020 (Thomson StreetEvents) — Edited Transcript of Aditya Birla Capital Ltd earnings conference call or presentation Friday, August 7, 2020 at 12:00:00pm GMT

* A. Balasubramanian

Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd

Aditya Birla Capital Limited – CEO of Aditya Birla Health Insurance Company Limited

Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst

Ladies and gentlemen, good day, and welcome to the Q1 FY ’21 Earnings Conference Call of Aditya Birla Capital Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Ajay Srinivasan, Chief Executive, Aditya Birla Capital. Thank you, and over to you, sir.

Thank you, and good evening, everyone. Thank you for joining this call on our Q1 results, a quarter where most of us spent our time indoors during lockdown. I’m joined today by my senior colleagues and today together, we’ll take you through our presentation, which I trust you either have with you in as a hard copy or in the screen in front of you.

I’d like to start with Slide #3, which has the key highlights for Q1. I’d like to start first by talking about the overall results. And I think as the results would show you, we’ve displayed resilience across businesses despite, as I said, the quarter being a quarter where all of us were working under lockdown.

In a quarter such as this, our consolidated PAT at the Aditya Birla Capital level grew 1.4x quarter-on-quarter to just under INR 200 crores, at INR 198 crores.

We were not only one of the first to move to work-from-home but we were also one of the first entities in our view to restart our businesses. And the 91% of our overall ABC branches have been operational with very strict health measures and protocols in place to ensure both employee and customer safety.

Moving on to the businesses. Our Life Insurance business had a very good Q1. We grew 5% year-on-year, and that’s good given that — given the environment we’re working in and given the fact that the industry itself degrew by 23% in the same quarter. So our growth was significantly ahead of industry growth in Q1.

Our Health Insurance continued to grow extremely strongly. We grew in Q1 by 72% year-on-year to just under INR 250 crores of premium with a retail mix of 73%. And we now have the distinction of being the fastest-growing health insurance company in the sector.

Our asset management company monthly AUM has rebounded. And this was aided by our focus on retail, focus on SIP and our focus on the B-30 markets, as you will see subsequently.

We have maintained our core operating profit in our lending businesses, the NBFC and housing finance company despite slower disbursements due to the lockdown situation that we operated under.

Our NBFC PBT, excluding the COVID provision that we made, grew by 42% quarter-on-quarter, aided by a reduction in our cost-to-income ratio of about 220 basis points and lower credit costs.

Our housing finance company NIM expanded quarter on quarter. And our PAT excluding COVID provisions grew by 40% year-on-year.

The other financial services businesses, so this is a portfolio of other businesses that we’ve had over a period of time. That profit before tax grew by 64% year-on-year, so clearly, these businesses are now contributing significantly to the overall profitability of Aditya Birla Capital.

And lastly, I think we want to spend some time talking about technology because the deployment of technology across the platform has really what has helped us operate in the situation, improve customer experience and improve efficiency of the platform across the board.

Moving on to Slide #4 to the results of Q1, I want to call your attention to 3 points on this slide. The first is that in spite of being under lockdown, our revenue has grown by 9% Q1 ’21 over Q1 ’20. So in spite of being in a situation where we are working from home, we were still able to grow our revenue. Our PAT, as I just mentioned earlier, is 1.4x of what it was in the previous quarter, which is Q4 of FY ’20. The third area I want to draw your attention to on this slide is regarding costs. OpEx optimization has been a key area of focus for us in our plans for the year. It’s also something that I spoke about in the last investor call. And our aggregate nonvolume-linked cost excluding Aditya Birla has — which is in the clearly a different mode of growth, our Q1 OpEx was down by 10% Q-on-Q. So clearly, the efforts to tighten costs are already showing even in the Q1 results.

Our Q1 stand-alone cost is down by INR 42 crores versus Q1 of ’20, driven by lower brand and marketing expenses and the elimination of interest cost, which we had as a result of raising equity in FY ’20. So we are on target to achieve an overall reduction of 8% over an annualized FY ’20 base, something that I referred to in the previous investor call.

Moving on to Slide 5. I want to just talk a little bit about our technology and our push to digital and the impact that it had. Our push to digital and our reliance on technology to improve our customer and distributor experience and overall efficiency has been something that’s been ongoing, but I think it’s one of the key reasons for our resilience in Q1 during the lockdown.

So I want to walk you through our approach to technology and some of the outcomes that we’ve seen. If actually we look at technologies in leveraging 5 key customer-facing areas, mainly prepurchase, onboarding, the renewal and collections journey, customer service and in providing an integrated experience across all our businesses at the Aditya Birla Capital level.

This slide is a very busy slide, and you see a lot of data on it because I think we’ve had reasonable success across each of these measures that I spoke about.

But I just want to stop and run in through a video that will give you a sense of the journey and some of the things that we have done in the area of digital and technology.

(presentation)

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [3]

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Let me now handover to Rakesh Singh, our — leader for our Lending businesses, our NBFC and Housing Finance, and Rakesh will walk you through the highlights for these 2 businesses.

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Rakesh Kumar Singh, Aditya Birla Capital Limited – MD & CEO of Aditya Birla Finance Limited [4]

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Thank you, Ajay.

Moving to Slide 7, I will give you a performance overview of NBFC business. As the country moved out of the lockdown, 100% of our branches became operational. In quarter 1, we did 37% of business of the previous quarter of FY ’20. So almost 37% which we did. If you look at 47% of quarter 4 numbers we did it in quarter 1. July was even more encouraging, 70% of the business which we did in quarter 1 we did in July. Important to point out that 66% of this business was retail and SME. We continue to leverage the government schemes, which is the emergency credit facility provided and SIDBI CGTSME (sic) [CGTMSE] for our MSME customer segment.

We have been pushing digital during the lockdown and 75% of the customers we onboarded in quarter 1 through digitally.

We have been — for the last couple of years, we have been focusing on rebalancing portfolio towards target segments. Our retail portfolio has been growing well. It has grown 17% year-on-year.

With a focus on cost rationalization and reduction, we reduced OpEx by 11% quarter-on-quarter in this quarter 1.

In terms of improvement in PCR, on our Stage 3, we improved our PCR by 5.3% to 38.6%. Collections efficiency in loan book which is under moratorium — which is not under moratorium saw a similar level of collections efficiency which we saw in quarter 1 of last year.

Our core operating profit was quite stable. PBT for the quarter 1, excluding COVID provision, grew 42% quarter-on-quarter.

Now moving to the next slide, Slide 8. If you look at — and I mentioned this, July disbursement has been quite encouraging for us. And we look forward as we go and as the lockdown really eases out, the business will improve further.

On the right-hand side, if we see majority of the growth last year had come from the retail segment. At the same time, we have been trying to rightsize our corporate and institutional business, and I just want to highlight we have reduced our structured finance business by 46% year-on-year.

Looking at the environment, our construction finance book is also down 12% year-on-year.

Our loan against security, looking at the volatility, we reduced it by 57% year-on-year.

Moving to the next slide, Slide 9. We have been building granularity across all our customer segments. But I just want to take your attention to our Retail segment. Retail segment, which was 15% of our overall portfolio, has moved to 19% and this segment will continue to grow. We have a plan to add 50 to 70 new locations for retail expansion and we’ll take a call once the economy opens up in quarter 3, quarter 4. With focus on both retail and SME, we expect to grow the NBFC portfolio this year by close to 5%.

Moving to the next slide, Slide 10, and talking about the profitability metric, we have maintained our margins, the core margins at 4.8% compared to 4.76% last quarter.

If you look at, we have improved our cost of borrowing by 20 basis points. It has come down to 7.94% compared to 8.14% last quarter. With focus on cost rationalization, our cost-to-income ratio has come down to 31.3% compared to 33.5% last quarter. And we have maintained the core operating profit in this quarter.

Moving to the next slide, Slide 11 and we talk about the quality parameters of the portfolio. If we exclude the IL&FS , our Stage 3 is 3.13%. In this quarter, we have improved our provision to about — by 5.3%. We expect about 50% resolution of these accounts, the Stage 3 accounts in this year. And we are working on a few of the accounts at this point in time. And once the lockdown and everything else eases, we will be able to resolve this.

In this quarter, we have provided 50% additional COVID provision that will take our provision cover on COVID to 30 basis points. This has been arrived by stress testing our portfolio in terms of the LGDs and the PDs.

If you look at, 28% of our AUM is under moratorium at this point in time. And the nonmoratorium portfolio, 85% of the portfolio under — which is not under moratorium…

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Unidentified Company Representative, [5]

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No, no under moratorium.

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Rakesh Kumar Singh, Aditya Birla Capital Limited – MD & CEO of Aditya Birla Finance Limited [6]

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Under moratorium was never in 30 days — 30-days overdue in the preceding 3 months before the lockdown. So December, Jan, Feb, if we look at, these accounts were never under 30+.

Collections efficiency, as mentioned earlier, that has reached to the efficiency of first quarter of last year.

In terms of secured, we have 80% portfolio which is secured. Apart from that, 4% of our retail unsecured portfolio is covered under the credit guarantee. So almost 84% of our portfolio is secured in nature.

I’ll move to the next slide, which is the ALM slide. Our ALM is quite comfortable. Till the next 1 year, we have a very, very positive ALM. If you look at, we continue to raise long-term money and our long-term mix is close to 87%.

Even at a stressed case scenario, we — our funds available is closer to INR 12,000 crores against a liability maturity of INR 9,249 crores. So quite comfortable in terms of the ALM profile which we have. We have a very comfortable capital adequacy of 20.1%.

I’ll move to the next slide, Slide 13, leveraging technology, and during the lockdown, this really got really enhanced. And you can see it across, whether it’s the customer onboarding, distributor onboarding, digital payments and collections, customer service, all parameters improved significantly over the last year.

So in terms of digital customer service, if you see, it was 23% last year, which has improved to 85%. Our digital payments also has improved from 88% to 99%.

The next slide, Slide 14, is the financial slide. I will leave you to go through this, and if there are any questions, we’ll be happy to take the questions.

I’ll move now to the Housing Finance and move to Slide #16. Again, story both the lockdown and once the markets have started opening up, our business has really picked up. In the month of July, we had logins, which is 84% of the previous year. June month, it was 53%. So it’s completely improving month on month, which you can see.

Gross disbursal in the month of July was 53% of previous year. And the gross disbursement in July was 2x of what we did in the quarter 1.

Again, in this business, there was a strong focus on driving the digital platform and digital acquisition. We enabled direct and DSA-assisted journeys, and 85% of our new sourcing was done through the digital and the mobile platform.

We continue to focus on the affordable home loans, which grew 37% year-on-year. And our construction finance book came down by 34%. Construction finance is just 4% of our overall portfolio. Our NIM in this business improved by 31 basis points quarter-on-quarter and 29 basis points year-on-year.

Collections efficiency in the book not under moratorium is at a similar level as what it was in quarter 1 last year. Again PPOP is very stable and excluding COVID provision, the profitability, the PBT grew by 23% quarter-on-quarter.

Moving to Slide 17. We have been — here, we have been focusing on Retail and Affordable segment. And if you look at, 96% of our portfolio in the Retail, only 4% is construction finance. Our affordable book has grown by 3.5x over the last 2 years.

And that you can see on the right-hand side, most of the growth last year has come from Affordable and Retail Loan Against Property segment. With the focus of Affordable Housing segment, we expect to grow this portfolio by 10% to 15% this year. I want to move to next slide, Slide 18 on the sourcing strategy and see the geographical mix, a lot of focus is on affordable, and that is the reason the nonmetro locations are contributing, and the growth is coming from the nonmetro locations. Now the nonmetro location book mix is now 45%. If you look at the average ticket size of home loans, that’s come down from INR 35 lakhs to INR 30 lakhs. Affordable segment, 63% of our Affordable segment comes from the salaried segment. So again, that’s a reflection of our portfolio quality in the Affordable segment.

Moving to Slide 19, I’m talking about the profitability metrics. We improved our margin by 31 basis points. The margins improved from 2.96% to 3.27%. This was benefited by 19 basis point cost — cost of borrowing coming down by 19 basis points and improvement in product mix.And clearly, we have maintained our core profit during the challenging times.

I will move to the Slide 20, and talking about the portfolio quality. Stage 3 book, in housing, we have 1.2% is stage 3, 32% is the PCR or the provision cover. 28% of our retail loan book is under moratorium and 92% of the loan under moratorium was never in 30-plus DPD preceding the 3 months of the lockdown. So again, a reflection of the portfolio which is under moratorium.

In terms of — if you look at Stage 3, we have a good security cover and our resolution should be better there as well.

In terms of construction finance, which I mentioned is only 4% of our portfolio, INR 9 crores is the average ticket size and quite manageable.

Affordable home loans, if we look at, the average ticket size is 13 lakhs. And 29% of affordable home loans is backed by mortgage guarantee provided by IMGC. And 48% of this portfolio is covered by Pradhan Mantri Awas subsidy. 30% of our book under moratorium is covered by IMGC, which is a mortgage guarantee.

Moving to Slide 21. We have a well-matched ALM. And again, we’ve a very comfortable ALM here as well. And if we stress test this, again, till June ’21, we are quite comfortable. If you look at on the right-hand side, funds available till June ’21 is INR 3,137 crores against the liability maturity, which is only INR 1,625 crores. Again, very comfortable capital adequacy of 17.8% in this business.

We have leveraged technology during the lockdown and we’re really on our path to increase our sourcing and servicing our customers through digital platforms. And if you look at on the right-hand side, whether it is digital onboarding, customer interaction on digital channels, digital collections and self-servicing, everything has improved significantly.

And if you look at, self-servicing has moved from 46% to 93% and digital onboarding, which was only 10% in quarter 4 last year, has gone up to 85%. So we are leveraging and we’re really using technology to reach out to our customers and serve them.

If we look at the profit of the last 2 years, the PAT is at 37% (sic) [INR 37 crores] if we exclude the COVID provision compared to INR 35 crores of previous quarter.

The return on assets have improved by — to 1.24% compared to 1.18% previous quarter.

The next slide is the financial slide, and I’ll leave you with the financial slide. If there are any questions, we’ll be more than happy to take those questions. Thank you so much.

I will now hand over to Balasubramanian, who is the MD and CEO of our Asset Management business.

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A. Balasubramanian, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life AMC Limited [7]

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Thanks, Rakesh. From the AMC business point of view, I think beginning of the quarter, we could gain our momentum, where we have seen our assets under management growing by about 8% from INR 2,02,000 crores to INR 2,17,000 crores for June ending closing. And closing equity AUM moved up from INR 65,000 crores to INR 78,000 crores, grew by about 19%. And overall we maintained the leadership position in fixed income category, which are comprising of higher margin assets up to about INR 98,000 crores.

In our retail franchisee, we continued to keep our focus on retail assets — average assets under management, increased by 12% in the month of April to June to about INR 44,000 crores, roughly. And B-30 average assets under management also grew by about 12% from April ’20 numbers. And overall, our focus in terms of SIPs resulted in the number coming up to 27% quarter-on-quarter growth from INR 31,000 crores to about — to INR 31,000 crores, and overall market share in SIPs improved to about 10.29% from 9.89% in the past.

And leveraging digital technology, I think we have used this — in COVID lockdown period, we used the digital technology to the fullest, and as a result of that, our transaction volume moved completely 95% (sic) [94%] to digital transactions from 81% in the previous quarter. Ramped up digital enrollment of the customers per month about 50,000 [digitally investors we could enroll to transact with us] during this period using technology. Also increased our footprint in digital platforms such as PhonePe, GRUH app and several such digital platforms we increased our percent as well as improved our servicing through the digital platforms.

Overall profitability, PBT to the AUM improved about 24 basis points from 22 basis points for the quarter ending March 2020. And overall profitability we could maintain at the same level, more or less close to the same level as of the March quarter ending 2020. And focus on cost control, as Ajay mentioned about, the continued — even the AMC we could do that effectively, reduce the overall cost by about 7% compared to the previous quarter as well as previous year.

With respect to the specific numbers, next slide if you see on 27, overall, though the assets under management on closing came at about INR 2,17,000 crores, for the quarter, we had an average assets of about INR 2,25,000 crores, which of course includes the 3 months of further gathering. At the same time, the overall customer base remained at 7.2 million customer base, again strong retail base that we have built, that we could maintain that.

And overall equity assets, as I mentioned, grew by about 8% on a quarter-on-quarter basis and — on overall assets and equity grew by about 19% during the quarter.

So moving to the next slide, 28, the overall traction in the retail, as I mentioned earlier, the mix of retail and HNI that’s about 45% of total assets under management, grew by about 4% on an overall basis between retail and HNI portion of assets. And retail assets grew by about 12%. And overall, this has caused about lack of — overall again quite a healthy mix that we have in the overall asset mix.

And within that which we have been building in terms of building our B-30 market average AUM, also, I’ve seen a growth of about 15.3% overall contribution coming from B-30 markets, growing about 12% to about INR 34,000 crores. And SIP mix overall moved up by 27% from INR 25,000 crores to INR 31,000 crores, which again takes into account the monthly inflows of about INR 847 crores, which include SIPs, as I mentioned, on the right side of the presentation. And which have, again, I mentioned about earlier about market share from 9.9% to 10.29%. Again, it reflects on our focus on building our retail through SIPs and also the overall contribution of SIPs to the total assets under management.

And Slide #29, in respect of the distribution, of course, the overall distribution channel partners dealing with NDs and online channels and IFAs and direct continued to remain more or less same in terms of focus. Our overall market share also more or less remained the same, except in the case of IFAs, given the fact that we work with IFAs very closely, and that’s actually improved from 47% in Q1 of last year and 47% of Q4 of last year to about 49%.

And overall, in terms of number of locations in which we operate, they remain at 310, and the number of IFAs we deal with remain at 80,000 numbers. And of course, all the channels that we are dealing with continue to sell our — the need of growing our size.

During this COVID period of 3 months, we actually could use the opportunity to connect with the customers as well as the distributors. Using the digital platform, we conducted various investor seminars as well as distribution engagement programs. All these things not only has resulted in customer base increase by about [20,000], which I mentioned earlier for the month, we brought the empanelled book close to about 300 IFAs to our business during this period. And we also tied up with new digital distributors now, which has gone to about 75. And therefore, we could actually create not only awareness about our digital platforms, we could also make them sweat a bit in terms of adding overall growth to the business.

Leveraging technology continues to remain the focus area for us, both for onboarding our customers, ensuring that prepurchase journey is made smoothest as well as customer retention happens with using analytical tools. And finally, of course, servicing the customers using the self-service platform. In all these areas we made a good progress.

On the right side, if you look at in each of these areas, whether digital transactions or percentage customer interaction on digital channels, digital payments, self-service, everywhere, we have seen growth coming from a quarter-on-quarter with substantial improvement.

And with respect to specific where we have been undertaking a few activities like in the prepurchase journey using our portal and using analytics and Next Best offer that we offer for selling our products to the existing customers in order to increase our customer base, we have seen a reasonably good progress of adding others to the overall gross sales at the rate of about INR 587 crores on activities. And analytical-based platform has also added to the INR 150 crores assets under management. We could also use this platform — digital platform to retain SIPs. As you all know, that SIPs are getting stagnated in the industry. The [same thing is used] to retain our SIP assets. We have seen some progress on that using digital platforms.

The last bit is, of course, the numbers, though Ajay mentioned about briefly and overall, the profitability or PBT we maintained more or less same number as last quarter, with improvement in basis points contribution from 22 basis points for March ending 2020 to about 24 basis points as of June ending.

With this, I’ll invite Kamlesh Rao, who is the MD and CEO of Birla Sun Life Insurance, to take you through the insurance business.

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [8]

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Thank you, Bala. I’m referring to Slide 34. And the fourth quarter has largely been a full lockdown period with some easing that we saw in parts of the country in June.

In our industry, which is broadly driven by banca contribution of 55% and nonbanca at 45% for private players, the industry saw a degrowth of 23% year-on-year in individual premium business and 20% degrowth year-on-year in the group insurance business.

ABSLI in the first quarter grew 5% as compared to the first quarter last year. And the group insurance business, we actually grew 3x in Q1 of ’21 as compared to last year.

The lockdown period clearly defined that to be successful during this time, we need highest level of digital enablement across sales, service and renewal collection. In that regard, we were able to reach greater than about 3.5 lakh customers in engagement digitally. 10% of our business actually came through the preapproved offers that we executed on our 2-click, 3-click digital journey that we put in place in Q1 of this year. 96% of our business — individual business was actually sourced digitally. And renewal collections on digital mode in value terms reached 65%, and on number of policies basis reached actually 87%, significantly higher than the same time last quarter last year.

The quarter saw a healthy mix in our channel strategy with a 42:58 mix between proprietary and banca as well as a healthy product mix strategy with controlled ULIPs and higher protection business, both of which contribute to higher gross margins.

Digitization continues to have positive impact on our quality of business, with persistently going up in all cohorts and the 13-month actually going up by 200 basis points year-on-year. The higher top line with well-managed costs improved our OpEx to premium ratio to 16.3% for the quarter. Despite G-Sec rates moving down, with a healthy product mix, we’re getting gross margins at 33.1% and net margins actually improving over the same quarter of last year.

On Slide 35, we give you the same picture between the individual and the group business. Point to note on the group new business premium is growth being 3 times. We continue to grow this segment, keeping in mind that it is value accretive, and it contributes to both top line as well as the bottom line of the company.

If you look at Slide #36, we basically talked about leveraging technology in different areas. If you look at the graphs on the right-hand side, with 96% of our sourcing being done digitally, 80% of distributor portal adoption, digital revenues, as I said already, 65% and self-service levels at 96% just indicates the adoption of digital within the firm, which would augur well for both top line and reduce costs through the year.

Slide 37 gives you an idea of the breakup between our partnership and proprietorship business. Left-hand side, our partnership is one of the largest banca tie-ups we have with access to more than 9,500-plus branches. And in our business, on the proprietorship side, if you look at the mix of the protection business, which is now at 13%, it’s at the top quartile as far as protection mix is concerned among proprietary channels across the life insurance industry.

Slide number 38 gives you overall product mix that we have, reasonably balanced between ULIPs being at 32% and the traditional business being at balance 68%. And in the nonpar business, 100% of our expected maturity benefit of guarantee portfolio are fully hedged.

On the right-hand side it gives you some idea of the product launches that we have done inside of the lockdown period, an interesting product on the child plan, riders with ULIPs, all of which contributed to both business as well as incremental volumes that we got and incremental margins that we got in Q1 of this year.

Slide number 39 gives a perspective of the quality of our business. There’s renewal premium which is growing at 2 years CAGR of 11%, where in spite of lockdown, Q1 of financial year ’21 renewal premium collected was higher than Q1 of last year. Persistency trend, like I spoke about, not only the 13th month but across all the cohorts, the persistency is going up, including the 61st month, which is now closer to 50%, and we hope that this will grow through the balance part of the year.

OpEx, as I mentioned, compared to Q1 of last year, which was 23%, is down to 16.3%, combination of both top line as well as controlled costs that we managed in Q1 of this year.

Slide number 40 speaks about the margins in our various businesses. If you look at the gross VNB margin, in spite of G-Sec rate of where we are at 5.9% compared to 6.9% at the same time last year, we are able to get gross margins of 33%, and that’s the healthy mix of products that I spoke about. And idea of the net VNB, if you look

at what we have done this year quarter 1 is significantly better than Q1 of last year as well as Q1 of the prior year. The reason I am referring to Q1 of the prior year is to give some indication of where it will end by the end of the year because last year, financial year ’20, part of the net VNB was muted because of loss of business in the last 15 days. So the way the trend is going, it looks like we will be in reasonable double-digit net VNB by the end of this year.

Slide 41 is on the financials, the bulk of which I have already covered and spoken about. If there are any questions, I will be more than happy to take at the end of the presentation.

With this, I invite Mayank, who is our MD, CEO of the Health Insurance Company.

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Mayank Bathwal, Aditya Birla Capital Limited – CEO of Aditya Birla Health Insurance Company Limited [9]

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Thank you, Kamlesh, and I’m very happy to share the results for the HI business. We had an extremely good quarter with growth of 72% during the quarter, backed by 95% growth in our retail portfolio and which now makes it 73% of our overall business that we do. This growth of 72% was in the light of 6% growth at the industry level for health insurance and 16% for all the SAHI companies, about 5x of where the industry was in the same quarter.

The reason why I think we have been able to do this industry-leading growth is because, one, our very unique and differentiated health-first business model rather than insurance-first model that traditionally has been played out in India, which actually relates much better with the younger and the healthier and as well as consumers who have some conditions, both of whom were not fully catered to by the segment.

In addition, we also have a very large health ecosystem, which we use to engage very effectively with the consumer set. And the early results are reflected in a 20% higher persistency and 6% lower claims for the active customers.

Secondly, our very scaled and diversified and at the same time, digitally enabled distribution network has helped us grow significantly. We have 9 banca tie-ups, giving us access to 14,000-plus branches across the country, especially in these times the salaried class, which is a much better segment for health insurance, which — and this is why we have about 66% of the business coming in from banks.

In addition, because we had great strength in tele-enabled digital sales, we leverage that across all our face-to-face channels also in these times. And our total digital issuance in the Q1 was moved up to 98%, though we already were very high at 93% in the previous year.

We have also invested significantly in technology and digital the entire customer journey, and the numbers are reflected here, whether it’s onboarding, servicing, where we use WhatsApp extensively or even renewals where it went up to 92% digitally in this quarter vis-a-vis 65% in the same time last year. All of this has resulted in a much improved profitability with our combined ratio now inching down further to 132% vis-a-vis 146% last year. And we’re very confident that we should be moving towards sub-110% by the last quarter of this financial year, which means that we are on track for breakeven by Q4 FY ’22, which is what we have been indicating for quite some time.

Moving on to Slide 44. This is just further expansion of what I spoke about our offering, where clearly, our effort has been to expand the market through health-first model, where if you see the younger and healthier segment, which is 65% of India’s population below 35, they find it very relevant because of our incentivized wellness model and a segment which actually needs with above the age of 55, which we’re not necessarily getting either insurance or the right kind of insurance, we cover them through our chronic and disease risk management program. And overall, we have a very diversified portfolio from byte size/one click product to a global insurance cover for $1 million.

Moving to the next slide, this is just to give you a sense of how we have leveraged our engagement to convert all of that into health data and using analytics to now move into hyper-personalized engagement through our health risk cohorts with each of our customers, which makes the engagement very relevant at a personal level. And then we use the ecosystem to recommend specific interventions which can be funded or the customer will fund themselves.

Moving on to Slide 46. Our distribution, as I said, very well diversified and large distribution. Apart from 9 banks, we have got 30,000 advisers selling for us and apart from brokers. The fact that they’re now present across the country is reflected in the 63% nonmetro GWP for us. And therefore, it’s not just a metro phenomenon. And the other thing is that our digital leverage has been further strengthened by investing further in both agency and banks to create significant advances.

We — in the last quarter, we onboarded 100% of our digital — advisers digitally, engaged with 12,000-plus advisers through training, and we have continued to invest further. In addition, given the large ABG ecosystem, the health insurance clearly is a very relevant product. We have our ABG-focused channels, both Feet-on-Street and digital are playing out extremely well, and we expect to expand that going ahead.

Slide 47, just to expand further on our digital footprint in the consumer journey, end-to-end from onboarding to servicing, engagement and renewal, we have an industry-leading health app, features on WhatsApp, which is very popular, multilingual chat-bot. The metrics are there for you to see on how WhatsApp servicing has increased and renewals, as I said, 92%. But in addition, using this to reach out to 37 million-plus customers and prospects in COVID time using our Health From Home initiative, which was a big success.

Slide 48 gives a view of the health of business outcome. For the last 3 full financial years, moving 3.2x in revenue, 8.9x in customer acquisition, an extremely good trend in all our corporate ratios, especially claims and also the combined ratio to 132%. Our belief is that this growth will be sustained going ahead because of the external trend, which provide us a tailwind, whether it’s consumer behavior or channel mix or additional assets. And in each of these areas, we have great strength, as we have shared in the previous few slides.

The last slide on financial is — will just give the data, and we’ll be happy to address any questions that you may have.

I pass on to Ajay for the closing comments

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [10]

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Thank you, Mayank. I just want to move on to Slide 52. As I said at the beginning, we’ve worked very hard on optimizing our portfolio of businesses. This group of businesses we call other businesses, which included a group of businesses we started, used to lose money up to FY ’19. We then rationalized this portfolio and they turned profitable in FY ’20.

Now the businesses that are there in the portfolio are scaling up in their own right, and they’re all profitable, so as you’ll see from this slide, these businesses have grown by 64% year-on-year, largely driven by our general insurance broking business, which has grown its PBT by 20% year-on-year and our newly formed ARC, which turned profitable in its first year of operation, which again has grown its profitability quite significantly on a year-to-year basis. So this portfolio now is all profit making, and we’ll continue to add to the overall profitability at Aditya Birla Capital.

So I’d just like to end by summarizing what we’ve been saying during the course of today. First, all our businesses are positioned to capitalize on the growth opportunities in the market, leveraging on the digital assets that can be seen from our performance in Q1 during lockdown. This is a journey we’ve been on for a while. But clearly, we’ve seen the benefit of it during lockdown when all our businesses have done, as you’ve heard so far, reasonably well. We will look for balanced growth across all our businesses as we go forward during this year and future.

Second, I think our comprehensive product range, our extensive distribution network and our strong brand enable us to acquire customers at scale, adding to the 20 million customers that we already have. Retailization, as you would have seen, is a common theme across all our businesses, where we continue to build our retail business, retail portfolio and our customer count.

Third, we have a very strong focus on cost optimization, be it with regard to operating expenses or our cost of borrowings. And this will help us both get leaner as well as more efficient. We are on track to optimize costs across the platform, as I mentioned right at the beginning.

Fourth, leveraging synergies across the platform, I think, gives us an advantage in terms of costs, allows us to transfer best practices from one business to another and allows us to cross sell. We will continue to drive the benefits of synergy across the platform as we go forward.

And last, I think all the steps that I mentioned here are expected to help us to enhance profitability even in what is clearly an uncertain and challenging year, and we are very focused on the task ahead.

So I’d like to just stop here and open it up for any questions

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Questions and Answers

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Operator [1]

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The first question is from the line of Kashyap Jhaveri from Emkay Investment Managers.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division – Research Analyst [2]

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(technical difficulty)

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Operator [3]

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I’m sorry to interrupt you, Kashyap. We can’t hear you very well, sir.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division – Research Analyst [4]

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Hello?

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Operator [5]

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Yes, this is better.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division – Research Analyst [6]

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Yes. I have 2 questions on our asset management business. If I look at Slide #29, where we have shown that about 49% of our equity AUMs come from IFAs and that number is about 80,400 versus if I look at last year, that number in the same quarter was about 78,000. Seemingly, the pace of new IFA addition for us has meaningfully slowed down, also in line with what industry probably is also facing. So what do you — I mean how do you see the impact of the profitability of IFAs given what has happened to the trail commission guidelines? And consequently, the impact on IFAs registration, would we probably see going forward some of the — some attrition in that number and consequently impact on our equity even?

And second, alongside that other question is that, if this were to happen, do we see any cannibalization of AUMs from our asset management business to probably insurance ULIP business?

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A. Balasubramanian, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life AMC Limited [7]

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Yes. I think overall, your observation, the way I would look at it is, one, for us dealing with the IFAs and the banking and the ND channels is important, while also building our direct asset channel. While we do that, we have invested a lot of time and energy with individual financial advisers across the country, and we’ll be building it. Though as you — as we mentioned, the industry itself has not been expanding in the IFA space, in terms of increasing new IFAs, therefore, there is limited scope in terms of adding new IFAs at this point of time. But having said that, these are the sustainable assets.

I think if you look at our SIP book, the way we build, all these things are done on the basis of the sustainability needs of the business. And the IFAs, in general, the persistency ratios are high. And that’s one of the trends that we have created, working closely with the IFAs in one — for maintaining sustainability of AUM as to the IFA (inaudible) fee and also then closely on many areas as part of building the skill and development activities there.

So I don’t see any issues with respect to that having an impact on the business. But any challenge that come for the whole industry, that’s the time actually, we’ll have to tackle that. But as of now, given our own trend that we’ve created all these years, we will continue to keep that high focus area for us in building this channel.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division – Research Analyst [8]

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Right. And just on — so on other cash flow, do you think that this could probably — in terms of profitability, if the distributors are finding as probably ULIP more profitable for them versus they could be probably advising clients more on doing ULIP product rather than direct investment…

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A. Balasubramanian, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life AMC Limited [9]

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No, while, of course, you are — while your observation/concern could be seen as valid, but this situation anyway we keep having at industry level rather than — and finally come back to the conclusion that ultimately, every customer has to be advised (inaudible) allocation strategy. And in this process, the mutual fund will remain as the dominant investment opportunity for customers. At the same time, we believe the customers will keep coming in, in between depending upon the needs and various other things which you may consider. So while this remains as a challenge, but we’re not seeing a specific shift, both for industry as well as for us moving from (inaudible) everybody focus on customer application pattern.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division – Research Analyst [10]

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Okay. And just one last question here. At industry level, would you have the number of IFA registrations as of FY ’19 and FY ’20? Like we had 78,000 in Q1 FY ’20 and 80,400 today. What would be the industry level number for both the quarter?

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A. Balasubramanian, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life AMC Limited [11]

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This number what we have given is the overall number for the whole industry. And within that, we have close to about 40,000 IFAs registered. In general, what we are doing whatever comes to the [industry, we ensure that we also work with that at that time as we become] an industry player. So you see more or less numbers remaining the same as what we had given here.

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Operator [12]

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(Operator Instructions) The next question is from the line of Nidhesh Jain from Investec Capital.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [13]

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First question on the NBFC book, if you can give some data or color in terms of how the collections or moratorium is panning out in the unsecured portion of our NBFC book and how one should think about the final credit cost on that book, that would be useful, sir?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [14]

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Nidhesh, on the retail, I think our collection efficiency is pretty decent. The customers under moratorium close to 85%, 90% of the customers in personal loans are paying their EMIs. And only 10%, 15% are under moratorium. For business loans, it’s only 20% of the customers are under moratorium. Everyone else is paying. So retail has been quite in terms of better than the company average on the moratorium.

In terms of collections efficiency, also it’s decent. The reason is because the customers who are under some stress, they are opting out for moratorium. So if you look at, it’s quite good compared to the — and that’s what I mentioned, the collection efficiency is as good as what we had in quarter 1 of last year.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [15]

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So 15% of the customers in the personal loan and 30% in business loans are…

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [16]

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20%.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [17]

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20%. 15% and 20%. Okay.

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [18]

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Yes.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [19]

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And secondly, on the Health Insurance business, we have seen very good growth. But sir, how we should think about COVID-related claims? It seems like in Q1, it has not seen any — you have not seen any impact. But how do you see that impact in coming quarters?

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Mayank Bathwal, Aditya Birla Capital Limited – CEO of Aditya Birla Health Insurance Company Limited [20]

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Yes. So first, Nidhesh, is that we have started to see some flattening of the COVID claim curve, mainly because the fresh set of infection are happening in Tier 3, Tier 4 cities, which are not as highly penetrated, as you would expect the metro cities where the first set of claims were coming in. So that’s the first message.

Second is that the claims that we have seen, which — as an additional set of claims through COVID have been actually reasonably well compensated by the reduction in claims where for treatment, which otherwise could be handled at home and people would end up going to the hospital and also deferment of the, I would say, elective treatment. So overall — and even though some of the elective treatment will come back in the future, but we are not seeing any — I mean, currently, we are not worried about the claims because of COVID really impacting the profitability.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [21]

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Do you think that this improvement in claims ratio that we have seen is broadly sustainable?

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Mayank Bathwal, Aditya Birla Capital Limited – CEO of Aditya Birla Health Insurance Company Limited [22]

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Yes, yes, absolutely.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [23]

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And the last question is on the operating expense. We have seen a reasonable reduction in operating expense this quarter across businesses. But Q1 was also a quarter where the activity levels were very low. So do you think this operating expense that we have seen — reduction that we have seen is sustainable? Or once the activity level improves, that operating expense will again revert to last year level?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [24]

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No, so Nidhesh, like I said in the beginning, we have a 10% quarter-on-quarter reduction in nonvolume-linked expenses. And I’ve also indicated that we’re looking at about an 8% reduction in annualized cost over the year. So we are looking at every line item and looking to optimize costs across the board. And therefore, it should hopefully be more permanent than just Q1.

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Nidhesh Jain, Investec Bank Limited (SA), Research Division – Research Analyst [25]

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And this 8% reduction is absolute — in absolute amount, you are cutting 8% reduction in the overall cost?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [26]

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8% of our annualized FY ’20 cost, yes.

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Operator [27]

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(Operator Instructions) The next question is from the line of Vinay Tibrewala from Darashaw & Company Private Limited.

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Vinamra Tibrewala, [28]

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My question is for Rakesh. Rakesh, in the moratorium part, you mentioned 28% is the moratorium. If you could just give me a break up how much is secured loans and unsecured loans. And what are the number of accounts which are under moratorium, especially on the wholesale front?

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Rakesh Kumar Singh, Aditya Birla Capital Limited – MD & CEO of Aditya Birla Finance Limited [29]

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So on the wholesale front, it will be less than 20%. And you asked me secured, unsecured. I think secured also is pretty low. The only segment where it’s slightly high is the SME segment, where it’s higher than — it’s closer to around…

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [30]

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That’s secured.

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Rakesh Kumar Singh, Aditya Birla Capital Limited – MD & CEO of Aditya Birla Finance Limited [31]

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Yes, that’s secured also. So there is where — because the SME segment is where the cash flows have been impacted because of the lockdown and where you have a higher moratorium.

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Vinamra Tibrewala, [32]

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Okay. So here how many people have taken moratorium for, say, more than 3 to 4 months? And how many have taken recently only for the month of July? June, July? Can you give me that breakup as well?

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Rakesh Kumar Singh, Aditya Birla Capital Limited – MD & CEO of Aditya Birla Finance Limited [33]

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So again, when we started in April, it was high. Then every market is coming down as the lockdown is getting — it’s easing. I think the customers are able to pay their EMI. So starting from in April, so — yes, then it’s been coming down, and it’s come down to around 28%.

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Vinamra Tibrewala, [34]

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Okay. And do you have any number in terms of the granularity, what’s the average ticket size of these wholesale accounts who have opted for moratorium?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [35]

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So average ticket size, I can’t give you. I don’t have readily available. I can — I think the most important data on the moratorium book is the fact that if you look at the 30-plus DPD, in the prior 3 months, this book was actually performing very well. I think that should give you a better sense rather than the additional data because we don’t have the additional cuts available right now.

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Operator [36]

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(Operator Instructions) The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division – Research Analyst [37]

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I just have one question regarding capital raise. We raised capital last year, I think about INR 10 billion. But given the situation right now, do we have plans? And if so, if you could just talk about how you’re thinking about raising equity capital, that would help. And deployment of the same.

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [38]

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Yes. So the capital raise we raised last year should be good enough to fund growth requirements for our investors during this year. And both our lending businesses, as Rakesh had mentioned, have got very healthy capital adequacy ratios. So that should again give us a buffer for both dealing with any issues that may come up as well as for growth.

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Operator [39]

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(Operator Instructions) The next question is from the line of Aditya Mundra from Mytemple Capital.

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Aditya Mundra, [40]

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Yes. Sir, am I audible?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [41]

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Yes.

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Aditya Mundra, [42]

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Yes. Sir, in the life insurance business, when the new business premium growth has been good, any particular reason your renewal premium has been — has seen a slightly muted growth even if I compare it to the competitors who are actually in a much better renewal premium growth? I have other questions also, but maybe…

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [43]

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So I think it’s linked to the moratorium in Q1, but Kamlesh will answer that question.

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [44]

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Renewal premium has seen a pretty healthy growth for us, too, because if you look at the reflection in the persistency cohorts, that is starting from 30th month going right up to the 61st month, every cohort has grown. So I think there is a growth in the individual business team. It’s a function of what is due. Obviously, some amount of it doesn’t become due because there was a grace period given in the month of May and June ending up to July. But I’d say we’ve been able to recover a large part of that collection in the month of July and therefore not reflecting necessarily in the June numbers. But in the June numbers for the quarter 2, there is consistent growth in all cohorts, which is reflected in the persistency of our renewal collection.

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Aditya Mundra, [45]

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All right. And sir, as far as the NBFC is concerned, what is the long-term target of — like how much percent — in the long term, like 2, 3 years, what will be your percentage of retail, SME and mid-large corporate? How do we plan to keep that?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [46]

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So I can tell you about this year. We are — retail and SME, we are at 46%. We want to take it up to 50%. So we expect it closer to 50% this year. But really, the growth drivers are retail and SME.

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Aditya Mundra, [47]

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Retail and SME. Okay, sir. And as far as moratorium is concerned, how much of like business loan is about 20%, personal loan is 15%? And what about corporate book?

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [48]

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Corporate book, I told you, is less than 20%.

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Aditya Mundra, [49]

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Okay. Okay. And SME would be?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [50]

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We said SME is higher than the average. I think like Rakesh mentioned, these are the people who had cash flow issues. So as I said, again, I think for moratorium, it’s best to refer to the data point that we’ve given, which is if you look at the performance of this book in the previous 3 months, performance of the book was good. I think that should give you a better sense of the quality of the moratorium book.

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Aditya Mundra, [51]

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All right. And sir, as far as the moratorium in the housing finance book, it’s also about 28%, right?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [52]

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It’s 28% on the retail book, yes.

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Aditya Mundra, [53]

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On the retail book. Okay. And that is also, that 28% would be largely focused in which segment of the housing finance?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [54]

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In home loan segment, what is your question?

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Aditya Mundra, [55]

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Affordable housing or it’s the prime segment?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [56]

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It’s across the board.

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [57]

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It’s across — it’s solely on the corporate book, which is a very small portion, which is slightly higher than this.

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Aditya Mundra, [58]

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Okay, which is the construction financing in the book.

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [59]

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That’s right. Which is absolutely 4% of our total book. A very small percent of the total book. But again, there, I would again point you to just look at the performance of the moratorium book in the 3 months prior because you see 92% of that was never 30 days plus.

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Operator [60]

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(Operator Instructions) The next question is from the line of Alpesh Mehta from Motilal Oswal.

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Alpesh Mehta, Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst [61]

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Most of my questions have been answered. Just one question regarding the yesterday’s RBI announcement. Any sense on what percentage of our book may require some kind of a handholding even post moratorium or the restructuring that we need to do, both on the NBFC as well as the HFC segment?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [62]

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Too early, Alpesh. I think that only came out yesterday, I think moratorium ends in August. I think it’s too early to say. I think we’re just drawing comfort from the fact that the moratorium book has behaved well prior to that. And 85% of our book is secured. I think those are 2 things that we would point you to.

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Alpesh Mehta, Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst [63]

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Perfect. And most of our peers have the higher percentage — like a percentage of the loan book COVID-related provisioning, do we plan to step it up? Or you believe that the current level of provisioning is more than sufficient for any expected stress into the earnings going forward?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [64]

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So I think it’s a function of, a, the segments in which you operate; b, the security; c, the kind of moratorium book that you have; and then the stress testing that we’ve done to be able to derive this. So we’ve done a fairly detailed analysis based on all of these factors. And we think therefore, at this point in time, this provisioning is adequate.

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Alpesh Mehta, Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst [65]

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So there won’t be any step-up required — I mean any meaningful step-up required from the current levels?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [66]

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So we don’t know. We can’t tell what is going to happen in the future, Alpesh, like you very well know. I mean we don’t know what it is going to look like in September, October. But based on what we know today, we believe that these provisions are adequate.

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Alpesh Mehta, Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst [67]

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Okay. Great. And lastly, the — any sense from the — because most of the — what we are seeing at the industry level right now, most of the NBFCs are coming and raising capital, Piran just touched upon that. But just any sense from the rating agency perspective, whether the current leverage is sufficient or any pressure from their side?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [68]

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So we just had our rating reaffirmed about 2 or 3 months ago. So during the lockdown, we had our rating reaffirmed.

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Alpesh Mehta, Motilal Oswal Securities Limited, Research Division – Deputy Head of Research of BFSI & Banking Analyst [69]

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And there is no communications from the rating agencies relating to increasing the capitalization.

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [70]

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We have very comfortable capital adequacy.

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Operator [71]

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The next question is from the line of Abhishek Saraf from Jefferies.

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Abhishek Saraf, Jefferies LLC, Research Division – Equity Analyst [72]

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My question is centrally on life insurance bit. So, if you can just explain in terms of the product mix, so obviously, this quarter, we have seen nonpar saving expanding further in our product mix. So what is the internal comfort level on this? Or we are okay to grow it at these levels? I understand off late, there has been a lot of attraction towards the nonpar savings throughout industry players given the steep yield curve. But what would be our comfort level, one on nonpar savings list?

And on the overall balance sheet level, what would be the share of nonpar savings? So as a percentage of our AUM, if you can give some color on that?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [73]

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Trend on guaranteed savings and protection both in the marketplace, and that’s evident because of the pandemic. And you see some growth happening in both those areas for protection as well as on the nonpar guarantee. But some of it has also come off the new product that we’ve launched. It actually is a solutioning platform on child. And actually, the driving point on that is not necessarily higher guaranteed savings rate. It’s more planning for child’s education and future and marriage, if required. So that’s seen a blip because of a new product launch, but it’s still within comfortable levels. I think 40%, 45% in that range. And that’s what we are looking at. Plus if you notice what we put in the presentation, that 100% of our expected maturity benefits in that portfolio are actually fully hedged through FRAs minimizing the risk of interest rate on the balance sheet side of the book.

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Abhishek Saraf, Jefferies LLC, Research Division – Equity Analyst [74]

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Sir, just on persistency data, I noticed that, of course, it’s been a very good outcome for us because in most of the cohorts, we have seen expansion and improvement in persistency, where most of the industry peers have actually seen some kind of step in persistency movement. So what would you attribute for this performance?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [75]

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So like I said, we’ve made sure that the ability to pay in different forms, we have actually expanded that. So products like e-NACH, which had to be done physically, now is possible to be digitally. And some of the initiatives that we’ve put in place with tie-ups. So suppose you register on Paytm, if somebody wants to pay the renewal premiums right now. We’ve initiated being able to pay on WhatsApp. So the whole expansion of the ability to pay on renewal as far as — on digital for renewal collections actually has helped us get to significantly larger numbers. And we are seeing it improving, and we actually feel at the rate we are going, we’ll actually do better through the rest of the year.

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Abhishek Saraf, Jefferies LLC, Research Division – Equity Analyst [76]

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Not a great proportion of your customers would have actually opted for the grace period, then is it fair to assume that here?

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [77]

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So normally grace period is — I mean inbuilt, you always get 30 days kind of grace period. But the number of people who actually opted for grace wasn’t even more than 18% to 19% at that point in time, when the grace period was around till the month of July. Plus what we do is when the grace period thing is opted for, we also have analytical models which we work on, which tells us that somebody is using the grace period not to pay or basically using the grace period from economic benefit point of view. And some of these models that we put in place, it actually help us get collections renewal at actually lower costs have actually benefited both the ability to digitize and the models that we use in analytics have actually helped us get higher renewal collections.

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Abhishek Saraf, Jefferies LLC, Research Division – Equity Analyst [78]

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Okay. And just last bit on just — so obviously, there’s been a very sharp jump in our group new business premium. So is it mostly in the savings bit or we have done some other products also like GTI or — credit product obviously has been very muted for the industry. So if you can just give some more color on that, what is driving that?

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [79]

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Are you talking about the group book? I didn’t get your question.

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Abhishek Saraf, Jefferies LLC, Research Division – Equity Analyst [80]

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The group new business premium?

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [81]

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Group premiums.

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Kamlesh Rao, Aditya Birla Capital Limited – CEO & MD of Aditya Birla Sun Life Insurance Company Ltd [82]

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Yes, so group new business, rightly, we’re more careful about not just the growth because if it comes in, in areas which is not appropriate from both bottom line and top line perspective, then that’s not the business that we encourage. So it’s more fund-based business that we are pushing. Credit life, we’d like to, but like you rightly mentioned, lending is not a great thing happening for the first quarter. So that will be muted, for sure. But we are looking at areas on fund management business and — on the traditional side. That’s what we are looking at. And we’ve got some good accounts on the group business in that area in the first quarter.

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Operator [83]

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Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for closing comments.

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Ajay Srinivasan, Aditya Birla Capital Limited – CEO [84]

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So I’d just like to thank all of you for joining this call. I hope the call was audible and clear. I know in these days there could be some technology challenges, but I hope you were able to see and hear the entire presentation. Thank you very much for joining us. Stay safe, stay well, and have a lovely weekend.

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Operator [85]

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