Ladies and gentlemen, good day and welcome to Q2 FY 2023 earnings conference call of Aditya Birla Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vishakha Mulye , CEO. Thank you and over to you, ma'am.
Thank you. Good evening, everyone, and welcome to the earnings call for Aditya Birla Capital for the quarter ended September 30th, 2022. I'm pleased to present the business performance and financial results for Q2 FY 2023. I would also like to welcome and introduce two senior colleagues, Pankaj Gadgil and Vijay Deshwal, who joined us recently. Pankaj joins us as MD and CEO for Aditya Birla Housing Finance Limited. Pankaj will also be responsible to develop the digital channel for ABC Platform and the strategy for payment business for Aditya Birla Capital. He joins us from ICICI Bank, where he has served for the last 19 years in the areas of retail assets and liabilities, business banking, SME, payments and large ecosystem. Vijay joins us as Chief Strategy Officer and Head of Investor Relations.
He will be responsible for formulate and facilitate execution of various strategic initiatives at ABCL. He will also be responsible to communicate ABCL's strategic initiatives and its positioning with analysts, investors and all the other stakeholders. He joins us from Cyrus Poonawalla Group, where he spearheaded acquisition and integration of Magma Fincorp with the financial businesses of Poonawalla. His two-decade experience spans across various facets of banking and finance. I'm joined by my senior colleagues, Bhava, Rakesh, Tushar, Pankaj, Kamlesh, Mayank, Pinky and Vijay. Together we will present the results and take the questions that you may have. Let me begin by giving a brief perspective on the macroeconomic environment and emerging trends in the financial services industry. The Indian economy continues to build on the momentum gained over the last few quarters. The demand continues to be strong.
This has informed driven industrial activity and service sector, which is reflected in the lead indicators. Service sector PMI at 54.3. GST collections remaining above INR 1.4 lakh crore for eight months in a row. Passenger vehicle sales at all-time high of over 3.5 lakh units and commercial vehicle sales recording a 20% year-on-year growth to reach 70,000 units in the month of September 2022. However, the overall macroeconomic environment has seen continued headwinds led by the inflationary pressures and slowdown in the global economy resulting from the policy action by the central banks across the globe. Though the continued concerns remain due to these headwinds for FY 2023, the Indian economy is expected to grow at 7%, driven by strong domestic demand.
Coming to Indian financial services, we see a continuous transformation laid by digital disruption, which has already changed the way India invests and makes payments. The UPI payments are touching a volume of over 700 crore every month with a total value above INR 10 lakh crore. This has been well supported by the open digital infrastructure initiatives by the Government of India, which are set to transform the Lending and Insurance landscape in the country.
The introduction of Open will not only increase the credit penetration by transitioning the system to cash flow-based lending, but also has the potential to reduce the credit cost due to the data access from multiple systems. The proposal of digital health ID will enable a unified interface and allow the customized insurance solutions become reality. We at Aditya Birla Capital are gearing up our digital properties to maximize the opportunity arising out of these initiatives.
I'm pleased to report that Aditya Birla Capital continued to build up scale with an accelerated growth momentum across businesses. For the quarter ended September 2022, our consolidated profit after tax was INR 488 crores, a 30% year-on-year growth. The Consolidated Revenue for the same period grew by 21% year-on-year to INR 7,210 crores. We added 2 million customers during the quarter and our Active Customers base has increased to 41 million. In our NBFC business, we continue with a strong momentum of disbursement and granularization. The disbursements of quarter have more than doubled year-on-year to INR 12,488 crores. This helped the loan book to grow at 26% year-on-year to INR 64,975 crores. The granular book across retail, SME and HNI segments now constitutes 65% of our asset book.
We continue to maintain strong focus on quality of assets, with the gross Stage Three assets reduced by 55 basis points year-on-year to 3.1% as on September 30th, 2022. The provision coverage ratio on Stage Three assets improved to 49.1%. Coming to our Housing Finance Business. We disbursed INR 1,237 crore during Q2 in FY 2023. The loan book grew, now stands at INR 12,455 crore with a 94% retail mix. This improvement makes the expanded NIM by 89 basis points year-on-year to 5.1%. The average AUM in our AMC business reached INR 282,580 crore, with an overall equity AUM Mix improving to 42.1%.
We continued our focus on building a retail customer franchise with addition of 0.2 million portfolios during the quarter. The total active portfolios are 8.1 million at the end of the quarter. With our continued focus of growing faster in alternate asset segment, ABSL AMC crossed INR 6,500 crore as on thirtieth of September 2022. The growth momentum in our Life Insurance business continues with a 16% year-on-year growth in retail first year premium and about 23% growth in our group businesses. Renewal premium grew 40% year-on-year to reach over INR 2,952 crore in Q1 FY 2022, 2023. We also continue to see the profitability profile of this business improving and we are well on track to deliver over 18% net VNB margin this fiscal year.
In our Health Insurance business, our unique and differentiated health-first model s help us to deliver industry-leading growth over 62% this quarter on a year-on-year basis. ABHI expanded market share by 260 basis points year on year to 11% in the last quarter. We acquired 2 million customers and our Active Customers base has now reached 41 million. We added 65 branches during the quarter and our physical footprint has now reached 1,158 branches. Our branch expansion is targeted at driving penetration into tier three and tier four towns and new customer segments. Digital first approach is at the core of our business strategy to deliver product innovation, direct acquisition and best-in-class service delivery. We onboarded 97% of our customers digitally, with 12 million plus customers interaction on a digital channel every quarter.
Over 90% of our customer acquisition happens through digital ecosystem. Over 75% of our Life Insurance business happen digitally, and 87% of our Life Insurance customer requests are digitally self-serviced. In our Health Insurance business, 100% of our distributors are now onboarded digitally, and 85% of the business is delivered by auto underwriting. We leverage technology and analytics at every stage of customer journey and continuously look at upsell and cross-sell opportunities backed by data outcomes. In our Lending Businesses, sharp use of analytics has resulted in repeat customers contributing 32% of the fresh business in digital lending portfolio. 75% of our digital Lending Businesses happens using machine learning scorecard. In our AMC business, our health and cross-sell and upsell reaching 7% of our gross retail sales.
In our Life Insurance business, cross-sell and upsell now contribute 39% of our first year premiums. In our Health Insurance business, 24% of the retail fresh premium originates from an analytics-led cross-sell. I'm also pleased to share that we successfully raised growth capital of INR 665 crore from wholly owned subsidiary of Abu Dhabi Investment Authority, ADIA. A globally diversified investment institution for a 9.99% stake in our Health Insurance subsidiary, valuing it at INR 6,650 crore. This demonstrates the strong positioning of our Health Insurance franchise, which continues to gain significant market share backed by a health-first approach. Going forward, we will continue on accelerated growth momentum across our businesses to build scale and drive market share. We will continue to focus on quality and profitable growth.
With that, I will now hand over the call to Rakesh to take us through the NBFC business performance in detail.
Thanks, Vishakha, and good evening, everyone. In our NBFC business, we saw strong momentum across all segments, contributing to an overall loan book growth of 12% quarter-on-quarter and 36% year-on-year, taking our loan book to nearly INR 65,000 crore in quarter two. Our retail and SME segment book grew 50% year-on-year. We grew faster than competition in quarter two. We acquired 1.2 million customers this quarter, taking our Active Customers base to 5.3 million. This base grew from 3.6 million in March 2022, chalking a 47% growth in H1 of this financial year.
If I look at absolute loan book growth, we added INR 7,100 crores of loan book just in quarter two, which was same as what we had added in all of H1 last year, and it pivots on investments we have made to scale up productivities in branches we launched over the last 12 to 18 months. Not only have we got to our desired retail and SME segment mix of 65%, as per the guidance which we had provided earlier, we also continue to expand our NIMs progressively quarter-on-quarter in a challenging interest rate environment and have passed on the increase in cost of funds. Quarter two was also a strong quarter in terms of profit delivery, with a profit before tax at an all-time high of INR 488 crores, registering growth of 26% year-on-year and 6% quarter-on-quarter.
Our return on equity expanded by 145 basis points year-on-year and 32 basis points quarter-on-quarter to 14.7%. Further, asset quality has shown a consistent improvement over last year. Gross stage three book has reduced to 3.1%, was 3.6% in quarter two of last year. Stage two book has also reduced by 272 basis points year-on-year. Our collection efficiency is at 99.2%, consistently better than pre-COVID levels. We have progressively increased our stage three CPR, taking it to a very healthy 49.1%. Also, the restructured book still under moratorium is only at 0.34% of our overall loan book compared to 0.85 in the previous quarter. Further, collection efficiency of the restructured pool has come out.
The loans which has come out of moratorium is at a very healthy 95.1%. We have provided additional disclosure by segment, product, book progression, average ticket size and asset quality trends this quarter to show how not only are we driving growth similarly driven across segments, but have progressively seen asset quality improving, driving superior return on assets. We disbursed INR 12,488 crore in quarter two, which is by far the highest quarterly disbursement for ABFL. We disbursed 2.5 times of what we did in quarter two last year and 1.3 times of quarter four of last year. 70% of our disbursement was to retail and SME segment and all product verticals contributed to this momentum.
I just want to share and really throw some color on the disbursement in the four product segments which we have shared. We disbursed nearly INR 3,513 crores in the personal and consumer loan segment. This comprised 28% of overall disbursements in quarter two and was up 4x year-on-year, taking the segment book to INR 9,563 crores. Here, we focus largely on salaried professionals in the emerging income segment. 77% of this segment comprises of personal loans, of which nearly 50% has been sourced digitally. The balance comprises of consumer loans where we finance various end use such as lifestyle, healthcare, and education. Nearly 32% growth in our digital portfolio was driven by personal loans, compared to 20% last quarter.
Next, I would like to touch on unsecured business vertical, where we disbursed small ticket business loans to self-employed professionals and supply chain solutions to MSMEs with granular average ticket size of INR 9.61 lakh. Disbursement in this segment was up 12% quarter-on-quarter, registering a loan book growth of 66% year-on-year, taking the overall loan book in this segment to INR 6,508 crores. Our secured business loan segment, which primarily comprises of LAP, loan against property, and working capital solutions to self-employed and MSMEs contributed the largest share with 36% of overall disbursements coming from this segment. At nearly INR 4,507 crores, disbursement in this segment was up 15.9% quarter-on-quarter and 2.18% year-on-year.
As a result, the secured business loans segment grew 28% year-on-year and stood at INR 27,212 crores in quarter two. The average ticket size of this segment is INR 1.95 crores and we see the average ticket size continue to come down as we deepen our penetration in semi-urban markets. The corporate segment portfolio grew by 13% year-on-year to INR 20,836 crores, accompanied by significant improvement in asset quality with GS3 coming down from 5.3% last year to 4.1% in quarter two.
The next leg of growth for ABHFL is going to be driven by our investments in enhancing our MSME proposition by building a unique and differentiated platform solution, which Vishakha spoke about, to onboard customers through our existing ecosystem, digital partners and open networks such as ONDC and Open. This will be fully serviced through digital journey for our products available on a unified platform and value-added services for MSMEs to transact seamlessly. We continue on our growth journey by adding 62 new branches in H1, taking our footprint to 221 branches as of quarter end, as we target 325 branches by end of this financial year. Our investment in distribution, digital sourcing, data analytics, building platform-based solution gives us a high degree of confidence that the strong growth momentum is going to continue through the rest of this financial year.
With that, I will now hand it over to Mr. Pankaj Gadgil, MD and CEO of Aditya Birla Housing Finance Business.
Thank you, Rakesh. Good evening, everyone. I'm pleased to share Q2 FY 2023 performance of our housing finance company. The key highlights are as follows. Disbursement of INR 1,237 crores in Q2 FY 2023, which is an increase of 24% YoY and 40% QoQ. Asset growth across customer segments. Loan book as of Q2 FY 2023 is INR 12,455 crores, an increase of 10% YoY and 3% QoQ. Net interest margin was the highest ever and it has increased to 5.13%, 89 basis points growth YoY and 36 basis points QoQ. PBT for Q2 is INR 76 crores, an increase of 15% YoY and 6% QoQ. As a result of this, ROE is 13.87%, 12 basis points growth YoY and 19 basis points QoQ.
Now I will share further details of performance in book growth, financial performance, liquidity management and portfolio quality. First of all, momentum in disbursement and book growth. We witnessed accelerated growth in disbursements across value and growth segments for the quarter. The value segment comprises of Affordable Housing and Construction Finance. Growth segment comprises of the prime business. Here we are leveraging depth and width of our distribution network and enhancing digitization throughout the customer life cycle. Internally, we have launched a digital index that helps us to monitor our digital penetration to provide a seamless onboarding experience to customers. Loan book as of Q2 FY 2023 is INR 12,455 crores, 10% growth YoY. Whereas the value segment contribution in loan book has grown to 47% in Q2 FY 2023 from 38% in Q2 FY 2022.
Growth segment contribution stands at 53% of the loan book. The customer base has increased consistently and sequentially has grown by 8% QoQ to 52,000+ customers at the end of the quarter. Retail book contribution stands at 94% with average ticket size of INR 24 lakhs as of Q2 FY 2023. Now I will cover the next element which is robust financial performance and liquidity management. We continue to focus on stakeholder value through robust financial performance. Certain highlights. NIM increased to 5.13% in Q2 FY 2023 on account of decrease in contribution from the value segment and our ability to pass on increase in rates to customers due to periodic hikes in the repo rate during the quarter.
PPOP percentage increased to an all-time high to 3.14% in Q2 FY 2023 from 2.86% in Q2 FY 2022. The company continues to have diversified and cost effective long-term financing sources. We have a healthy borrowing mix. The mix of borrowing from NHB has increased to 16% in Q2 FY 2023 from 7% in Q2 FY 2022. This has given us an advantage in optimizing our borrowing costs. Our long-term credit rating from ICRA and India Ratings and Research consistently stands at AAA. We have a well-matched ALM and our capital adequacy ratio is at 23.9% as of Q2 FY 2023 against a regulatory requirement of 15%. The third element is the continued focus on quality. Here our primary focus is sustainable growth while maintaining a quality portfolio.
Some of the key highlights are, pursuant to the RBI circular dated 12th November 2021, we have aligned our asset classification in line with these guidelines. As a result of which Stage Three is 3.6% with a provision coverage ratio of Stage Three of 33%. The collection efficiency stands at an ever highest of 99.3%. We continue to emphasize on quality of origination. Towards that, salaried and self-employment professional segment contributes 57% of disbursement in Q2 FY 2023 from 47% in Q2 FY 2022. 92% of our disbursement in Q2 FY 2023 are with CIBIL score of more than 700, and these are also new to credit customers. To summarize, momentum in disbursement and book growth, robust financial performance, and focus on portfolio quality has resulted in consistent improvement across all return metrics.
To summarize, PAT for Q2 FY 2023 is INR 59 crores, an increase of 15% YoY, and PAT for H1 FY 2023 is INR 115 crores, an increase of 28% YoY. ROA for Q2 FY 2023 is 1.94%, an increase of thirteen basis points YoY, and ROA for H1 FY 2023 is 1.91%, an increase of thirty-three basis points. Lastly, return on equity, ROE for Q2 FY 2023 is 13.87%, eleven basis points growth YoY. ROE for H1 FY 2023 is 13.78%, a 160 basis points growth YoY. As I conclude, I now hand over to Bala, MD and CEO of our Asset Management Company.
Thank you, Pankaj, and good evening to everyone. As I present the AMC analyst call via the ABSL MF, we remain focused on building our momentum in the five focus areas. One, delivering sustainable performance. Two, building a retail franchise by increasing geographic footprint. Growing our passive and alternate investments. Fourth, leveraging digital platform for customer acquisition and enhanced customer experience. And fifth, driving a strong and robust risk management and governance framework. Against this backdrop, let me give you quick update on FY 2023 Q2 performance. Our total quarterly Average Asset Management for the quarter ending September 2022 stood at INR 2.94 lakh crore. Our total mutual fund quarterly average AUM was at INR 2.8 lakh crore with a market share of 8.2% ex-ETF.
Our equity mutual fund AUM for the September 2022 quarter was at INR 1.19 lakh crores with a year-to-date return of 42.1%. We have witnessed an increase of our monthly SIP books from INR 867 crore in September 2021 to INR 931 crores as of September 2022 from around 30 lakh live SIP accounts. We registered 2.2 lakh new SIPs in the quarter of September 2022. Customer acquisition remains central to our strategy. We have added around 2 lakh new folios in Q2 FY 2023, and with this the overall folio stands at 8.1 million. Moving to alternate investments, our private product offering has grown 8x to INR 16,923 crores as on September 2022.
On the PMS and AIF front, we have launched a suite of products like India Equity Service Fund and Asset Linked PMS product, which is gaining some traction from the institutional investor front. On the real estate side, I'm happy to share that we have completed the second close of Aditya Birla Real Estate Credit Opportunities Fund . These days, we'll also take in this product to the global market with our partners in the real estate venture [inaudible]. On the digital front, we continue to build volume and increase overall transactions. We have onboarded 70% of new customers digitally, and 82% of our overall transactions are digital, and 88% of the transactions coming from customers are serviced through digital platform. Moving on to financial numbers. Our focus continues to remain in achieving robust asset mix with the high margin assets in equity and fixed income assets.
We deliver strong profitability and our focus on segmental growth. Total revenue for Q2 FY 2023 is at INR 388 crore, up by 42% on a quarter-over-quarter basis. Profit after tax for Q2 FY 2023 is at INR 192 crore, up 18% on a quarter-over-quarter basis. With this, I'll hand over to Kamlesh Rao, the MD and CEO of Aditya Birla Sun Life Insurance.
Thank you, Bala, and good evening to all of you. The second quarter for the Life Insurance industry grew at 7% in the individual segment. The trend for ABSLI was a healthier growth of 16% in Q2. For the first half, we have grown in line with the private industry, as you can see in slide number 48. The individual business for us has come with a well-balanced product mix, with ULIPs now at 23% and traditional mix at 74%, which augurs well for our gross margins. We believe these margins will continue with protection share going up in the second half of the year. The Life Insurance for the private industry saw a growth of 9% in Q2, in which ABSLI registered a growth rate of 23%.
Even for the first half, ABSLI growth rate of 61% has been better than both the private industry as well as the overall industry too. In the Life Insurance business, we continue to be the second largest player in the profitable ULIP segment. In the credit life business, we are growing at higher than 100% for the last two years. Slide number 51 demonstrates the strength of our distribution franchise, both in terms of our proprietary presence as well as our partnerships. Our guidance areas of focus of direct business has seen a 27% CAGR over the last two years, and we are growing at greater than 100% in our public sector bank partnerships.
With future regulation allowing more than three partners in times to come, we see our ability to manage growth in both large private sector banks like HDFC, as well as public sector banks like Indian Bank, a key differentiator for our future growth strategies. Our total premium at INR 6,373 crore has registered a growth rate of 30% over last year, and this has come on the back of new business growth as well as renewal premium growing at 13%-14%. The digital collections composition of our renewal premium at 77%. This overall growth is seen across persistency buckets from 13th month right up to 61st month, the 13th month now at a healthy 86%, which is a 300 basis points rise over the last year's same time.
Our AUM under management now stands close to INR 65,000 crore, and we have grown at a healthy CAGR of 17% over the last two years. As seen in slide 54, we have 24% of this AUM in equity and balance 74% in debt. Investment performance seen either from a one-year lens or from a five-year perspective, we'll see ABSL MF having done better than the respective benchmarks across all three categories of equity, debt or even balanced funds. As evidently seen on the right-hand side of slide 52, our new product strategy continues to pay us rich dividends. 27% of the new business came through these new products that we launched in this year. Our newly launched FMP, which competes with bank fixed deposits, has seen the fastest INR 100 crore collection for a newly launched product.
Analytics capability has helped us do 29% of our new business through upsell and helps us increase productivity through our PASA campaign, which will contribute 25% of our new business by the end of this year. Our newly launched SPA product will help us manage the balance in our traditional portfolio of 74% through the second half of this year. Our digital adoption across various areas is demonstrated in slide 55. Across all areas of new business at 97% continue our guidance of 60% of this sourcing being auto-underwritten by year-end. 83% of our services are now available digitally, and our customer self-service ratio now stands at 87%. We continue to manage the net margin story well, as is seen in slide 56.
Last year during H1, we managed a net VNB margin of 7.6 and closed for the year at a healthy 15% net margin. We have shown a growth of 473 basis points in our net margin as compared to last year. For the half year of this year, we now have 12.3% net VNB margin, which gives us the confidence of closing the year at greater than 18% net VNB margin, which is once again be ahead of our guidance provided for this year. Our embedded value continues to grow at a healthy 17% CAGR for the last two years. In terms of ROEV, we have grown for the first half at a rate of 15.7%. The COVID claims now at subdued levels for two successive quarters.
Our claims are in line with the plan. We, however, continue carrying COVID provisions of INR 30 crores for the balance part of the year. Our journey over the last few years has been one of maximizing net margin expansion. We now stack in the top quartile for our persistency levels as well as OpEx to premium ratios. We have grown top line at a rate better than the industry, and we'll continue this journey of growing in a value-accretive manner over the second half of this year too. With this, I now hand over to Mayank to give you details of the Health Insurance business.
Thank you, Kamlesh, and a very good evening. I'm very happy to now present the performance of our Health Insurance business. We had a very strong second quarter, which made our performance in the first half very strong on the foundation of a very differentiated health first business model that we have been setting up for the last five years. We had at the beginning of the year highlighted that we will focus on the growth agenda, having demonstrated the superior unit economics of our business in the previous financial year. The fact that the category has tailwinds and all the steps being taken by the regulator and the government provide an opportunity for a player like us to fully leverage the growth opportunity. We have demonstrated that by a 66% YoY growth in the first half of this financial year.
We are the fastest growing Health Insurance company in the industry, well ahead of the industry growth rate of 18% and the SAHI growth rate at 27%. The growth was powered by both our retail and corporate franchise. The retail franchise grew at 37% YoY, whereas our corporate business franchise grew at a staggering 163%, powered by a huge focus on cross-sell and upsell to our existing clients and also the continued full OPD offering, new category of corporate OPD offering. Both of these now together constitute 38% of our business in H1 in the corporate business of our company. We now believe that we are the most profitable corporate franchise in the Health Insurance industry in India.
We acquired 5 million net new customers during the first half, taking our customer base to 24 million lives, a 48% YoY growth for this first half of this financial year. We will now focus on expanding the relationship with this large consumer base by both upselling the Health Insurance products and also exploring the opportunity to sell the other ABC offerings to these customers. We now have a SAHI market share of 10.9%, a 260 basis point increase YoY. We're also pleased to announce and confirm, in fact, the onboarding of a strategic partner, a wholly-owned subsidiary of Abu Dhabi Investment Authority, in this last month. The strategic partner has invested a sum of INR 665 crore to acquire a 9.99% stake in ABHI. The transaction was concluded with the receipt of funds in the month of October 2022.
The infusion of funds by a strong category financial partner is an external validation of our differentiated and a very sustainable operating model. The Health Insurance market, as I mentioned earlier, continues to be of large opportunity. It is very exciting, and this new partnership, along with the support of our existing shareholders will continue to support our growth vision. On the profitability front, our combined ratio came down to 112% for the first half, a large reduction from the 144% in the same period last year. This thus brought down our half yearly loss to INR 149 crore from 250 crore in the same period last year. We believe that the higher scale will continue to create operating efficiencies as we move ahead.
With our differentiated model ahead, we continue to look at newer range of offerings to cover the white spaces in the industry. Having chosen the young and/or the health-conscious segment, we are pleased to announce the launch of Activ Fit, the industry's first comprehensive plan for the young and millennial customers. The product is in line with our strategy of segmented product offerings directed towards millennial consumers. It has industry's first digital health scan-based health underwriting, and is therefore very attractive for the younger consumers, and we are looking forward to this being one of the major, you know, part of our overall product mix in the times ahead. Our digitally enabled distribution mix is the most diversified distribution in the industry, with the agency channel being the single largest channel at 23% of our retail business.
We now have 70,000+ advisors across 200+ branches. We do this by leveraging the one ABC branch strategy to nearly double our branch network at a low cost, and are also synergizing with other business units in areas like common advisors, combination of product offerings to existing consumer base. We now work with 15 banks, having added UCO Bank, State Bank of India, and also activated the IndiaFirst Bank in the last quarter. On the digital front, our business, including through alliance partners, grew 131% YoY and has become a sizable 15% of our total retail mix. We will continue to invest extensively in our tech and digital capabilities with a clear focus on superior consumer experience, but more importantly, scale hyper-personalized engagement given our health-first model.
We will continue to enhance our digital health and wellness ecosystem, which now has 60+ partners, and we now work with multiple Insurtech and Healthtech players to enhance consumer value and operational efficiency, and at the same time make the ecosystem very valuable for our consumers. At 96%, we have the highest claim settlement ratio in the industry, a testament to our focus on the key moments of truth for our consumers. Our digitally powered scale engagement helps us know our consumers better, and we have, to our mind, the largest set of consumer data set, including the health and lifestyle profile. We're using high-end analytics tools to create much better business outcomes, as we have explained in the deck. Looking ahead, we will continue to grow the franchise aggressively with a clear eye of best-in-class unit economics.
We are expecting to well surpass our guidance of 40% growth that we gave at the beginning of the year, and will be powered by a focus on getting more out of what we already have, fresh capacity both in agency and other channels, and also looking at exploring offerings for a large pool of white spaces not yet addressed by the industry. Efforts by the government through National Digital Health Mission and also the regulator to open up the industry will continue to open up the market more and more for players like us. I'd now like to thank you and pass it back to Vishakha for her closing remarks.
Thank you, Mayank. This concludes the comments on the Q2 FY 2023 business performance. We are very happy to take if there are any questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from Emkay Global . Please go ahead.
Hello.
Mr. Singh, your line is in talk mode. Please go ahead.
Good evening. Good set of results. A couple of questions, particularly on the insurance side. The first one that if I see more or less, I mean in terms of profitability and growth target, it looks all right on the life side, but the market has changed, particularly on the protection, retail protection. You had certain, you know, protection targets. So I mean, what are sort of your expectations from here onwards that how are you going to achieve the protection targets? And how overall growth because I mean, on the life side, the industry is going through a sort of a challenging phase. That's the question on life, you know, protection in the product mix and the growth outlook. The second question will be on the health side.
Yes, the business is shaping up quite well. If you can just help us understand, you know, your mix in terms of how it is retail or corporate, and thirdly, group, kind of a group retail that you sell via banks. So that mix. How do you see, you know, your combined ratio target of 100% or breakeven, right, Mayank, being achieved by FY 2024? Thank you.
Let me take the question Life Insurance first. Protection we do in three buckets. If you look at the group side, on the OIRT, we are amongst the largest players in the market. I said on the credit life side we do, and we've been growing at more than 100%.
In the last call, we had stated that protection business because of reinsured premium pricing, we were absent in a particular segment and above, which is basically INR 1 crore plus sum assured, because it didn't make sense. I mean, technically, the reinsured premium was common, whether you paid it for the INR 5 lakh income guy or the INR 7 lakh income guy or INR 10 lakh income guy, which is the reason we muted our aspirations on protection. However, all the product mix generates a final gross margin, and we've actually met better than the expectation of both the gross margin as well as I told you on the net margin perspective.
In the month of September, in the second half, we've been able to get changed pricing because the scenario is changing and we want a differentiated pricing for protection products above INR 1 crore, and we've just launched that product. Therefore, in the second half of the year, like I said in my commentary, we are very hopeful that the margins will actually remain the same or even go up because the protection part of the business will start going up in the second half of the year. The Health Insurance, Mayank will answer that question.
Yeah. Before I come to the mix, let me just share that what is our approach. As I mentioned that our retail franchise grew at about 37%, well ahead of even the total, you know, industry growth, which was at 18% for the overall industry. Our effort is that we continue to look at opportunities where our health first model makes sense. In the corporate side also, as I mentioned, we are looking at corporates which are, you know, profitable and also the segments like OPD, which actually helps us get more health data for our consumers because that's very important to, you know, get into scale engagement.
Additionally, because of our margin, corporate actually is a good consumer profile because our ability to do scale engagement, given the fact that we know the consumers much better in a corporate arena, works very well for us. Our key thing is that, you know, whatever business we write must be profitable. Broadly, if you like, to give you a sense, we would like to keep our retail franchise anywhere between 65% to 70-75%. Over a period of the entire year, you'll see that in that range. Grow the corporate business in areas which we feel are profitable, but at the same time which help us promote our business model, which is health database, and that's our the way we look at our business mix.
100% combined ratio by FY 2024 looks achievable?
Our guidance was not 100%, you know, if you refer to our guidance, our guidance was business volume. Guidance was the first quarterly taken, you know, in the previous financial year of quarter four. That we've already demonstrated. As I mentioned, you know, there is a lot of tailwind for the category, and we like to continue to explore the full growth opportunity, you know, because of the various enablers that are present for the category today.
Okay. Thank you.
Thank you. The next question is from the line of Kunal Shah from Carnelian Capital. Please go ahead.
Hello. Am I audible?
Yes, sir.
Yeah.
This is Manoj here from Carnelian. First of all, congratulations to the ABC team for great set of numbers. I have couple of questions. One is on your one ABC and one P&L strategy. Just wanted to understand how ABC under this strategy will be different vis-à-vis earlier. Secondly, how or whether this will require some kind of cultural change when like you are running so many diversified businesses. What kind of cultural changes, what kind of incentive structure which you have to design to achieve one ABC, one P&L? This is my first question. I will come back with my second question.
Yeah. Manoj, I will take that question. If you look at our organization structure, we are today organized product-wise. Every of our company is a product from a consumer perspective. Whether you take lending, which is NBFC and housing, we have protection, which is both life and health. Of course we have investing, which is AMC, and we do also have a broking, you know, franchise. Clearly, you know, we have all the products across our various companies in the form of PIFA, which is what typically the consumer look for, which is protecting, investing, financing and advisory.
When we talk about our one you know ABC one P&L, what we mean by that is that we will own the customer jointly and centrally and together, which will have three facets to it. One is one experience, you know. The second is one customer, and the third is one team. When I talk about one experience, we are today omni-channel, which means that we have both physical and digital channels. Our endeavor would be that we want to give the choice to our customer as to how he wants to deal with us by ensuring that the experience across the channels is consistent and exactly same. The second is one customer.
As I said that all of us together will own the customer centrally. Means that we will look at the profile of the customer and we'll try to give him a solution which is suited for his lifestyle and not only at his level, but probably, you know, giving him a solution for the entire ecosystem of that particular consumer. That while doing that, we need to work together as one team to deliver, you know, the full solution to a customer and its ecosystem. While doing, as you rightly said, it will require a mindset change, it will require a cultural change, and we are working on that to ensure that all of us put the customer centrally together.
Yes, it will also require a change in terms of our incentives and, you know, the way we look at the entire compensation within ABC. We recently rolled out our, you know, long-term incentive plan and our performance will have a weightage for this kind of behavior, which is, you know, owning the customer and really aligning the performance metrics to the overall philosophy of one ABC and one P&L.
Great. Thanks for such elaborate answer. My second question was mainly on one of the accounting part. When I see provision coverage ratio of our NBFC and compare with a provision coverage ratio of banks and all, because LGD is not what I understand. But is 45%-47% a good PCR to have or is there any target to take this ratio up going forward?
If you look at our PCR on stage three, it's 49% for the quarter.
Yeah.
As we have declared this time also 73% of our portfolio is secured. If you look at a lot of other businesses, the NBFCs and some of them, they have a lot of unsecured business in their portfolio. We have a secured portfolio and provision coverage is quite healthy. 49% provision coverage on a 73%-74% secured book is very, very healthy and I don't think there is a risk on that front.
Okay. Okay, great. Thanks for taking my question and wish you all the best.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Thanks for taking the question. Firstly, with respect to Housing Finance in terms of the strategies, I think the overall presentation has been changed with respect to the focus on affordable. Would there be any change in terms of the strategy because this time we don't see maybe the slides on that aspect. As you mentioned, like both value as well as the growth segments and that includes even construction finance, prime, everything put together. How do we look over there in terms of the Housing Finance Business strategy?
Hi, Kunal. Pankaj here. I think if you see the slides that we have shown, like you rightly you know picked up the slide on disbursement and book growth. It has in fact more granularity as far as the contribution of each segment is concerned. What we try to do is we try to put a value segment and the growth segment within value also. We are tracking affordable separately. We map affordable separately and we also have a line on construction finance. If you look at affordable in itself, say today 41% of the book continues to be affordable. What we are trying to say is that there will be opportunities for them which will be there you know because we have one ABC, we have one ABG. There'll be opportunities on prime itself.
There will be opportunities, you know, which will come in on the non-interest property as well as the informal segment. I think we want to maximize those opportunities by leveraging our breadth and depth, you know, of the entire distribution. Our focus, you know, clearly continues, you know, to be to build the value businesses and leverage the cost of funds that we've got. I'm sure you would have, you know, seen in terms of the benchmarking on cost of funds as well. I think that also augurs well for us to take care of the opportunities that we have across the segments. I think the focus, you know, really continues on, you know, maximizing the contribution on the value segment and look at opportunities in the other segment as well.
With respect to margins, how should we look at 5.13%? Because I think affordable is a segment wherein we can still sustain. If we get into prime and the other segments, do we see margins sustaining at this level? I think, Kunal, since this is very market dominated, I think the critical thing is going to be, you know, how do you manage and maintain the mix, which is the appropriate mix. I think, since the focus is on the guided, you know, ROE and ROA, I think the mix will have to get managed. Of course, like I mentioned, it's going to be a function of the opportunity that we have. We will, you know, keep shaping it, you know, as the markets also evolve there. Right now this is showing a 5.13%, it will be range bound in that sense.
Sure. Second is with respect to GS2 in corporate and mid-corporate, almost 110 basis points kind of increase, which is equivalent to 200, more than 200-odd INR crore kind of an exposure. So is this one single exposure which is leading to this kind of a rise or there are few accounts which have actually got into GS2?
Kunal, these are few accounts. I think the resolution and the customers are paying for in October itself, a few of them have been resolved and we look at resolving this in quarter three. We don't see a big impact there.
Okay. This would be spread across few accounts, not a one single account or domains?
No, it's spread across few accounts.
Sure. Lastly, in terms of getting classified as the upper layered NBFC, any thought process with respect to how the operating structure could be and maybe with respect to the listing of that entity over a period?
Kunal, if you look at, we still have time. We have a lot of time. The next three years, it has to be till April 2025 is what the timeline is. At this point in time on most of the parameters, we are compliant being an upper layer. Whatever the regulations which has come from RBI on most of the regulations we are already compliant and listing is one condition which we will assess and evaluate as we go along.
There is no maybe. We are not falling short in any of the parameters as far as upper layers is concerned.
No, no. Most of which we have already complied with and we are in the process to close on anything which is open right now.
Okay. Sure. Thanks and all the best. Yeah.
Thank you. The next question is from the line of Vinay from JBR Group. Please go ahead.
Hello. Hello.
Yes, please go ahead.
Great. Congratulations on great-
Sorry to interrupt you, Mr. Vinay. The audio is not clear from your line. Please use the handset phone.
Am I clear now?
Yes.
First of all, congratulations on great set of numbers. Madam, this is for India's CEO. Madam, when can we expect a dividend? We are an equity holder holding the stock for last four years.
You know, as we articulated, we see the you know, growth in each of our businesses. We will keep evaluating, you know, as we go forward, the requirement of capital in each of the businesses, and I'm sure these decisions appropriately will be taken by the board.
Mr. Vinay, does that answer your question?
Yes.
The next question is from the line of Sahej Mittal from HDFC Securities. Please go ahead.
Hi. Thanks for taking my question. Firstly, I mean-
Mr. Mittal, sorry to interrupt you. Volume is very low from your line. Please increase it.
Is it better now?
Sorry, can you hear sir?
Yeah. Hi, thanks. One follow-up on the Health Insurance business. I mean, firstly, what's the claims ratio for this quarter?
No, it's close to about 56%-57%.
Mayank, where are we in terms of achieving our breakeven? You said that we achieved something around in the fourth quarter of 2022. Can you just restate that?
Yeah. The important point for us was to demonstrate the superiority of our unit economics given the differentiation in the model that we have vis-à-vis industry. Therefore it was, as I mentioned in the past, probably the fastest ever quarterly breakeven that any Health Insurance company has had. Now, as we look forward, you know, the entire category has very large growth opportunity. If you've tracked it you know that from what government is trying to do through the universal healthcare coverage and the National Digital Health Mission and the opportunity this throws up. The regulator itself has given a clear ambition. We are continuing to explore that growth opportunities and, you know, what that would imply in terms of its impact on the profitability et cetera.
I think the core is unit economics must be profitable and we must leverage the growth opportunity to its fullest. You know, we are of course very encouraged by the fact that our model has been liked by large players like, say, the Abu Dhabi Investment Authority and not just the induction of capital, but the fact that the valuation that they gave us is among the highest in the industry is a testament to the core economics of our model. Therefore, we would not like to let go any growth opportunity that's there before us as we look at the Health Insurance category.
Got it. I mean, in terms of our claims and combined ratio, where do we see the claims and combined ratio in next 12 and 24 months?
I'm happy to have a separate conversation with you to get into those details, if you want.
Sure. One question on Life Insurance side, for Kamlesh. I mean, you know, given that we are already in the rising interest rate environment, how are we looking at the non-par product? I mean, are we repricing that product to make it fully attractive, for the FD customers if they go out to a bank? If you could throw some color?
For non-par mix, we have the ability to reprice it based on the market scenario. If you look at over the last t hree months' time, I think we've got significant opportunities in our new products to reprice. Like I said, the FMP product, it was an opportunity. We did the first of several hundred crore acquisition there. As I'm speaking to you in the second half of November, we'll have an opportunity to reprice that product. We follow a reasonably active strategy on that. From a risk management point of view, we've always stated this, that the expected maturity benefits, whatever we have to do out of our guarantee product, we fully hedge it through FRA. That's what we do on the risk management philosophy. Rightfully, as like asked by you, we've actually repriced at different points of time when the interest rates have gone up.
Got it. In the traditional business, if you could, give out the straight PAR and non-PAR business. I guess it's not there in the presentation?
It's there in one of the slides on details of the product. We followed an active non-PAR strategy for the first five and a half months of this year because I think there was an opportunity in the marketplace. We didn't have a product of the PAR price which would have garnered share. Happy to say that we launched that in the back end of September. The 65% levels of non-PAR contribution that you would have got in the first five months of this year, you will see that number come down to roughly around 50 or 51% for the second half of the year.
Because the PAR product that we have launched in traditional has already started giving us 14%-15% contribution in the traditional mix. Like I mentioned in the beginning, we are hoping that the protection part of the business in the second half of the year will be higher than what it was in the first half of the year.
Sure. Thanks.
Thank you. Ladies and gentlemen, considering the time constraint, this was our last question. I would now like to hand the conference over to Ms. Vishakha Mulye for closing comments.
Thank you so much all for joining the call. Look forward for more interactions as we go forward. Thank you.
Thank you. Ladies and gentlemen, on behalf of Aditya Birla Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.