Ladies and gentlemen, good day, welcome to the Q4 FY 2026 earnings conference call of Aditya Birla Capital Limited. As a reminder, all participant lines will be in the listen-only mode. 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 and then zero on your touchtone phone. I now hand the conference over to Ms. Vishakha Mulye, MD and CEO, Aditya Birla Capital Limited. Thank you. Over to you, ma'am.
Thank you, good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q4 of FY 2026. Joining me today are senior members of my team, Bala, Rakesh, Pankaj, Kamlesh, Mayank, Pinky, Vijay, and Hitesh. I will cover our strategy, financial and business performance, followed by a discussion on performance of our key businesses by our business CEOs. Indian economy continues to demonstrate resilience amid heightened global uncertainty and supply chain disruptions arising from the war. Underlying growth momentum in India remains strong, anchored on domestic demand and investment activity. While external volatility and energy prices pressures warrant close monitoring, inflation remains broadly manageable and policy contentions are stable. At Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology.
I'm delighted to share that in April, we concluded our equity fundraise of INR 2,750 crore in Aditya Birla Housing Finance from Advent International post receipt of all requisite approvals. Now coming to the financial and business performance. Our consolidated profit after tax, excluding the one-off items, increased by 30% year-on-year to INR 1,124 crore in Q4 of FY 2026. For the full year of FY 2026, including the one-off item, our consolidated profit increased by 21%. Our total consolidated revenue grew by. Sorry, 12% year-on-year in Q4 of FY 2026 and 14% year-on-year in FY 2026. Moving to growth across businesses.
During the quarter, we built on our strong growth trajectory across our businesses seen in the previous quarters and further strengthened our market position. Disbursement in NBFC business grew by 28% year-on-year to INR 24,950 crore and in HFC business by 37% year-on-year to INR 7,980 crore in Q4 of FY 2026. Our NBFC portfolio grew by 27% year-on-year to around INR 1.6 lakh crore, driven by growth in secured and unsecured businesses and personal and consumer loans. HFC portfolio grew by 53% year-on-year to about INR 47,450 crore. In insurance businesses, we remain among the fastest-growing companies.
In FY 2026, the individual first year premium for our life insurance business grew by 15% year-on-year, and gross written premium for our health insurance business grew by 39% year-on-year. In our AMC business, the quarterly average mutual fund AUM grew by 14% year-on-year to about INR 4.35 trillion. Moving to profitability. The strong growth across businesses was accompanied by increase in profitability. In NBFC business, the profit after tax increased by 27% year-on-year to INR 825 crore in Q4 of FY 2026. The ROA increased by 6 basis points year-on-year and sequentially to 2.31%. In HFC business, the profit after tax doubled year-on-year to INR 200 crore in Q4 of FY 2026, and INR 647 crore in FY 2026.
The ROA increased by 63 basis points year-on-year and 11 basis points sequentially to 2.07%. Despite the changes in GST, there was an improvement in the profitability of our insurance businesses. In life insurance business, our VNB margin expanded by 260 basis points year-on-year to 20.6%. In the health insurance business, our combined ratio improved from 105% in FY 2025 to 103% in FY 2026. Moving to quality of portfolio across our businesses. At Aditya Birla Capital, we follow prudent risk management practices with a strong emphasis of return of capital. We saw a strong quality trend across our businesses despite volatile market conditions and uncertainties in the operating environment.
The GS2 and GS3 loans in NBFC businesses declined by 38 basis points sequentially to 2.42%, and HFC business declined by 19 basis points sequentially to 0.76%. We have seen no material impact from geopolitical tensions in West Asia on our portfolio. However, we continue to be watchful and will calibrate our strategy by closely monitoring the ongoing developments. In our AMC business, the fund performance remains strong with over 75% of equity AUM in top two quartiles for one-year returns. Moving to digital and technology. We continue to leverage data and technology as a core growth enabler. AI is now becoming a core operating layer for us, and we are scaling up its uses across various areas such as underwriting, sales, voice calling, audit and compliance, customer service and operations.
This will significantly enhance customer experience, reduce turnaround times, and improve productivity. Our business CEOs will take you through the select use cases in more detail. At Aditya Birla Capital, we remain excited about the long and medium-term opportunities in the Indian economy despite the near-term uncertainties and volatilities. Our strategy, disciplined execution, and building blocks that we have put in place give us the confidence to sustain growth, gain market share, and improve profitability while maintaining strong portfolio quality across our businesses. We will continue to closely monitor the ongoing developments in the macroeconomic environment and take appropriate interventions to recalibrate our strategy if necessary. Now, I request Rakesh to take us through the performance of NBFC businesses. Over to you, Rakesh.
Thank you, Vishakha. Good evening, everyone. I'm pleased to report a very strong close-closing of the financial year 2026. In quarter four FY 2026, our AUM reached to INR 159,916 crores, reflecting an 8% quarter-on-quarter and 27% year-on-year growth. At this growth rate, we would be amongst the fastest growing diversified NBFCs operating at this scale. Bottom line delivery remained robust with profit after tax for the quarter growing 7% sequentially and 27% compared to the same period last year. We nearly doubled our AUM and profits in the last three years, demonstrating a track record of building a franchise that delivers industry-leading growth with strong commitment to scale profitably. This year has been a remarkable journey for us. I would like to share a few milestones achieved.
First, our AUM crossed INR 1.5 lakh crore in Feb, with our focus segments, retail and MSME AUM surpassing INR 1 lakh crore. We delivered highest ever quarterly disbursement of INR 25,000 crore, up 16% quarter-on-quarter. From an AUM growth standpoint in quarter four, nearly 85% of the growth came from retail and MSME segments. Udyog Plus, our proprietor B2B platform, nearly doubled in scale this year with its AUM crossing INR 5,000 crore. From asset quality point of view, our credit cost was at 1.04% in quarter four, is our lowest ever. Now coming to quarter performance and starting with the new business sourcing, our disbursement for the year was up 25%, driven by strong traction in retail and MSME, our focus segments for growth.
Together, these segments accounted for 68% of the total disbursement and grew 33% year-on-year. This performance reflects sustained improvement in employee and grants productivity enabled by our deliberate reengineering of customer journeys end to end. Since the start of the year, turnaround time across retail and MSME product journeys have reduced by over 30%. These gains have been powered by deeper integration with digital public infrastructure, efficient file processing, and upgrades to our underwriting platforms with best-in-class rule engines and refreshed scorecards. Collectively, this has improved the speed and precision with which we calibrate risk cohorts throughout the year, eliminating the need for manual rework. This year, we also expanded our MSME proposition with new product launches, which has seen a very encouraging response.
In our personal and consumer business, we see steady momentum returning with disbursement growing by 60% for the full year to INR 18,738 crores. As a result, the AUM grew 8% sequentially and 38% year-on-year to INR 21,432 crores. The mix in the total AUM improved by 106 basis points to 13.4%. This portfolio has seen continued cohort corrections throughout the year. Also initiatives such as use of AI calling bots and behavioral analytics have led to higher front-end efficiency and nearly half the flow rate compared to last year, resulting in superior asset quality outcomes. The gross Stage 2 and 3 for the personal and consumer loans portfolio reduced by 50 basis points sequentially and 260 basis points year-on-year.
Gross Stage 3 for this segment stands at 1.3% as of March 2026. In quarter 4, we disbursed INR 12,023 crores to MSME, registering a 21% sequential growth. As a result, our MSME book grew by 31% year-on-year to INR 91,451 crores, comprising 57% share in the overall AUM. Out of this, 81% is secured and 19% is unsecured. We continue to be a category leader in secured MSME segment in terms of growth and asset quality. Our secured MSME AUM grew at 27% year-on-year, which is faster than the industry growth. The asset quality for this segment continues to be healthy and best in class on the back of strong cash flows and the collateral.
The gross Stage 3 for this segment stands at 1%, down 20 basis points sequentially and 50 basis points year-on-year. In our unsecured business loan segment, we saw the disbursement grow at a healthy 28% year-on-year in Q4. This growth comes on the back of consistent risk cohort calibration and sourcing undertaken throughout the year. Growth in this segment benefited from new product launches, which now comprise nearly 20% of full year disbursement with our proposition for professionals doing exceedingly well. The Udyog Plus, our proprietary MSME platform, now supports a full suite of trade credit solutions offered digitally and is recognized amongst the top non-bank finance on trades exchange. This growth has also supported a strong improvement in asset quality with GS2 and GS3 down 90 basis points sequentially.
Gross Stage 3 for unsecured business loans stands at 1.4%. 14% of the gross Stage 3 book is covered under the government guarantee scheme, excluding which the gross stage is at 0.9%. Our corporate segment grew 3% quarter-on-quarter and 15% year-on-year. This segment now comprises 39% of our overall portfolio in line with our strategy to focus on retail and MSME businesses. Asset quality in our wholesale business also continued to improve, with GS 2+ GS 3 reduced by 60 basis points year-on-year. Coming to portfolio quality at an entity level, our gross Stage 2 and gross Stage 3 stands at 2.4%, improving by 38 basis points sequentially and 136 basis points year-on-year.
At these levels, our gross Stage 2 and Stage 3 would be our lowest ever in the last 5 years. I further wish to highlight that about 72% of our book is secured. Our overall Stage 3 book is well provided with a PCR of almost 48%, which has improved by 358 basis points over last quarter. The impact of improving asset quality is clearly visible on credit costs as well. Our credit costs for the quarter reduced by 19 basis points to 1.04. The full year credit cost reduced by 13 basis points to 1.18%. In fact, our credit cost has been one of the lowest among diversified NBFC and lowest we have seen in the last 5 years.
Moving to profitability, our net interest income for the full year has increased by 18% to INR 8,170 crores. Net interest margin, including fees, was at 6.08% for the quarter and OpEx to AUM ratio for the quarter was at 2%. In quarter four, we delivered profit after tax of INR 825 crores, registering a growth of 7% quarter-on-quarter and 27% year-on-year. The full year profit grew 20% to INR 3,001 crores. The ROA for the quarter increased by 6 basis points to 2.31%. We continue to invest in AI to transform how do we do business, and I am happy to share our progress in realizing measurable gains across scale, productivity and customer experience.
Across scale and servicing, AI-driven channel intelligence enables more autonomous interactions across voice, email, and mobile. By end FY 2026, 65% of contact center calls and 71% of service emails were straight-through paths, driving a seamless digital experience for our customers. Our loan origination journeys are powered by AI to enable fraud detection by analyzing identity data, digital footprints and behavioral signals in real-time, flagging anomalies and strengthening onboarding and underwriting decisions without adding manual friction. In credit and underwriting, AI and ML are embedded across decisioning workflows, including AI copilots for credit assessment memos. This has improved credit manager productivity, reduced underwriting turnaround times, and strengthened consistency, governance, and cohort monitoring. In collections, GenAI-powered bots enhance contactability, call quality, and self-cure outcomes. AI-led pre-delinquency management optimizes engagement, timing, and channels supported by 100% call coverage and automated audits.
Across operations, GenAI use cases span grievance handling, agent upskilling, digital contracting, automated letters, and real-time service MPAs, strengthening operating efficiency and scalability. Going to FY 2027, retail and MSME segments will continue to pivot our growth strategy. We will continue to deepen our relationship with customers by offering relevant and timely solutions. We will further leverage our sourcing capability through scaling up the new product variants and leverage our proprietary digital platforms like ABCD app and Udyog Plus for direct sourcing. Overall, our approach remains consistent, grow responsibly, stay close to our customers and deliver steady long-term value for our stakeholders. With that, I will now hand over to Pankaj Gadgil, Managing Director and Chief Executive Officer of the Aditya Birla Housing Finance Ltd.
Thank you, Rakesh, and good evening, everyone. Let me begin with the key highlights for FY 2026. We recorded our highest ever disbursements of INR 25,332 crores, registering a growth of 44% year-on-year. AUM has reached INR 47,452 crores, registering a 53% year-on-year. Contribution of the ABG Group stands today at 17.4% of retail disbursement. Stage 2 and 3 reduced to 0.76%, improving by 63 basis points year-on-year. EBT of INR 832 crores, increasing 98% year-on-year, and ROA at 1.88% and ROE at 14.27%. For more detailed financials, please refer to slide 31. Now covering the strategic highlights and initiatives. FY 2026 has been a pivotal year for the entire housing industry, supported by strong structural tailwinds, rising urbanization, improving affordability, and an increasing homeownership across income segments.
At ABHFL, our guidance at the beginning of FY 2026 was to achieve an ROA of 2% to 2.2% over the next 6 to 8 quarters. I am pleased to share that we have accelerated this journey with ROA at 2.07 in quarter 4 FY 2026, supported by strong operating leverage and disciplined execution. Our digital transformation journey, initiated in FY 2023, has delivered significant outcomes over the last three years. We have delivered 4x processing scale-up in processing capacity, 96% improvement in productivity, CAD improvement from 21 days to 12 days, and Stage 2+ Stage 3 has improved from 4.99% in FY 2023 to 0.76% in FY 2026. These outcomes strengthen our confidence and position as well to scale sustainably. Now covering our outlook.
Given the industry outlook and our performance so far, we remain focused on consistent growth leadership with best-in-class portfolio quality while remaining mindful of the macro environment. On distribution, we have undertaken a comprehensive assessment of our branch footprint and identified high potential geographies to enhance both coverage and conversion. Accordingly, we plan to open 100+ branches in FY 2027 with expansion in Tier 2, Tier 3 markets to increase distribution width and deepening penetration in metro and Tier 1 cities. This expansion will support us to achieve a INR 1 lakh crore AUM in the next 24 to 30 months. Tech, digital and AI. As mentioned earlier by Vishakha, tech, digital and AI continue to be core pillars of our strategy. We are embedding AI across customer and operational journeys, supported by structured capability building through global best practices and internal immersion programs.
Let me now briefly highlight a few use cases that are being implemented across ABHFL. FinWise for sales manager productivity. Using AI-enabled doc assist to ensure the right documents are collected upfront for first-time right logins. Enhancing our industry-first AI copilot FinWise for contextual objection handling and predictability for our teams. FinWise Plus is being launched for enabling channel partners with instant knowledge access, resulting in higher counter share for us. Second, FinEngage. This is for top-of-the-funnel engagement. This enables query handling from login to disbursement, enhancing sales manager face time and higher productivity. Third, Fintellect. This focuses on back office automation and faster credit decisions. Automated sufficiency and completeness checks, example, bank statement period validation, cross-document consistency checks such as BOP, AI-generated insight and business credit assessment memos to support faster underwriting decisions. Fourth, FinServ Assist, enhancing customer experience.
This enables contextual customer interactions, driving a 40% reduction in repeat calls and a measurable uplift in Net Promoter Score. In summary, in FY 2027, we expect NII and credit costs to be range bound. Growth led by capacity and productivity will continue to drive operating leverage, leading to an ROA of 2.1%-2.2%. Thank you for the attention. With this, I'll now hand over the call to Bala, MD and CEO of our asset management company.
Thank you, Pankaj, and thank you and good evening to everyone. At the ABSL AMC, our overall asset management, including alternate assets, outstand at INR 421 crores, growing about 17% year-on-year. Our mutual fund quarterly average assets stood at INR 433,000 crores, representing 14% year-on-year increase. Within this, our equity mutual fund quarterly average AUM stands at approximately INR 197,000 crores, 17% year-on-year growth. Our SIP contribution for March 2026 improved to INR 1,204 crores, growing by 11% quarter on quarter, supported by INR 40 lakh contribution coming from SIP accounts. Total investor folio for March 2026 stood at INR 1.1 crores.
The new SIP registration for the quarter at approximately INR 6 lakh, growing by 16% on a quarter-on-quarter basis. Over the last year, we at ABSL AMC have made meaningful progress in further strengthening our investment team and sharpening our portfolio construction process, resulting in sustained improvement in investment performance and stronger investor confidence and consistent flows into our flagship funds. Moving to our alternate business, the PMS and AIF category has maintained a strong momentum, complemented by a comprehensive suite of credit offerings. Our PMS and AIF assets grew significantly from INR 11,300 crores in Q4 FY 2025. That is around INR 570 crores in Q4 FY 2026, representing 3 times growth over the previous year. The ESIC mandate account for approximately INR 27.4 crores as of March 2026.
Our PMS and AIF AUM excluding ESIC registered year-on-year growth of 14%, reflecting healthy underlying momentum. On the APF mandate, we have signed all the agreements and are operationally ready to receive the fund flows, which will come up very, very soon. On the real estate front, our AUM grew by INR 740 crores, registering 14% year-on-year growth. We currently have a fundraising underway for the ABSL Real Estate Credit Opportunity Fund Series 2, focused on senior secured lending to post-approval brownfield real estate projects across tier 1 cities. Our passive business is witnessing significant momentum with the Q4 FY 2023 average AUM at INR 14,200 crores, reflecting 25% year-on-year growth.
ATF quarterly average AUM grew at 60% year-on-year, significantly outpacing the industry growth and an expanded base of 16.9 lakh folios, supported by a diversified 54 product suite. We have invested in line with ABC businesses in strengthening our technology and digital ecosystem with the launch of our new investor app and enhanced partner app. These platforms reflect our commitment to simplifying how our customers interact with us by making them more intuitive and transparent. Beyond infrastructure, we have built an AI foundation across our customer journeys through voice AI, WhatsApp integration, and intelligent chatbot that engage customers in ways that resonate with their preferences. We're also happy to announce that we have incorporated our wholly-owned subsidiary, ABSL Ventures International IFSC Limited at GIFT City, and have subsequently obtained all the required license to further strengthen our presence.
Moving to financials, Q4 FY 2023 revenue from operations are INR 4,858 crores as compared to INR 429 crores Q4 2025. Q4 FY 2023 operating profit is INR 252 crores as compared to INR 230 crores in Q4 FY 2025. Q4 FY 2023 profit after tax is INR 87 crores as compared to INR 228 crores in Q4 FY 2025. For the full year, the revenue from operation is stood at INR 1,843 crores as compared to INR 1,633 crores. Operating profit was at INR 1,051 crores as compared to INR 941 crores in FY 2025. Profit after tax, INR 975 crores as compared to INR 913 crores in FY 2025. With this I'll hand over to Kamlesh Rao, MD and CEO, Aditya Birla Sun Life Insurance Company.
Thank you, Bala, good evening to all of you. Some quick highlights of the life insurance business at ABSL. The overall industry registered a growth of 10% in financial year 2026, with the private life insurance industry growing at 12%. During the same period, ABSL clocked a premium growth rate of 15% in the individual life insurance segment. The components of this growth were proprietary business growing at 3% and the partnership business growing at 23%. In the agency business, we focused on getting the retail part of our business better, in our direct business, we continued our growth backed on productivity.
In our proprietary business, the product mix is favorable for further growth, and hence in order to scale further, we have added 26 more branches, and with this, we now have a distribution network of 450+ branches across the country. The partnership business grew at 23% CAGR across all our existing 12 partner banks. In the bancassurance space, we now have a healthy mix of private as well as public sector banks, and have banks that have both large national presence as well as ones that dominate the regional space. Mindshare in the large banks have grown, and in the large part of the smaller private sector as well as the public sector banks, we continue to have a dominant mindshare of their total business.
At Axis Bank, we started with being present in 25% of their total business, and by the end of Q3 last year, we got access to more zones backed by our good performance in the bank. We will, for this year, have access to more than 50% of the business of the bank. The partnership business has a balanced product mix with margins going up through the year for all banks. We now have 12 banker tie-ups, and we will continue to expand our banker presence further going forward. In the product mix of the individual business, traditional business including protection increased to 67% and ULIP came down to 33%, helping expand margins for the year. We are seeing a healthy growth in the annuity segment with 10% of our retail new business coming from this segment now.
In the group life insurance segment, the private industry grew by 24% and overall industry grew by 19%. Like we have mentioned in previous quarters too, we have had a calibrated approach to interest rate sensitive business this year, which saw us degrow in the first half of the year. We are happy to share that for the full year we have grown by 31%, enabling us to get back to rank 4 in the group life insurance business. A large part of this business for group has come from the profitable unit-linked business. We continue to be at rank 2 in the ULIP AUM in the industry with an AUM size of INR 16,000+ crores in the group business.
Credit life business delivered strong growth of 40% during FY 2026, supported by all partners and with 33% now of our business coming from the captive channels of our own NBFC as well as housing finance. In the group term life insurance business, we continue doing business at 18%-20% ROE and with a very healthy renewal book. Group AUM now contributes 26% of the overall AUM at INR 29,000 crores. Our total premium for FY 2026 stands at INR 24,779 crores, up by 20% from last year. The 13-month persistency for us grew in the last quarter, reaching a healthy 86.1% for the full year.
Renewal premium grew by 17% with growth across individual as well as the group life insurance segment. Our digital collections now account for 83% of our annual premium. We continue to work on customer lifetime value, which is reflected in our upsell ratio of 32%. On quality parameters, our overall customer NPS now stands at 66 compared to 59 last year. Our OpEx to premium ratio stands at 21.2%, including the GST and the labor law impact for the year. Total AUM now stands at INR 1,10,505 crores, with a year-on-year growth of 11%. 22% of this AUM is in equity and the balance 78% in debt. On YTD basis, more than 82% of our funds continue to outperform as compared to the respective benchmarks.
Our digital adoption across various areas is demonstrated in the investor deck in slide 48. 100% of the new business customers are onboarded digitally. 83% of all our services are now available digitally. 67% services are HTP, and our customer self-service ratio now stands at 94%. At Aditya Birla Sun Life Insurance, we are bringing our AI initiatives together under a focus program we call Saras.ai, designed to improve how we operate across policy issuance, underwriting, and servicing. Through Saras.ai, we are reducing manual effort, enabling faster underwriting decisions, and making policy issuance and servicing more responsive, especially through AI-led handling of conversations across email, calls, and WhatsApp. We are also equipping our advisors with better insights and tools to improve productivity and customer engagement. The focus is clear.
Use AI to enhance human judgment, not just replace it, and drive greater speed, consistency, and quality in everything that we do. On value, performance parameters, our solvency stands at 1.78 or 178%. Embedded value is now at INR 15,447 crores, which grew at 12% with an ROEV of 13.2% for the year. Our net margins, like Vishakha mentioned, are now at 20.6%, 160 basis points higher than last year at 18%. We observed margin expansion due to a controlled ULIP mix and increase in protection and annuity mix, apart from healthy rider attachments. The traditional business did see an uptick in margins on account of favorable interest rate and the steepness of the yield curve through the second half of the year.
It partially helped margins and partially helped us offset the GST impact for the year. Our guidance continues to grow the individual FYP at a CAGR of 20% plus for the next three years. While achieving this growth, we intend maintaining our current VNB margins in the 18%-20% range, and in absolute numbers, double the value of our net VNB in the next three years' time. With this, I hand over to Mayank, India CEO for Health Insurance.
Thanks, Kamlesh. Let me now share an overview of the performance of our health insurance business. It was a very interesting year for the insurance sector. Reduction in GST to NIL, new insurance act, new labor code, with leaders being worked towards transition to IFRS reporting from FY 2027. Our view is that all changes supportive for sector's long-term growth, but with some issues to address in the short term. Presenting our performance, we continue to build on growth momentum in maintaining our position as the fastest-growing SAHI player during the entire year. For FY 2026, as per the old accounting regulations, we achieved a gross premium of INR 7,292 crores, representing a strong 39% year-on-year growth. Even on a 1 by N basis, our gross premiums stood at INR 6,855 crores, reflecting similar 39% growth.
Our market share thus in SAHIs have improved from 12.6% to 13.7% and year-on-year increase of 110 basis points. We grew strongly across both retail and group businesses. The retail franchise experienced a large 43% year-on-year growth, and it continues to be diversified across retail distribution channels. The proprietary channel with an agent base of over 1.86 lakh agents registered a 36% growth. All our major bank and digital alliance partnerships also experienced good growth. Our corporate business delivered a growth of 35% in the last year, driven by our focus and disciplined strategy to create a sustainable franchise in this segment. As we shared earlier, we have now taken our differentiated Health First model to corporates also, and we are seeing very positive response from them.
On the profitability front, our net profit for FY 2026 stood at INR 39 crores as per the new accounting regulation. Profit includes an impact of new labor code and net GST impact of close to INR 40+ crores. As per the old accounting regulations without one by N, the net profit for FY 2026 stood at INR 85 crores. Our combined ratio for FY 2026 under the old accounting regulations was at 102%. Under the new accounting framework, under one by N, the ratio was 103% versus the 105% on a comparable basis. These improvements underscore our continued focus on unit economics and thus overall profitability ahead of industry. We do believe our robust growth and superior unit economics driven by our digitally enabled and differentiated Health First model will continue to help us grow ahead of the market.
Our Health First model is resonating with our consumers, with nearly 40%-45% of our consumers, retail consumers engaging with us for their health, where we use an AI-driven consumer engagement engine. 11.25% of our eligible consumers earned good health-based incentives, which we call health returns, up from 9% last year, reflecting a very deep engagement with our wellness ecosystem. These consumers continue to exhibit 8% lower loss ratio and 11% better persistency on an absolute basis, and these are shown in slide 59 and 16. Similarly, investments in managing customers with high health risks through interventions for more than 270,000 lives have led to improvement in their loss ratios of more than 7%-8%. Overall, this has helped keep our retail loss ratio well under control.
We believe this business model, which now other competitors are also trying to look at seriously, but needs a large investment commitment and persistent efforts over many years to mature, gives us a large competitive advantage as we scale further in this, including the corporate side of our business. In our promise for insurance, more focus is on claims experience, where we have made investments in the state-of-the-art AI ML-driven claims adjudication engine, which continues to enhance both customer satisfaction and also eliminate leakages and wastages. We now process more than 25% of our pre-auth requests straight through with no human intervention. Similarly, we are investing consistently in data analytics capabilities to create efficiencies across the business life cycle. For example, apart from claims, as I shared earlier, usage of GenAI helped bring in 35%-40% productivity improvement in underwriting alone.
We use agentic AI extensively in renewals management, leading to significant cost reduction, but also better customer confidence leading to very good traction in the renewals. Investment in three capabilities across consumer health and insurance life cycle has helped us to use our consumer app, Activ Health, to create very high consumer engagement. It has led to our MOU crossing 6 lakh consumers. We continue to remain very optimistic for our business. FY 2027 marks a significant milestone for ABHI as we enter our 10th year of operations. We will continue to invest more in our proprietary distribution franchise, work towards a 100% core, scale our differentiated Health First approach, also even more deeply embedding AI and emerging tech in our business. We believe we are well positioned to outform the market and deliver sustainable value.
Thank you, and I'll now hand it back to Vishakha for her closing remarks.
Thank you, Mayank. This concludes our remarks on Q4 FY 2026 performance, and we'll be very happy to take if there are any questions.
Thank you very much. We will now begin with the question and answer session. Your first question comes from the line of Chintan Shah from ICICI Securities. Please go ahead.
Thank you for the opportunity, and congratulations on the quarter. This first question on the margins. Margins on the NBFC business to Rakesh. The margins have actually compressed like almost 4 basis points. This is despite like strong growth seen in the unsecured business as well. This unsecured growth has been kind of continuing since the last two quarters now. When do we see the margins improving? Also, can you give the delta between secured and unsecured yields? Yeah, that's the first question.
Chintan, if you look at, the margins have been more or less stable over the previous quarter. If you see from quarter 1, the quarter 1 of last financial year, the margin was 5.97, which is around 6.08, as you rightly mentioned. Slightly 4 basis point down because there were some MTM losses and all which were there. As we grow our unsecured business, you are right. That last couple of quarters, unsecured business is growing. Our unsecured personal consumer is still 13.4% of our overall product mix, which used to be 19%. Our unsecured business, which is also higher yield compared to the overall portfolio, that is at 11%. Combined together, unsecured business and personal and consumer is around 23.4%.
If we improve both these segments even by 200 basis points in the next two, three quarters, we will see expansion of margins by almost 25, 30 basis points. That's how we are really looking at in terms of improving. We did this calculation in terms of if the growth sustains at the current level, then what is the kind of margin we can look at.
Sure. Correspondingly, with the rise in margins also, I think credit cost seems to be at almost historical low. There could be also some normalization expected here, plus, growing in the unsecured piece would also entail a higher credit cost requirement. Probably means, I'm just trying to understand, in terms of ROE expansion. As you already mentioned, 25, 30 basis on the margin front and somewhat probably normalization of the credit cost front. What could be the ROE we could be looking at in 2027? Yeah.
We are looking at, by end of this year, we are looking at 2.5% ROE. This is what we are looking at. As I said, the margin expansion is the one way in terms of achieving that. Your point on credit cost, yes, credit cost of 1.04% is the lowest for us. As we grow our unsecured business, we expect this to, we have always guided that it will be in around 1.1%-1.2% kind of a range, it will remain in the similar range, is what we expect. Even if the unsecured business grows.
Okay, sure. Lastly, on the AI front, I think we talked a lot about AI, and we probably seem to be making a sizable investment. Ultimately means, what is the probably result kind of expected from this? I think margins, the credit cost is already at historical lows, probably won't delta won't come much from that front. Also NIMs, we are expecting it to improve. That is largely due to change in the mix. OpEx is likely to further moderate due to AI or is it the customer quality which is likely to improve? Yeah, some thoughts on that would be helpful. Thanks.
In terms of if you look at underwriting, I think the stages can come down in terms of the earlier. If there were multiple stages, that can come down, and that has improved our turnaround time, which I spoke about in my own opening remarks. Clearly the customer experience, these things will improve significantly and which is improving. We are seeing our Net Promoter Score both on onboarding and service going up. Self-cure on collections has significantly improved in terms of because of the usage of AI and bots. Across, we should see our productivity and employee productivity improving, customer experience improving. In terms of your OpEx, if you see for the full year it's 1.93%, for the quarter it's 2%.
It's probably one of the better cost-income ratios in the industry. We will see what efficiency we can draw on this line as well.
Sure. This is really helpful. I'll get back in the queue for further questions. Thank you and all the very best.
Thanks, Chintan.
Thank you.
Thanks.
The next question comes from the line of Gao Zhixuan with Schonfeld. Please go ahead.
Sorry. Thanks for the opportunity and congratulations on the results.
Sorry to interrupt. Mr. Gao, your line is quite muffled. May I request you to use headset, please?
Yeah. Am I audible now?
Sir, it is still not.
Am I audible?
Sir, your line is muffled.
Am I audible? Yeah. Am I audible?
This is slightly better. Management, are you able to hear the participant clearly?
Not with absolute clarity. It's
Mr. Gao, we request you-
Okay. Please go ahead, Zixuan.
On the margins, just want to follow up on that. You know, ROCE margin can define our unsecured plus PL and consumer mix have went up 2 percentage points year-on-year. The margin is almost, you know, slightly changed from year-on-year. I just want to understand why hasn't the increase in the focus area mix actually resulted in the margin improvement.
Margins mix on unsecured and personal loan growth. Yeah. I think, if I understood your question right, you are talking about that unsecured has grown and our margins, in terms of reflection on the margin. What I mentioned for my earlier question response also is that the overall product mix, if we look at, that is still at 13.4%. Personal and consumer was at 13%, and still at 13.4%. All other segments have also grown quite well. Still product mix is. Earlier we used to have 19%. Our personal and consumer used to be 19% of our overall portfolio, which two years back we had calibrated. We are coming back with the growth.
In the next two, three quarters, we will as it keeps growing, as I mentioned, by every 200 basis point improvement, there will be a margin expansion the way we see it in this business. I think if it continues to grow at the current rate, if you see last quarter we have grown by 8% quarter-on-quarter, and if that continues, in the next, two, three quarters, we will see the margins expanding.
Got it. Thank you very much.
Thank you.
Thank you. The next question comes from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi. Good evening. Thanks for the opportunity. A couple of questions. The first one is on your credit cost, I mean performance. FY 2026 having very great, and you are guiding again despite increasing unsecured, keeping it 1.1%-1.2%. Can you just help us, I mean, what is your kind of a base case assumption behind this 1.1%-1.2% guidance in terms of the current conflict? Because this current conflict is of course on certain scenario and that sort of is dragging on. Based on your kind of assessment, what is your base case assessment where you are guiding for this 1.1%-1.2%?
The first question is on if you were to look, I mean, at the margins, the kind of diversified business you have. Of course, I mean, you are the leaders in OpEx and credit cost is very impressive and that's why of course you're allowed to operate a slightly lower margin. When you are talking of margin expansion, it is largely driven by product mix. Based on the market dynamics and competitive analysis, can you sort of indicate where are you versus competition in terms of, you know, yield, your yields? Is it, I mean, that you are pricing it lower or it is kind of a parity to some of the, you know, mid-size bank or the large NBFC that operates?
I mean, how are you placed versus competitive dynamics in this segment in terms of yields you are offering? Because the kind of, you know, one of the best cost of fund you have, but the margins are kind of slightly, it looks like, they have moderated. Thanks.
Avinash, your first question was how are we giving, what is our base case in terms of the credit cost, which we are giving a guidance for. The reason for that is almost 72%, 73% of our loan book is secured. When I say secured, it's secured by a collateral which is not depreciating in nature, which is appreciating in nature. Majority is backed by real estate collateral, primarily the SME owners, self-occupied, residences, offices. That's how. In terms of pricing, if you look at and you mentioned, we compare quite well with the other NBFC in this segment. Our yield in this segment is almost 12.2%, 12%, 12.2% odd. I think quite well priced. What was the other question?
Risk market CDO.
Which is what? In the secured, if you look at yields, I think our pricing is quite well priced compared to the industry. In terms of how the margins, yes, we have one of the best cost of borrowing with best credit cost. I think from here on, as we still are personal and consumer is pretty small in the overall product mix. As I have been saying, 13% is our personal and consumer, which is a high-yield product for us, and that is still 13%. The moment it improves every 200, 300 basis points, you will see a margin expansion in this for us.
Credit cost because still, even 200, 300 basis points we go up, still 70%, close to 70% of our loan book will be secured. That's the reason we are quite confident on the credit cost and with that change in the product mix, expansion of margin.
Okay. Thank you. Thank you.
Thank you. The next question comes from the line of Arun Antony from JM Financial. Please go ahead.
Hi. Hi, sir. Thank you for the opportunity. Just a couple of questions. One, when I see, look at the numbers for this quarter, the OpEx growth has sharply outpaced the AUM growth, and this is for the last three quarters as well. If you could shed some light on why this OpEx growth has been increasing and specifically for this quarter. Another question would be, despite increasing the PNC exposure, the AUM numbers have been increasing, but disbursement figures have been broadly flat for the PNC as well as the unsecured space. Why is this also happening? These are my two questions.
OpEx has been, we have been seeing, our investment in our retail businesses and MSME business which we have been doing, over the last, few years and few quarters as well. That's, that's the only reason which on the OpEx side. As I mentioned it, there will be some normalization which will happen. That's the reason on the OpEx.
Is there any specific reason for the sharp rise in this quarter?
No, there's no specific reason for that.
Okay. Okay. Thank you.
Thank you.
On the disbursement piece.
Disbursement. Disbursement piece, I'll tell you, on the personal and consumer, as we have been saying, we are quite calibrative in terms of how much we will disburse. The disbursement is flattish, yes, and we are looking at a very, very calibrated growth in the current environment. On the unsecured business side, this last quarter also I had mentioned that there is a supply chain business and line of credit which we don't include in our disbursement numbers, because those are churning portfolios and that's the reason you don't see that kind of numbers in terms of disbursement, but that adds to the AUM.
Okay. Okay. Understood.
Some segment and some products which we don't count in our disbursements.
Okay. Okay. Excellent. All right. Thank you.
Thank you. The next question comes from the line of Mitesh Jain from Investec. Please go ahead.
Thanks for the opportunity. In housing finance also we have seen margin compression on a QoQ basis. What is the reason for that and what is the outlook for margins and ROA in the housing finance business for FY 2027?
Pankaj here. If you see the NII for Q3. Q3 NII was 5.22 for us and Q4 NII 5.03. Observation is the 19 basis has gone down. If we drill down it, you know, a bit deeper, you will see that the NIM actually is 4.13 for quarter three and it is 4.07 for quarter four. There's a 6 basis point difference in the NIM. Largely, I would say it was seasonality and also the competitive pressures on that side, which has actually led to a 6 basis, you know, decrease in quarter four. If you look at the other income, you know, element, there is 1.09% that we got in Q3, and Q4 we got 0.97%.
Other income typically is a function of three important parameters. One is, of course, the direct assignment that you do. Second is, through the insurance attachments that you make. You know, third is, any repricing that you have to do, you know, for any BT outs that happen. I'm happy to share that the BT outs are very consistent for us. Q3 and Q4 there is no, you know, broad difference. The DS was slightly lesser because DS typically you do for capital conservation, typically, and also for sometimes main, you know, ensuring that the PBC mix is up to scale. On both these fronts we are comfortable, so DS was slightly lower as compared to Q3.
That was, you know, therefore there was, you know, some kind of a kind of a gap to ensure, you know, business attachment was safe. The reason of the other income being down is essentially because the DS is low and, last but not the least, mark-to-market in Q4 was also there because, you know, some maturities are held to maturity and this others are also linked to market. All of us know how the G-sec actually moved. There was, you know, some loss that we also had on mark-to-market. That is basically the reason why when we see, you know, the overall NII being INR 5.03 versus INR 5.22.
As I mentioned earlier, you know, in my opening, you know, remarks, we are estimating the NII to be range bound in this year. They should be in the range of about 5.10 to 5.13. There will definitely be some compression in spreads, as you would know, the capital, you know, has come in, there will be some support that we'll have on the corp side of it. That should help us, you know, in maintaining the NII at the current levels that we are, you know, talking. We are demonstrating operating efficiencies as you would have noticed versus last full financial year against 2.94.
We have closed the year on OpEx to average loan book at 2.4%, so it is about a 50 basis points, you know, decrease that we have got. This year also we anticipate that number to be closer to about 2.10. You know, this is coming at the back of the 100 plus branches that we are opening. Actually we are building our operating efficiencies and net of, you know, increase in the branches. We expect the OpEx to average loan book to be in the range of about 2.13. That leaves us at 5.13 less, you know, 2.13.
That is 3%. With the credit cost being at 28 basis points we should have pre-tax ROE of 2.72, which should translate to an ROA between 2.10 to 2.15. That is, you know, what we are targeting, you know, right now. On credit cost, we're fairly, you know, confident because if you look at the trajectory of the credit cost, both in absolute and in %, you know, we have come down. Stage 2+ Stage 3 for us is amongst the top 2 in the industry. It is currently trending at 76 basis points with 44 basis points of Stage 3 and 32 basis points of Stage 2. Having a very strong Stage 2 performance gives a lot of confidence that the credit cost, you know, will be normalized.
Therefore, you know, our confidence of being in that ROE trajectory of between 2.1 and 2.15 I think is, you know, where we are. Along with a very, very robust, you know, growth. That's why I spoke about the INR 1 lakh crore of AUM in the next 24-30 months.
Sure, sure. From a medium-term perspective, how do you see ROA, ROE for housing finance business?
ROA mentioned for FY 2027, the ROEs will be in that range of 2.10%, 2.15% because currently the capital is, you know, has come in. You would have noticed INR 2,050 crores, you know, coming in already. Naturally, the ROE will be lesser than, you know, the last financial year. It will be in that range of about 9.5%-10%. Currently we are at 14.27% at the end of the financial year. The DY is becoming much, much better and it continues to, it will continue to rise because as you would have seen, we have always been in the DY of about 6.5%, 6.1%, 6.5%.
As the years will progress in the next, you know, 12 to 24 months, you will see the ROEs crossing 15%. That is, you know, our trajectory.
Sure. Now in, on life insurance, there is a negative operating variance and assumption change variance. What are the reasons for that?
In the bridge that you see, there are two aspects which are, we are on the verge of shifting from the IFRS regime to the IFRS regime. And typically in an IFRS regime, the conservatism that you have in your valuation interest rate actually does not unwind for you. What we've done is we've revisited some of our assumptions, as we build in, for moving into the IFRS regime in the next 1.5 years. It's supposed to be 2026 or 2027 because we asked for a forbearance to say we will go to IFRS in FY 2027. We've had some change in assumptions on the reduced paid up benefits on some of our products. That has got built in as we speak.
We are showing operating variance negative on account of these factors. Like I said, the large part of the reason is on account of change of the assumption, which we think when we move into from IFRS world to an IFRS world, it may be a prudent step to do at this point in time.
Sure. These assumptions are on which parameter? Persistence or?
Assumptions largely are on parameters related to, basically your portfolio getting a little better. For the lapses that you assumed, if they are lesser, some of it because it is lesser than what you planned for, you obviously need to bring in better reserving. Some of the assumptions that you make if the experience does not turn out to be the same. In a way, on a long-term basis it is good for the portfolio because you're seeing less lapses, so obviously it'll contribute to the embedded value growth in future times to come. You do this on an annual basis, and, we did this in the month of January. We do this every year.
Sure. In, in life insurance we have also been growing pretty well versus industry growth. How do you see growth next year, FY 2027?
Like I said, we've said maintain that we will definitely want to grow at 20% plus. Look at the CAGR of the life insurance business for the last two years. In individual we've been at about 23, 24 has been our CAGR for the last two years, and in group we've been at about 26, 27. Like I said, as we get new banker infrastructure, like I said, Axis we are present in only about 20%, 25% of their business for the whole of last year. It'll be close to about 50%. All of this will help us maintain that CAGR for sure in the next two, three years to come.
Sure. Sure. Last question is on NBFC. Have we seen a spread compression on a line of business basis? Because of overall margins have, there's a marginal decline in margin this quarter. Last quarter also I think margin there was slight dip. There has been a mix shift towards high-yielding portfolio, but that is not visible. Probably the numbers have been marginally shifted. On a line of business basis, have we seen a spread compression basically in secured business, are we seeing a spread compression?
No, Mitesh, we haven't seen any compression. It's primarily the outcome of the product mix is what it is. If you see from in quarter three, it has not compressed. In quarter two was 6.06, it improved to 6.12. It's 6.08 in this quarter. The reason I mentioned one is, yes, quarter four is slightly more competitive and everything else, but there was a MTM loss because of the G-sec on the which had gone up. That has impacted our margins by three, 4 basis points. Because we believe that it's quite stable and we should be able to improve from here.
Sure. Thank you, Vivek. That's it from my side.
Thank you. Ladies and gentlemen, due to time constraints, we will take this as our last question. I now hand the conference over to Ms. Vishakha Mulye for closing comments.
Thank you again for joining us today evening and we look forward to keep in touch. If there are any more questions, feel free to get in touch with any of us. Thank you.
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.