Aditya Birla Capital Q2 Review - Healthy AUM Growth Sustained; NIM Compression In NBFC, HFC: Motilal Oswal

Motilal Oswal Report

Aditya Birla Capital Ltd. has exhibited a significant improvement in operational metrics across all business segments in H1 FY24. But for some jitteriness around digital/fintech sourced consumer and personal loans, FY24 will see an uptick in growth, lower credit costs, and better return ratios.

Aditya Birla Capital's asset management business is likely to churn out better profitability, driven by an improvement in revenue as well as cost rationalization. Value of new business margin and persistency margin in the life insurance business continue to improve. The drag on consolidated profit after tax from other segments such as health Insurance will fall, improving the overall profitability.

We expect a consolidated profit after tax compound annual growth rate of 40% over FY23-26E. The thrust on crossselling, investments in digital, and leveraging ‘One ABC’ will lead to healthy return ratios, even as we build in a consolidated return on equity of ~15% in FY26.

We reiterate our 'Buy' rating on the stock with our SoTP (Sep-25E)-based target price of Rs 220.

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