Aditya Birla Capital Q2 FY27 Earnings Call: PAT Jumps 38% YoY, AUM Crosses Rs. 11 Lakh Crore (ABCAPITAL)

Broad-Based Beat: PAT Up 38% YoY, Lending Franchises Fire on All Cylinders

• Consolidated PAT of Rs.1,288 crore — up 38% YoY and 10% QoQ in Q2 FY 2026-2027; total consolidated revenue grew 31% YoY and 12% QoQ, which management attributed to the diversified business model and disciplined execution.
• NBFC AUM at Rs.1,76,557 crore — up 26.5% YoY and 5.4% QoQ; NBFC PAT crossed the Rs.1,000 crore milestone at Rs.1,008 crore (+41% YoY, +8.7% QoQ) with ROA at 2.45% (+25 bps YoY, +7 bps QoQ).
• HFC AUM grew 50% YoY — to Rs.57,373 crore (+11% QoQ); HFC PAT rose 73% YoY to Rs.261 crore with ROA at 2.12% and ROE at 11.47% in Q2 FY 2026-2027.
• Credit costs at 0.92% (92 bps) — best in the last 7 years, improved 24 bps YoY and 11 bps QoQ; NBFC GS2+3 at 2.31% (down 72 bps YoY) and HFC Stage 2+3 down 45 bps YoY to 0.65% as of September 2026.
• Macro backdrop — management noted the Indian economy continues to do well despite heightened global uncertainty, elevated commodity prices and tighter monetary conditions, while a deficient monsoon and higher food/energy prices have added inflationary pressure.

Retail-MSME Pivot, Gold Loan Launch, and a Deliberate Growth Recalibration

• MSME AUM crossed Rs.1 lakh crore — at Rs.1,00,119 crore (+30% YoY), now 57% of total AUM with a 79% secured / 21% unsecured mix; retail+MSME share of disbursements rose to 71% in H1 FY 2026-2027 from 67% in H1 FY 2025-2026.
• Gold loan launched August 2026 — 70 branches opened in the first 70 days with Rs.200 crore AUM; management plans a phased rollout of 200-300 dedicated branches by March 2027 (FY 2026-2027) and aspires to scale to 1,000+ branches over the next 3 years (through ~FY 2029-2030).
• New sourcing at Rs.24,708 crore — nearly at par with the highest-ever sourcing in Q4 FY 2025-2026; Rs.9,101 crore AUM added in Q2 FY 2026-2027, 85% from retail & MSME.
• Disbursement growth moderated to ~12% QoQ — vs a historical 20-30% QoQ trend; Rakesh Singh said the segment is being grown in a calibrated manner aligned to risk-reward, citing quarterly cycles and supply-chain finance utilization/repayment timing. Analysts flagged the slowdown; management framed it as deliberate, not demand-driven.
• Rate actions in Q3 FY 2026-2027 — ABF raised benchmark rates by 25 bps effective 26 October 2026 on the variable-rate portfolio (~70% of the loan book), citing the RBI's repo rate action, rising rates and inflation; ABHFL raised lending rates by 20 bps and hiked PLR by 20 bps effective 1 November 2026.
• HFC guidance — management is focused on building a Rs.1 lakh crore+ AUM franchise while moving towards 15% ROE and sustaining top decile asset quality over the next 8 to 10 quarters (horizon stated from Q2 FY 2026-2027).
• ABG ecosystem contributed 17.5% of retail disbursements — for ABHFL in Q2 FY 2026-2027; 101 new branches launched in FY 2026-2027 so far across metros, tier 1 and tier 2/3 markets.

ROA Already at Guidance Level, But Margin Expansion Remains Elusive

• 2.5% ROA delivered in Q2 FY 2026-2027 — management had guided to ~2.5% ROA by Q4 FY 2026-2027 and confirmed it is almost there already; management acknowledged (per analyst framing) that ROA gains are currently coming more from OPEX and credit cost than margin.
• No net margin expansion in Q2 FY 2026-2027 — ABF raised lending rates ~25 bps and the unsecured mix rose 1% QoQ, but the benefit was fully offset by higher cost of funds; NIM including fees stood at 6%.
• Incremental cost of borrowing rose 11 bps — between Q1 and Q2 FY 2026-2027; Rakesh Singh expects a further 5-10 bps increase in Q3 FY 2026-2027 if the rate-hike trend continues. Margin expansion expected only over the next few quarters (period unspecified).
• Liability-asset structure cited as advantage — borrowings 57% floating / 43% fixed vs asset book 30% fixed / 70% floating as of Q2 FY 2026-2027, aiding transmission of higher borrowing costs through repricing.
• Stage 2 (30+ dpd) at just 1% — of the overall Rs.1.76 lakh crore portfolio as of Q2 FY 2026-2027, described as best-in-class; management expressed confidence in near-term credit cost stability.
• Management overlay created post Iran-U.S. war onset — after reviewing customer segments under stress; included within Q2 FY 2026-2027 credit costs, with the review described as ongoing and no incremental overlay commitment for coming quarters.
• OpEx/AUM at 1.84% — down 11 bps QoQ and 19 bps YoY; OpEx guided to remain in the 1.85-1.9 range going forward (period unspecified), even while investing in new gold loan branches.

Life VNB Margin Up 450 bps; Health Gains Share Amid Regulatory Uncertainty

• ABSLI individual premium grew 25% YoY — in H1 FY 2026-2027 vs industry growth of 12% (private industry); partnership channel up 31% across all 11 partner banks, proprietary channel up 10%; IndusInd Bank onboarded with business commencement targeted by December 2026 (Q3 FY 2026-2027).
• Life VNB margin expanded 450 bps YoY to 16.1% — H1 FY 2026-2027 net margin up 447 bps from 11.6%, driven by higher annuity mix, rider attachment, channel productivity and favorable interest rates; solvency ratio at 190%.
• Regulator's distribution-reform consultation paper still at consultation stage — per Kamlesh Rao (ABSLI), with draft guidelines then final rules to follow and rollout expected in FY 2027-2028; management views it as a net opportunity. The Nomura analyst asked about meeting the proposed AUM caps (framed as a move from ~26% to 12.5%).
• 98% of net VNB (FY 2026-2027 breakup) from individual business — vs ~3-4% credit-life contribution for peers, so reform impact is lower; guidance intact over the next 3 years on growth and net VNB margin expansion. OpEx-to-premium at 21.2% (management corrected the analyst's 26% reference) vs the ~20% target within the 3-year guidance horizon.
• Health insurance gross premium grew 48% YoY to Rs.4,543 crore — in H1 FY 2026-2027, lifting SAHI market share from 13.6% to 14.2%; reported profit of Rs.46 crore with financials prepared under IFRS principles.
• Health claims settlement ratio (IFRS basis) at 104% — in Q2 FY 2026-2027 vs 103% in Q2 FY 2025-2026; Mayank Bathwal corrected the analyst's reading of a 500 bps YoY increase.
• ABHI feedback to the regulator on proposed caps — per Mayank Bathwal, to ensure no arbitrage in favor of any one category of player, with monoline-vs-multi-line economic nuances and the operating environment kept in mind in the final regulations; management is hopeful this will be reflected.

Rs.11 Lakh Crore AUM Milestone on ESIC/EPFO Mandates; GIFT City Build-Out

• Total AUM crossed Rs.11 lakh crore — at Rs.11.06 lakh crore, up 140% YoY in Q2 FY 2026-2027, aided by mandates received from ESIC and EPFO; PMS and AIF assets increased from Rs.13,300 crore to ~Rs.6 lakh crore in FY 2026-2027 to date on the EPFO and ESIC mandates.
• Mutual fund quarterly average AUM at Rs.4.42 lakh crore — up ~4% YoY in Q2 FY 2026-2027; equity average AUM ~Rs.2.09 lakh crore (+9% YoY) with equity mix at 47.4%; ~80% of equity AUM in top quartile on fund performance.
• SIP contribution of Rs.1,094 crore in September 2026 — across 41.7 lakh contributing accounts; new SIP registrations rose to ~7.05 lakh in Q2 FY 2026-2027 from ~5.2 lakh in Q1 FY 2026-2027; folios at 1.14 crore (+6% YoY).
• GIFT City retail fund launched — at a low ticket size of ~USD 500 for inbound and outbound opportunities; pipeline includes the ABSL Flexi Cap fund plus ~6 additional retail-category funds; management is positioned to build a scalable offshore franchise in the coming years.
• ETF quarterly average AUM grew 42% YoY — ahead of industry growth of ~27% in Q2 FY 2026-2027; first in India to launch the BSE Total Market Cap Index Fund and ETF, which it aims to build into a flagship "mother of all passive" product.
• Real estate AUM at Rs.860 crore — with total commitments of ~Rs.1,200 crore, up 43% YoY in Q2 FY 2026-2027; long-short platform now comprises 3 products with close to Rs.700 crore AUM.

AI as a "Core Operating Layer"; Multi-Year Guidance Reaffirmed Across Franchises

• AI scaled as a "core operating layer" — across underwriting, sales, voice calling, audit and compliance, customer service, and operations, aimed at better decision-making, efficiency and customer outcomes; ABSLI's Saras.ai program is scaling from experimentation to scaled adoption with emphasis on responsible AI, governance and human oversight.
• 15 AI use cases live at ABHFL — across the customer life cycle as of Q2 FY 2026-2027; FinGenius (AI-assisted document verification) went live and FinShift (offer-led channel partner journey) was introduced during the quarter.
• AI-enabled claims platform processes nearly 75% of cashless claims — at ABHI as of Q2 FY 2026-2027; targeted interventions for 3,70,000+ high-risk lives reduced their loss ratio by over 16% in H1 FY 2026-2027.
• Life insurance guidance reaffirmed — grow individual SIP at a 20%+ CAGR over the next 3 years (FY 2027-2028 through FY 2029-2030); management intends to expand VNB margins above 20% and double net VNB in absolute terms over the same 3-year horizon (through FY 2029-2030).
• NBFC ROA levers — Rakesh Singh cited growth, margins, operating expense and credit cost, with the retail, personal and consumer loan mix expected to increase going forward, driving margin expansion and profitability (qualitative outlook; no numeric target or timeline given).
• Outlook — management remains confident in the long-term growth potential of the Indian economy and its ability to capitalize on opportunities, with focus on strengthening customer relationships, scaling the franchise and creating stakeholder value; retail and MSME to remain the pivot of the NBFC growth strategy.