- Aditya Birla Capital (ABC) is a diversified Financial Services Group Company with significant holdings in lending, life and health insurance, and asset management, with a majority stake held by Grasim Industries.
- The merger between ABC Limited and Aditya Birla Finance aims to simplify corporate structure and enhance capital adequacy, positioning ABC as one of the largest NBFCs in India with combined assets under management (AUM) expected to exceed 5 lakh crore.
- ABC's lending business has shown positive trends with its lending book crossing 1.15 lakh crore, driven by growth in Udyog Plus, B2B MSME digital platform, and increasing market share in Housing Finance.
- The company plans to double its NBFC portfolio size in the next 3 years, with a capital infusion of approximately 1,600 crore in Q3 to fuel growth, along with strong group synergies and branch expansion.
- Focus on retail and SME lending is expected to improve margins and return ratios, with strategies to increase retail and SME mix to 75% contributing to raising margins to 7.5%.
- ABC maintains a strong asset quality, with 68% of its lending portfolio consisting of secured assets, reflecting a commitment to risk management through proactive measures.
- Asset management business is expected to improve, while growth in life insurance business has softened, and health insurance segment experienced a rise in losses due to seasonal factors.
- Valuation analysis suggests a reasonable upside at the current market price, with a 11% upside valuation justified due to multiple growth avenues.
- Key areas to watch include the quality of relatively risky retail unsecured loans.
- Overall, ABC's well-diversified financial services portfolio, strategic mergers, focus on asset quality, and growth strategies position it as a promising investment opportunity.
