Aditya birla capital Limited ("ABCL"), a lending subsidiary of Aditya Birla Capital Limited is among the leading well-diversified non-banking financial services company in India. ABCL offers customized solutions in areas of personal finance, SME finance, SME finance, corporate finance, wealth management, debt capital markets and loan syndication. ABCL is registered with RBI as a systemically important non-deposit accepting non-banking finance company (“NBFC”) and is amongst the top five largest private diversified NBFCs in India based on AUM.
For the FY ended 31st March 2023, ABCL has a book size of Rs. 66,923 Crores, net PAT of Rs 1287 Crores and net worth of 7,784 crores. The Net Interest Margin expanded by 53 bps y-o-y to 7.35% and ROA at 2.47%. ABCL’s long-term credit rating of AAA (Stable) has been reaffirmed by ICRA in February 2023. ABCL also has a long-term credit rating of AAA (Stable) by India Ratings, Perpetual debt credit rating of AA+ (Stable) by ICRA and AA+ (Stable) by India Ratings (Stable) and short-term credit rating of A1+ by ICRA & India Ratings.
SME caters to the varied needs of a diverse set of customers across retail, HNI, ultra HNI, Micro,Small & Medium enterprises . It encompasses a wide variety of financing solutions for clients, ranging Loan against property, to more complex Lease Rental discounting, Commercial Purchase and Inventory Funding / Last-mile funding. Financing solutions are provided to Self-Employed [professionals/ non-professionals] against a wide array of lending programs, each of which aims to estimate the client’s repayment capability accurately before the company to take an exposure. The lending program requires assessing clients on various dimensions, including income, repayment behavior, stability of income/ residence, profile, collateral [valuation, marketability], ownership structure of business and the property and many others.
Loan approvals entail a good mix of profile checks, balance sheet lending and collateral assessment. An in-depth understanding of the customer’s business model, Cash flows, customers & suppliers, success factors and dependencies needs to be taken into account given these are long term exposures [ranging upto 15 years]. The financials are assessed to understand the repayment capability in the near and long term. Collateral assessment is another complex part of the underwriting process involving checking the structural stability, marketability, valuation, regulatory / local body compliance and legal veracity – all to ensure the property can be liquidated to repay the loan if required in case of customer default. Lending is often structured to meet the client needs by deriving comfort through the hard collateral [can be a ready or under-construction property / project] and cash flows [in form of rentals, or project cash-flows – both against sold/ unsold receivables].
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For the FY ended 31st March 2023, SME is significant contributor to ABCL’s Portfolio (35% of ABCL Book Size) with a closing book of 23,133 crs
SME has been delivering all-time high PBT of almost 563.3 crs and has posted 3.04% of ROA for FY23
SME has moved into segmented strategy model with further focus on client types considering their different complexities and expectations
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In SME LAP business , customized solutions were developed across the entire debt capital spectrum i.e. Structured Lease Rental Discounting, Loan Against Property and Structured/Mezzanine Debt. A high-quality portfolio has been built under this Vertical primarily focused to contribute to the bottom lines.
Being one of the most preferred asset classes in the lending business today, this business continues to present challenge of competing with all FI’s / Banks in a highly price sensitive target segment.
For the FY ended 31st March 2023, SME LAP has contributor to SME Portfolio 28% of SME Book Size with a closing book of 6,443 crs .
SME LAP had also delivered all-time high PBT of 268 crs and has posted 3.97% + of ROA for FY23
Key Challenges:
SME LAP as a business faces a lot of competition from Banks, other NBFCs which has been intense, dynamic in the market.
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Managing factors like technological advancements, changing regulations, and evolving consumer behavior
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Manage profit & loss, manage portfolio, customer, customer portfolio, customer life-cycle to maintain a clean Book growth and hygiene.
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Larger number of variables & Finite market size: Economic situation, Industry and Corporate Performance, investor sentiments etc.in finite market size
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Competitive dynamics: Over two dozen leading NBFCs (Foreign and Domestic), Private & Foreign Banks create fierce competition. Entry of new players and exit of few existing ones continue to add to the dynamism of the market.
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Restore & rebuild: As the portfolio is primarily granular in the nature (with short term loan tenor also), the loan book need to be restored regularly by continuous generation of new business. Also, managing and monitoring quality of cash flows and security in the light of ever dynamic situation.
