Aditya Birla Finance Limited ("ABFL"), a lending subsidiary of Aditya Birla Capital Limited is among the leading well-diversified non-banking financial services company in India. ABFL offers customized solutions in areas of personal finance, mortgage finance, SME finance, corporate finance, wealth management, debt capital markets and loan syndication. ABFL 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.
ABFL offers end-to-end lending solutions to a diverse set of customers - Retail, HNI, MSMEs, and Mid & Large Corporates through secured as well as unsecured loan products. The diverse range of lending products includes Retail Small Ticket Secured and Unsecured Loans, Unsecured Personal Loans, Unsecured Business Loans, Health & Education Loans, Digital B2B2C and B2B2B Small Ticket Loans, Small Business Secured Loans, Loans Against Property (LAP), Lease Rental Discounting (LRD), Construction Finance (to Real Estate Developers), SME Loans, Capital Markets Loans (Loan Against Shares), Supply Chain Finance, Mid and Large Corporate Loans, and Infrastructure Finance loans. ABFL also has a Wealth Management division.
For the FY ended 31st March 2020, ABFL has a lending book of Rs. 47,075 crores, net PAT of Rs 821 Crores and net worth of 8,078 crores. The Net Interest Margin expanded by 38 bps y-o-y to 5.29% and operating profit is growing at 16% y-o-y. ABFL’s long-term credit rating of AAA (Stable) has been reaffirmed by ICRA. ABFL also has 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.
Mortgage lending encompasses a wide variety of financing solutions for clients, ranging from vanilla Home Loans and Loan against property, to more complex Lease Rental discounting, Commercial Purchase and Construction Finance lending. Financing solutions are provided to Self-Employed [professionals/ non-professionals/ salaried] 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.
Mortgages business across the industry is majorly driven by Direct Selling Agents (DSA’s).
ABFL Distribution network also majorly comprises DSA’s. The DSA’s are broadly of 2 kinds 1. Corporate DSA’s who are present across multiple cities and act as an aggregator and 2. Retail channels who operate in a single city with smaller team size.
As of today RM’s are mapped to channels basis their geographical distribution and have a mix of Corporate and Retail DSA’s in their fold. In doing so RM’s time is equally divided between the 2 channels.
To bring in more focus on distribution and channel engagement we propose the following structure wherein Tier 1 is divided into 2 verticals:
1. Alternate Channel Business which will source from Corporate channels and
2. Retail Channel which will source from Non-Corporate channels.
The metrics – RM Target/Productivity/Channel Management used will be different for both verticals depending on the potential of channels the RM’s are mapped to.
The focused approach will help the Mortgages Business scale up numbers and market share in all Tier 1 markets. Mortgages envisage the market share to go from the current 3% to at least 6% with the proposed organization structure.
The challenge that we foresee on account of these change in market dynamics are :
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More aggressive pricing strategy adopted by other institutions will impact our yield and fee income and further increase our cost of acquisition More players eyeing for the same business have increased negotiating powers of the customers. They have more choices now.
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Managing Channel Partners: Higher payouts offered by other institution to channel partners will impact the patronage that we enjoy with them. This must be offset by good Turn Around Time in processing cases ad also their payouts and building long lasting relationship with them.
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Retention of existing portfolio – Banks are luring our customers with clear repayment track with lower pricing and hence retention is a challenge.
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Team getting used to the new digitization of loan process that has been adopted by ABFL.
