Aditya Birla Capital Q2 FY26: Lending Momentum Accelerates, but Profit Expansion Stays Mild

Aditya Birla Capital Q2 FY26: Lending Momentum Accelerates, but Profit Expansion Stays Mild

Aditya Birla Capital delivered a quarter of steady growth, led by strong momentum in lending and asset-growth businesses, while consolidated profit expansion remained modest. Revenue rose 4 % YoY to ₹12,481 crore, and PAT increased 3 % YoY to ₹855 crore. The NBFC and housing-finance portfolios grew materially (AUM up ~22-29 % YoY), while fee-income businesses (AMC, insurance) also posted healthy traction. Asset-quality remains under control (Gross Stage 2+3 at 3.03 % in lending). The business is scaling, but margin and profit lever remain mild.

*Key highlights*
* Consolidated Revenue: ₹12,481 crore (+4 % YoY)
* Consolidated Profit After Tax: ₹855 crore (+3 % YoY)
* Total Lending Portfolio (NBFC + HFC): ₹1,77,855 crore as on 30 Sept 2025 (+29 % YoY, +7 % QoQ)
* NBFC Disbursements: ₹21,990 crore (+14 % YoY, +39 % QoQ)
* NBFC AUM: ₹1,39,585 crore (+22 % YoY, +6 % QoQ)
* NBFC PBT: ₹956 crore (+13 % YoY, +3 % QoQ) & RoA 2.20%
* Gross Stage 2 + Stage 3 Ratio (lending): 3.03% (improved 121 bps YoY, 67 bps QoQ)
* Mutual Fund Quarterly Average AUM (QAAUM): ₹4,25,171 crore (+11 % YoY)
* Life Insurance Individual First Year Premium (H1 FY26): ₹1,880 crore (+19 % YoY)
* Health Insurance Gross Written Premium (H1 FY26): ₹2,839 crore (+31 % YoY)

*Revenue & profit analysis*
Revenue grew 4 % year-on-year to ₹12,481 crore, signalling steady scale. However, profit growth was only 3 % to ₹855 crore, meaning margin and cost pressures are limiting sharper bottom-line expansion.
On the lending front, while AUM and disbursements expanded strongly, profit gains are modest: the NBFC business delivered PBT ₹956 crore (up 13 % YoY) and RoA of 2.20%. That suggests the book growth is positive, but returns are still moderate given the scale.
Profit expansion is constrained likely by a mix of factors: rising cost of funds, investments in growth/ distribution and margin compression in newer segments. The modest 3% PAT growth despite healthy topline growth signals the need to monitor operating leverage and margins carefully.

*Segment performance*
* Lending/ NBFC & HFC: Disbursements ₹21,990 crore (14% YoY, 39% QoQ) and AUM ₹1,39,585 crore (22% YoY) highlight strong momentum. The housing-finance business did even better. Disbursements ₹5,786 crore (+44% YoY), AUM ₹38,270 crore (+65% YoY). Asset quality metrics improved (Stage 2+3 ratio 1.10% for HFC) indicating credit strength.
* Asset Management: The mutual fund business delivered an 11% YoY QAAUM growth to ₹4,25,171 crore. Folios serviced exceeded 1 crore (+5% YoY). Operating profit grew 13% YoY to ₹270 crore.
* Life Insurance: Individual first-year premium (FYP) in H1 rose 19% YoY to ₹1,880 crore. Market share in individual FYP rose 50 bps to 4.9%. Renewal premium grew 18% YoY to ₹4,664 crore, 13th-month persistency held at 86%.
* Health Insurance: Gross written premium up 31% YoY to ₹2,839 crore, stand-alone health insurer market share improved to 13.6% and combined ratio improved to 112%.

*Asset quality/ risk metrics*
For the lending business, the gross Stage 2+3 ratio improved to 3.03% (down 121 bps YoY, 67 bps QoQ). A RoA of 2.2% in the NBFC segment is respectable for scale-up businesses. In the HFC segment, the Stage 2+3 ratio was 1.1% (down 112 bps YoY) with RoA at 1.82% and RoE 13.95% in Q2. These figures suggest management is maintaining discipline in underwriting even while growing aggressively.

*Balance sheet & capital position*
On a standalone basis, ABCL posted PAT of ₹916 crore in Q2 FY26 (up ~12% YoY). Tier 1 ratio of 15.39% and total CRAR 17.98%. Return on equity was 14.2%. The lending portfolio across NBFC and HFC stands at ₹1,77,855 crore (+29% YoY). Total AUM (AMC + life + health) stood at ₹5,50,240 crore (+10% YoY) as on September 30, 2025. The company added 22 new branches, increasing its network to 1,712. Capital adequacy appears healthy and the company is investing in growth, which may moderate near-term margins but sustains long-term scalability.

*Management Commentary & Outlook*
Management emphasised that the quarter reflects “strong growth momentum and market share gains” in lending, insurance and funds businesses. The D2C and B2B platforms (76 lakh+ customers for ABCD, Udyog Plus AUM ₹4,397 crore) continue to expand the ecosystem. They believe that operating leverage will kick-in as investments made in distribution, data and digital mature. However, they cautioned that margin enhancement and cost discipline will be key to translating scale into stronger profits (credit cost is expected in the range ~1.2-1.3% for FY26). The company remains focused on deepening penetration into Tier 3/4 markets, continuing branch expansion.

*Conclusion*
Aditya Birla Capital has delivered a mixed but promising quarter. On one side, the business is firing on most cylinders: strong lending growth, expanding AUM, improved asset-quality and solid traction in fee-income verticals. On the other, the modest 3% PAT growth shows that scaling up is still absorbing costs and margin gains are yet to fully play out.

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