Aditya Birla Capital Ltd

NSE:ABCAPITAL

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to the Q3 FY'23 Earnings Conference Call of Aditya Birla Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ms. Vishakha Mulye, CEO, Aditya Birla Capital. Thank you. And over to you, ma'am.

[Vishakha Mulye, executive]

Thank you. Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q3 FY 2023.Joining me today are my senior members of the team; Bala, Rakesh, Tushar, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Ramesh and Sanchita. Together, we will present the business performance and financial results and take any questions that you might have.I'd like to welcome and introduce two senior colleagues, Sanchita Mustauphy, Chief Risk Officer designate; and Ramesh Narayanaswamy, Chief Technology Officer, who joined us recently. Our current Chief Compliance and Risk Officer, Mr. Dhananjaya will be superannuating on March 31, 2023. Sanchita will work closely with Dhananjaya and then take over as the Chief Risk Officer from 1 April, 2023. She joined us from Tata Capital, and has more than 27 years of experience in the risk management, including credit and market and liquidity risk.Ramesh will be leading technology transformation across Aditya Birla Capital and will strategize, design and deliver a ONE-technology organization, with a key focus on building capabilities across core 4 technologies; digital, processes, automation and data. He has above 25 years of experience in technology domain across financial services, e-commerce, and logistics and payments product development. He has experience of working in various fintechs and large organizations such as Citi, Standard Chartered Bank, among others.Let me now begin by giving a brief perspective on macroeconomic environment. We continue to see a strong demand and improvement in industrial and service activity in the Indian economy. This is reflected in the lead indicators. Service PMI increased to 58.5. Manufacturing PMI increased to 57.8 in December 2022. GST collections crossed INR1.5 lakh crores in January 2023. However, we are currently experiencing volatility in the global economy and financial markets, geopolitical tensions and high inflation interest and exchange rate.Though concerns remain due to these headwinds, the Indian economy is expected to perform well in the current fiscal year, driven by sustained domestic demand. At Aditya Birla Capital, we follow One ABC One P&L approach, while continue to focus on quality and profitable growth in order to maximize the share-focused opportunities in the financial service space. We have a strong presence across protecting, investing, financing and advising, that is PIFA offering. We have adopted a customer-centric approach with an aim to provide holistic solutions to our customers and their ecosystem to suit their life stage and business needs.Our strong parentage and extended ABG and ABCL ecosystem provide us multiple opportunities to accelerate our growth. We follow an omni-channel approach towards distribution. We believe in giving complete flexibility to our customer to choose the channel to which they wish to interact with us. Our endeavor is to provide a ONE experience across channels to enhance seamless delivery of our products.Based on the past and dynamically evolving digital landscape and the consumer needs, we have embarked on all-inclusive platform strategy for customer, businesses and our channel partners to bring the Power of One ABC to them. I will cover on value proposition for each of these stakeholders in detail. First, customers. Our customer franchise continues to grow well. In the last quarter, we acquired 1.4 million customers, repeating our active customer base to about 43 million as of end December.We added 62 branches during the quarter, and our total branch count now stands at 1,220. Our branch expansion is targeted at driving penetration into Tier-3 and Tier-4 towns. Our Board today approved the formation of wholly-owned subsidiary to develop an omni-channel B2C platform. The purpose of this platform will be to provide -- to serve our existing customers and acquire new customers and act as a one-stop solution to deliver PIFA to all our customers.This platform will have various touchpoints such as app, web, branch and virtual engagement. As a first step, our customers at more than 400 branches across 113 location will receive assistance to achieve their financial goals. We will also be integrating payment stacks and value-added services through this platform, which will enhance customer experience and brand recall, and enable us to become a full stack financial service provider.Second, in businesses, we had mentioned in our previous quarters earnings call that we would be launching a comprehensive B2B platform for MSME ecosystem. We are happy to announce that we have launched the platform in a closed user group and it will go live in the next 20 days to 30 days. It provides MSME ecosystem with lending and value-added services to manage and grow their businesses. The platform will enable the cash flows in financing by using alternate data such as GST returns and transaction data, in addition to the traditional data sources and improve the turnaround time and customer experience. It will also offer PIFA solutions and value-added services to cover the full ecosystem of PODS, such as promoters, owners, directors and authorized signatory of our MSME customer.Third, channel partner. We have more than 2 lakh channel partners and we deeply value the vital role that we play in distributing our products. In the next 9 months, we will also be rolling out a B2D digital integrated platform for our channel partners, which will provide an opportunity to grow that business volumes and enable them to fulfill the life cycle needs of our customer. It will help our channel partners to enhance their customer servicing and track status of their application, business volumes and payouts. It will help us to increase our product penetration among existing customers and also provide us with an opportunity to expand our customer base.The B2C platform that we are working on will build an interoperability stack, which will be leveraged by both B2B and B2D platforms to provide PIFA solutions to our customers. This is the first approach is at the core of our business strategy for product innovation, direct acquisition, seamless onboarding and best-in-class service delivery, will let this data and analytics to maximize wallet share through cross-sell and up-sell.79% of our digital lending businesses happens using machine learning scorecards. In life insurance, cross-sell and up-sell now contribute 35% of our individual first year premium. In our health insurance business, 24% of our retail fresh premium originates from cross-sells. About 78% of our life insurance renewals happens digitally, and 88% of our life insurance customer requests are serviced digitally.In our health insurance business, all our distributors are now onboarded digitally and 85% of our business is delivered by auto underwriting. We will continue to ensure that our tech architecture is robust, flexible, scalable and resilient. We will build and nurture a culture, which is agile and uses adaptive and collaborative approach to build digital products and journeys for our customer.Going forward, we will continue to follow our One ABC One P&L approval to accelerate our growth trajectory and continue to build scale and drive market share in each of our businesses. We will leverage our digital capabilities, innovative products, and our One-Team approach to drive cross-sells and deliver superior transaction experience for our customer.Now, I will hand over to Vijay to give us a summary of the results for Q3 FY '23.

[Vijay Deshwal, executive]

Thank you, Vishakha, and good evening, everyone.Our consolidated profit after tax for the company grew by 27% year-on-year to INR530 crore in Q3 of FY '23. This excludes gains from stake sale in ABSLAMC in Q3 of FY '22, and fair value gains related to investments in Aditya Birla Health Insurance Company in Q3 of FY '23. The consolidated revenue for the same period grew by 31% year-on-year to INR7,699 crore.In our NBFC business, we continued with a strong momentum of disbursements and granularization of our book. Disbursements for the quarter grew by 98% year-on-year to INR13,099 crores. This helps the loan book to grow 47% year-on-year and 12% sequentially to INR72,994 crores. Loans to retail, MSME, SME, and HNI segments now constitute 66% of our portfolio. NIM increased by 41 basis points sequentially, and 77 basis points year-on-year to 7% in Q3 of FY '23.We continue to maintain strong focus on asset quality with gross Stage-2 and 3 assets reducing by 156 basis points sequentially, and 491 basis points year-on-year to 6.49% at December end. The provision coverage ratio on Stage-3 assets was 49.3% at December end. In our housing finance business, disbursements increased by 12% sequentially and 25% year-on-year to INR1,387 crores during Q3 of FY '23. The loan portfolio grew by 3% sequentially and 11% year-on-year to INR12,874 crores. NIM of the housing finance business increased by 22 basis points sequentially and 106 basis points year-on-year to 5.35% in Q3 of FY '23.Coming towards AMC business, the average AUM was INR2,81,717 crores, of which equity AUM was about 43% in the current quarter. We continued our focus on building retail customer franchise with addition of about 0.5 million folios in the 9 months of FY '23. The total active folios now stand at 8.0 million at December end.With our continued focus of growing passive and alternative asset segment, passive AUM grew by 28% sequentially and was about INR21,620 crores at the end of December. The growth momentum in our life insurance business continues with 25% year-on-year growth in retail first year premium, which was significantly higher than the industry growth in the same period.Group business premium grew by 41% year-on-year in 9 months of FY '23. Renewal premium grew 14% year-on-year to reach INR4,870 crores in 9 months of FY '23. Our VNB margin was 15.5% in the 9 months of FY '23, and we are well on track to deliver over 18% net VNB margin in this financial year.In our health insurance business, our unique and differentiated health-first model helped us to deliver industry-leading growth of about 59% year-on-year in 9 months of FY '23. ABHI expanded its market share by 220 basis points year-on-year to 10.4% among standalone health insurers in 9 months of FY '23.With that, I'll now hand over the call to my colleague, Rakesh, to take us through NBFC business performance in detail.

[Rakesh Singh, executive]

Hi. Thanks, Vijay. Thanks, Vishakha. Good evening, everyone.In our NBFC business, we saw strong momentum across all segments, contributing to a overall loan book growth of 12% quarter-on-quarter and 47% year-on-year, taking our loan book to nearly INR73,000 crores in quarter 3. Our retail and SME segment book grew 59% year-on-year. We grew faster than competition and at a double the rate which we had guided for overall loan book growth for FY '23.Now referring to Page 16 of the presentation. Let me call out a few key highlights. We added 1.35 million customers this quarter, taking our active customer base to 5.9 million, doubling the customer base from 2.3 million last year. In terms of absolute loan book growth, we added 8,020 crores of loan book growth in quarter 3, which is more than what we added in entire of H2 of last financial year.Personal and consumer loans contributed significantly to this growth, comprising over 40% of this net addition in quarter 3, making it the highest contributor across all product segments. 30% of the incremental book has come through digital channels. We continue to expand our physical footprint and added 51 new branches in quarter 3, taking our footprint to 272 as of December '22. And we have a target of 325 branches by March '23 of this year.Our retail and SME segment mix is at 66%, which is ahead of the guidance provided for FY '24 in quarter 3 of FY '21 when we had given this guidance. As a result of this continued improvement in segment mix, we have achieved the highest ever quarterly NIM of 7%, which is 77 basis points higher than the previous year and 41 basis points ahead of previous quarter. And this has led to our NII growing by 50% year-on-year and 20% quarter-on-quarter.Quarter 3 was also a strong quarter in terms of profit delivery with a profit before tax at an all-time high of INR540 crores, registering growth of 40% growth year-on-year and 11% quarter-on-quarter. The year till date profit after tax grew by 36% year-on-year. The ROE for the quarter was 16.2%, which expanded by 351 basis points year-on-year and 153 basis points quarter-on-quarter.On Page 18, we have shared our overall disbursements for the quarter. We disbursed INR13,099 crores in quarter 3, which is by far the highest for a quarter and we disbursed twice of what we did in quarter 3 of last year. While 73% of disbursement was through the retail and SME segment, all product verticals contributed to this momentum.Let me share further color on the disbursements. We disbursed INR4,649 crores in the personal and consumer loans segment. This was up 4.7x compared to last year, taking the segment book to INR12,812 crores. Here we focus largely on salaried professionals in the emerging income segment. 79% of this segment comprises of personal loans, which is nearly 56% have been sourced digitally. The balance 21% comprises of consumer loans, which we finance various end uses such as lifestyle, healthcare and education. Nearly 36% growth in our digital portfolio was driven by personal loans, cross-sell compared to 32% last year. So last quarter, we did 36% of cross-sell compared to 32% in quarter 2.Both unsecured and secured business loans vertical recorded a very strong growth as well. In unsecured business loans segment, we registered a loan book growth of 73% year-on-year, taking the segment loan book to INR7,254 crores. In the secured business loan segment, which majorly comprises of loan against property and working capital solutions to self-employed and MSMEs, we disbursed a total of INR3,894 crores, an increase of 29% year-on-year. As a result, the segment book stood at INR29,186 crores in quarter 3, clocking a 30% growth year-on-year.I had mentioned in the last quarter earning call that the next leg of growth in business loans vertical is going to be driven by a unique and differentiated unified platform we are building for MSME customers to enable digital journeys for our products, as well as value-added services for MSMEs to transact seamlessly. Vishakha covered it in detail, and we are looking at a quarter 4 launch for the platform.Now providing some details on asset quality on Page 24. We have seen consistent improvement over last year, with Stage-2 plus Stage-3 book coming down from 11.4% in quarter 3 of last year to 6.49% in quarter 3 of this financial year. This has been driven by a strong pullback in Stage-2 book of INR1,279 crores. Owing to superior collection and -- collection efficiency across product segments and better resolutions, we have reduced our Stage-2 book. Gross Stage-3 book has reduced to 3.1% compared to 3.9% in quarter 3 of last year.We continue to maintain our Stage-3 provision cover at nearly 50%. Our overall collection efficiency is at 99.6%, consistently better than pre-COVID levels. Also 99.8% of the restructured book is already banked as on 31 December, '22. Further collection efficiency on the restructured pool is healthier than the last quarter. As part of the regular process, we reviewed our ECL policy due to which there is a one-time higher ECL provisioning during the quarter and majority of the ECL costs increase for the quarter has come from Stage-1 provisioningNow to conclude and reiterate the quarter 3 performance. Not only did we have a strong quarter in terms of growth but with progressive increase in retail and SME portfolio mix, we have tracked well ahead of our FY '24 guidance on all parameters. We expect this strong growth momentum to continue for the rest of this financial year.With this, now, I hand it over to Pankaj for housing update.

[Pankaj Gadgil, executive]

Thank you, Rakesh, and good evening, everyone.I will cover the performance of ABHFL. In Q3, we experienced continued momentum in disbursal and book growth. Robust financial performance and focus on portfolio quality resulted in consistent improvement across all return metrices.Some of the key highlights are disbursements of INR1,387 crores in Q3, which is our highest disbursement in the last 16 quarters, an increase of 12% Q-o-Q and 25% Y-o-Y. Loan book as of Q3 is INR12,874 crores, an increase of 3% sequentially and 11% Y-o-Y. We have now witnessed growth for the last 2 consecutive quarters. This is encouraging, especially considering muted growth in the period FY '20 to FY '22.More importantly, the quality of origination continues to be very healthy. Later in the conversation, I'll share with you details on the parameters for quality of origination. NIM has increased to 5.35%, 22 bps sequentially and 106 bps growth Y-o-Y. Profit before tax for Q3 is INR78 crores, an increase of 4% sequentially and 16% Y-o-Y. Portfolio has improved, where the gross Stage-3 loans have reduced to 3.5% at the end of December '22 from 3.60% in September '22. Stage-2 plus Stage-3 loans have reduced by 60 bps Q-o-Q and 158 bps Y-o-Y. You can see that they are improving on every front, whether it is book growth, asset quality or core profitability.Now, let me take you through each one of these pillars in more detail. First pillar, growth. We are leveraging depth and width of our distribution network and enhancing digitization throughout the customer life cycle. As I had mentioned in the previous quarter, we have launched a digital index that helps us to measure our digital penetration to provide a seamless onboarding experience to customers. I'm happy to inform you that the digital index has improved significantly from 19% in April '22 to 37% in December '22. We are very confident to exit at a 50% level by March '23.We recorded accelerated growth in disbursements across both value and growth segments for the quarter. You can refer to Page 31 of the Investor Presentation for the detailed segmental contribution. We continue to focus on granularity with average portfolio ticket size of INR23 lakhs. We've opened several branches in Q3, and all these branches have been opened in Tier-2 and Tier-3 cities.Now, we have 127 branches across 20 states and UTs with a truly pan-India presence and a well-diversified portfolio. The customer base is about 55,000, and has grown by 5% Q-o-Q and 35% Y-o-Y. We continue to build capacity and enhance productivity through investments in talent, technology and analytics. The cost-to-income ratio is 41% as of Q3 FY '23.Pillar 2, portfolio quality. The moratorium on all the COVID restructured cases that have ended, all the numbers, which you are seeing on Page 33 of the Investor Presentation are including the performance of restructured cases and 100% of the cases are now presented for collection. We have incorporated the RBI circular dated 12 November, 2021, on NPA recognition from September '22 onwards. And our gross Stage-3 has reduced from 3.6% in September to 3.5%. We are maintaining Stage-3 BCR of 33%, and additionally carrying a management overlay of INR56 crores.With robust debt service framework and pre-delinquency management, the collection efficiency is consistently at 99% plus. We continue to emphasize on quality of originations. The salaried and self-employed professional segment now contributes 55% of disbursal in Q3. 94% plus disbursement in Q3 are towards customers, with 700 plus CIBILs all due to credit. You can see the detailed breakup of the same on Page 22 of the Investor Presentation.Now, I'll move to the third pillar, which is robust financial performance and liquidity management. We are ALM positive across all the buckets and 22% positive on a 12-month basis. You can refer to Page 24 of the presentation for more details. We are rated AAA by ICRA and India Ratings and continue to focus on diversified long-term borrowings. The contribution of NHB borrowings has increased to 17% in Q3 from 8% in Q3 FY '22. We have a 25% liability book at a fixed rate, which helps us to mitigate the cost in an increasing rate cycle. We are confident of maintaining competitive borrowing mix considering upward trajectory and improving asset quality.As you can see on Page 35 of the presentation, we have been able to sustain NII at 5.35%. Moving forward, however, I think our NII will be range bound between 4.7% to 4.9%, considering the lagged impact in borrowing cost and competitive intensity. The PPOP is highest ever at INR104 crores in Q3 FY'23 with a growth of 8% Q-o-Q and [ 27% ] Y-o-Y. The PAT for Q3 FY '23 is INR61 crores, an increase of 3% Q-o-Q and 15% Y-o-Y. The ROA is 1.9% for the quarter and ROE is at 13.7%. To summarize, we continue to invest in long-term growth by maintaining robust profitability and a quality portfolio.With that, I'll now hand over to Bala, MD and CEO of our Asset Management Company.

[A. Balasubramanian, executive]

Thank you, Pankaj.As I presented in the analyst call of AMC for few weeks back, I'll give a quick rundown on the performance of AMC for the quarter ending December. Our overall quarterly average assets under management for the quarter ending December '22 stood at [ INR2.90 ] lakh crores. Our mutual fund quarterly average AUM was about [ INR2.87 ] lakh crores with a market share of about 7.9%, excluding ETF.Our equity mutual fund AUM for the December '22 was about INR1.27 lakh cores with mix of about 42.6%, lower asset mix. We have witnessed an increase of our monthly SIP book from INR892 crores in December '21 to INR942 crores as on December '22 from around 32.6 lakh live SIP accounts. Around 2.3 lakhs were new SIP registered in December '22 quarter.Customer acquisition remains integral part of our strategy. We added close to about 5 lakh new folios in Q3 of FY '23, within the overall folios stood at about 8.1 million. Coming to the alternate business, which has been one of the focus area for [indiscernible] alternate business from overall growth point of view as well from profitability point of view, our passive product offering has grown 4x to INR21,000 crores -- INR21,619 crores as of December '22.On the PMS and AIF front, we have raised the commitment of about INR350 crores in India Equity Services oriented funds in Q2 FY '23 and have 4 products in pipeline under AIF product offering. On the offshore front, we have been granted approval by International Financial Service Centers, which is GIFT City to act as Registered Fund Management Entity and for non-retail at the GIFT City Ahmedabad. And prospectus for ESG Engagement fund has already been filed with GIFT City.On the real estate front, our cooperation with BentallGreenOak, started making some progress, maybe on conducting the roadshow in the overseas market and soon, which we will see some outcome on this. On the digital front, we continue to enhance our product efficiency and build volume and increase in the overall transaction through the digital platforms. In fact, we onboarded [ 75,000 ] new customers digitally. [ 80% ] overall transactions are digitally done today and [ 80% ] of the customers are onboarded and [ convinced ] by the digital platform.Moving on to financial numbers. As Vijay mentioned, in Q3, revenue from operations is at [ INR314 ] crores versus [ INR311 ] crores in Q2 FY '23. Operating profit before tax stood at [ INR172 crore ] versus [ INR173 ] crores of Q2 of last year. And for 9 months ending December '22, revenue from operations at INR930 crores as compared [ INR967 ] crores for 9 months ending December 2021. And operating profit before tax for the 9 months ending December '22 is at [ INR580 ] crores as compared to [ INR560 ] crores for 9 months ending December 2021. Our efforts to build a scale and size continue to remain a big focus area in the competitive AMC industry we are witnessing today.With this, I'll hand it over to Kamlesh Rao, our MD and CEO of Aditya Birla Sun Life Insurance Company.

[Kamlesh Rao, executive]

Thank you, Bala, and good evening to all of you.I'll cover the life insurance business. The consistent journey of ABSLI growth bettering the private industry continued for the 9 months ending December 2022 in both the individual, as well as the group life insurance business. Individual life Insurance grew at 25% against the private industry at 19%. You can see in Slide #49. And this business growth has come out of a combination of both increased productivity as well as the capacity that we invested last year.New products launch were key to our success, with our newly launched par product under the brand name Akshay collecting INR100 crores premium in less than a month. We also launched an industry-first immediate income guaranteed products under the Nishchit brand, which did its first 5,000 policies in 17 days flat.Our new product success, combined with our PASA contribution of 20% were hallmarks of the business done in Q3 of this year. The individual business has come with a very healthy product mix, as you can see in Slide #51. Traditional business at 77%, and the ULIP business at an all-time low of 21%, [ recovered ] well for the gross margins of the firm. This combined with the fact that 29% of our business comes from up-sell to our existing customers has helped productivity growth in both the proprietary as well as the partnership channels.The group life insurance for the private industry saw a growth of 16% in Q3 against which, ABSLI registered a growth rate of 41%, as you can see in Slide #49. We continue gaining market share in this business. We continue maintaining our second position in the profitable group ULIP segment. And within the group business, we continue our focus on credit life business, which is growing at more than 100% over last year.Our total premium at INR10,114 crores as seen in Slide #47, has registered a growth rate of 25% over last year and a 2-year CAGR of 24% is evidence of the consistency of our business growth. This has come on the back of new business growth, as well as renewal premium growing at 14%. The digital collection composition of our renewal premium is now at 78%. And we see growth across our persistency buckets on 13th month to the 61st month with 13th month now at 86% and 61st at 54%. We continue maintaining upward bias in our forward guidance for these persistency numbers.Our AUM under management as seen in Slide 53 now stands at close to INR68,000 crores with a Y-o-Y growth of 15%. And here, again, a 2-year CAGR of 17% is demonstration of consistency of our growth. 24% of this AUM is in equity and balance 74% in debt. Investment performance seen either from a 1-year length or from a 5-year perspective, we'll see ABSLI having done better than the respective benchmarks across all 3 categories of equity, debt, or even balanced fund.Our digital adoption across various areas is demonstrated in Slide #54. 98% of new business is now sourced digitally. We continue our guidance of 60% of this sourcing being auto underwritten by year end. 83% of all our services are now available digitally, which covers about 55% of our customer transactions and our customer self-service ratio now stands at 88%.We continue to manage the net margin story well, as you can see in Slide #55. Last year, same time, we managed net VNB of about 11.2% and close for the year at 15% net VNB margin. We have shown a growth of 430 basis points in our net margins as compared to last year. We now have a 15.5% net VNB margin for the first 9 months of this year, which gives us the confidence of closing the year at greater than 18% net VNB margin, which once again will be ahead of our guidance provided for this year.Our approach, as seen in Slide 48, will continue to be -- will be to continue the growth trajectory of this business ahead of the industry, backed by growth productivity as well as capacity. Our forward guidance is that the quality of our book will get better across the 13th and 61st month persistency from the current levels. Growth will come from a diversified mix of both proprietary as well as partnership channels. And we will continue to be best-in-class in our digital infrastructure, cutting across prospecting and onboarding in sales at the front end, underwriting at the middle end, as well as all customer touch points in service as well as claims.With this, now, I hand over to Mayank, who will give you details of the health insurance business.

[Mayank Bathwal, executive]

Thank you, Kamlesh.And I'm now happy to present the performance of our health insurance business. We had another strong quarter in terms of revenue growth, enabled by what I've shared in the past, a very strong foundation of a differentiated health-first model. And as we have said, as part of this proposition, which is more inclusive and importantly relevant, continues to find a lot of acceptance by our consumers and intermediaries both. We continued our growth leadership this year and we are pleased to inform that we had 59% Y-o-Y growth in the first 9 months of this financial year.We are the fastest growing health insurer in the country, well ahead of the industry growth at 20% and SAHI growth rate at 26%. The growth was powered by our retail franchise, which grew at 30% Y-o-Y. And this has helped us take our SAHI market share to 10.4%, a 220 basis points increase Y-o-Y. Overall, we have acquired 6 million net new customers during the 9 months, taking our customers served to 25 million, a 33% Y-o-Y growth.Our corporate business continues to do very well for us and has grown at a staggering 151%, powered by a huge focus on cross-sell and up-sell and also opening up new categories like Corporate OPD. Our corporate business is modeled on right risks, designed to capture market opportunity targeting new age company, and has delivered a less than 100% combined ratio. We believe we have set up one of the most profitable corporate business in the industry.On the overall profitability front, our combined ratio has come down to 114% for the 9 months, a reduction from 136% over the same period last year. The 9 month loss has reduced to INR217 crores from INR283 crores same period. On the claims front, we saw a continued increase in the retail claims, which started early this fiscal. This experience is in line with the industry experience and is attributed to final treatment of delayed medical intervention due to COVID and also some impact of long COVID-linked diseases and some impact of provider of inflationary pressure.To manage this impact, we are monitoring this extremely closely and take suitable steps, including further review of our sourcing guidelines, engagement with providers and increasing price for most of our flagship products. We will continue to closely monitor the situation, including collaborating with the industry where required. Overall, higher scale will continue to create operating efficiencies as we move ahead. We have been the most -- we have the most diverse distribution footprint to come in the industry, and we're now happy to announce our partnership with 2 PSU banks namely UCO Bank and Punjab & Sind Bank last quarter.We were chosen by these banks as their HI partner over all of our most tenured players, demonstrating the superiority of our business model. And this takes our total bank partnerships to 18, and strongly supplements our growth aspirations. Our digitally enabled distribution mix being the most diversified, now with the agency being the single largest channel at 21% in our retail business and we are continuing to grow our agency franchise with more than 80,000 advisors plus today across 200 plus branches, leveraging the One ABC branch strategy completely.On the digital front, our digital business has now through live partners grew 80% Y-o-Y, becoming a sizable 15% of our retail mix. To take our differentiated model first, we continue to launch new range of offerings. We've launched Activ Fit, industry-first product mainly for millennials early this quarter and this is already constituting a very good proportion of our new sales in less than a quarter.We continue to invest extensively in our tech and digital capabilities with a clear focus on superior customer experience and scale hyper personalized engagement given our model. At 96%, we have one of the highest claims settlement ratio in the industry, a testament to our focus on the moment of truth for our consumers. Our latest brand campaign with the theme of Kya Peeche Chhoda Hai showcases our business model and its impact through the lens of the experiences of our actual customers that they have had with our proposition, an industry-first yet again.To further know our customers and there is help, we are the first HI company to integrate into the Ayushman Bharat digital health platform, providing the opportunity to our customers for creating their ABHA health ID. We will continue to enhance our digital health and wellness ecosystem, and it has now got more than 60-plus partners. We have just in the previous quarter released our premium version of our leading consumer app, Activ Health, to further increase the engagement level with our consumers.Looking ahead, we will continue to grow on the franchise aggressively with a clear tailwinds that the category has, especially powered by the enablement that the regulator is providing. But we keep a very close eye on the best-in-class unit economics. We are now confident of surpassing our guidance of the 40% growth rate acceleration that we had for the year, and we will continue to work on opening newer white spaces for the industry.Thank you. And I'd now like to pass it back to Vishakha for her closing comments.

[Vishakha Mulye, executive]

Thank you, Mayank. And this concludes our comments on Q3 FY 2023 performance. And now we'd be happy to take any questions.

[Operator]

The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.

[Avinash Singh, analyst]

Yes. Couple of questions. The first one on your NBFC business. I mean, our FY '23 growth is into a different trajectory particularly because you are sort of finding new source of growth, particularly in the consumer and SME segment. Now by the end of FY '23, all of these new growth engines will be sizable enough. Now if we look beyond FY '23, I mean like FY '24 particularly, what kind of a growth rate considering that, okay, some of these segments would have matured, I mean, a reasonable size, so what kind of a growth trajectory you are going to follow on a overall basis maybe in FY '24? So that is -- and what sort of a credit cost trajectory you see considering that your business mix has been changing meaningfully towards more like a smaller ticket consumer loans. So that's on NBFC.And second would be on life insurance, whatever has happened in yesterday's budget and its impact. So, I mean, what sort of an impact do you see on your growth? And if at all -- If I can extrapolate it, say that, okay, if you want to maintain certain growth in that high ticket segment by making maybe your product more competitive by sacrificing margins. So where does the sort of yesterday changes you with a growth and margin trajectory? So that's my question.

[Unknown Executive]

So let me just take the question on the NBFC, on the growth. If you look at the last 4, 5 quarters, the growth has been very strong across all segments, which is consumer, personal loans and the MSME. We are building our capabilities across the retail and MSME, as I also mentioned in my opening remarks that we're building a portal for B2B so that we can really reach out to our micro SMEs and all. So, that will be another lever of growth, which we are looking at in the next 12 months to 18 months that should play out.We have built our digital assets over the last 2, 3 years and that's been playing out quite well. We see there is opportunity across these segments, especially the personal consumer and the MSME segment. There are opportunities for a player like us to grow and consolidate. Given the traffic or given the opportunity, which will be available in the market, we will continue to grow. What will be that range? Will be -- I think we will try and calibrate that. But yes, we see a good growth momentum going forward as well. On your question on.... On the credit cost, your second question on the credit costs. Yes, as we go more into the retail and the MSME, the credit costs will go up in line with the margins. And if you see, our margins have opened up by 77 basis point year-on-year and 42 basis points. This is on account of the product mix change. So, that will have a slightly higher credit cost. But the way we look at it is the risk adjusted return. So if the margins are higher, the credit costs, it should be able to absorb. But once -- I think in the quarter 3, we did the ECL revision. We think, in the near term, our credit costs should be in the range of 1.5, 1.6 levels. On the question on life insurance, you must refer to the fact that something happened like this last year, that being a similar thing happened on the ULIP for [ INR2.5 ] lakhs. And I think the industry and both us [indiscernible] moderated our product suite to make sure that nothing of that is factored in the growth during this quarters time. I think that has now come in the area of traditional products. I think the ticket size right now stated is about INR5 lakhs. We do about 15%, 16% of our business in this area.But you must remember that a large part of this proposition is on account of the fact that you have the offering, which tells you what you will get for the next 30 years, 40 years and one of these are guarantee products. So a large percentage of them buying for the fact that there's been -- know that they get his product 30 years, 40 years, obviously, there'll be some people who would be interested in the tax benefit also.We will get an impact of this over a period of time. But like I said, the way we manage the portfolio during this year to take care of no growth, nothing impacted us in the ULIP change. Our thinking process right now is we continue maintaining our aspiration on the growth level sets we want to have irrespective of this change that we've got in the budget.

[Avinash Singh, analyst]

Let me just sort of follow-up on this. I mean in ULIP, I mean the good part was that, okay, the tax applicable on the accrual was capital gain. So, I mean, particularly if some maturity amount, I mean, 10% in case of equity and the benefit of indexes in case of debt-related funds. So net-net, the tax impact was lower. That's number one on customer side. And for HI's company also, ULIPs share in profit, I mean the VNB would be much lower, so even if there is some kind of slowdown.Now, here this goes kind of very, very extreme. Again, I'm repeating [Technical Difficulty], but it goes to extreme, that all the gains will be clubbed, income from other sources and marginal tax rate to be applied. I mean, that leaves you in a situation where I mean it's very difficult to keep your product competitive because of the marginal tax rate. So that is going to -- and then the contribution of profit from these guaranteed product particularly because these are profitable products for insurers as well. So in VNB pool, just not you and for the industry, it is very high. So, can you just tell me the -- I mean I will say a markedly different vis-a-vis the ULIP scenario. And that's what the question was.

[Operator]

Management members, we are not able to hear you.

[Unknown Executive]

Sorry. You can hear now? So, your question is absolutely fair like, I said, because the difference in the margin between the ULIP and the products that we are talking about on guarantee is different. But like I said, the cap is on greater than INR5 lakhs. There is a sizable business that happens actually below INR5 lakhs too. And therefore, the industry and us will specifically ensure if you have a larger concentration of that. And see, finally, you have to make [indiscernible]. The loss of opportunity is about 10%, 12% of our business.Also remember that, during the same point of time, protection over the last 12 months to 18 months time has been on a low call or has been lesser for the industry, per se. A part of it, if you make up through higher protection, this is what the industry will look at and we are looking at. Specifically, it is a fact that we've already launched two new products of protection in the month of January. And the margins of that are significantly higher. So, I think if you can -- if you put a strategy in place to be able to recover a part of that through selling more in that segment, bring your product mix to protection, there is a possible product mix structure then margins will get protected for sure.

[Avinash Singh, analyst]

Okay. Okay. And is industry looking to sort of communicate with the Ministry or Department, I mean, just to give you some kind of a indexation or something to put a sort of clarity with other products because -- at least indexation or something?

[Unknown Executive]

So our [ house view ] or the [ view of the council ] covers all the life insurance companies, is, of course, making a representation because if it is taxable and technically, it should have indexation. The spirit of the thing is HNI should not have the benefit of 10(10D), the INR5 lakh price or something more than that is appropriate. So, you will keep in mind that these products also offer 10 times of your premium at cover. There is also a mortality element built in, which is not available in any other product. I'd say, based on that, of course, we will make a representation for sure, but that time will tell you what's the answer of that.

[Operator]

[Operator Instructions] The next question is from the line of Nidhesh Jain from Investec.

[Nidhesh Jain, analyst]

And congratulations for a good performance of the quarter. In the lending business, can you quantify the ECN -- one-time ECN impact for the quarter?

[Unknown Executive]

It's 42 basis points on Stage-1, Nidhesh.

[Nidhesh Jain, analyst]

Okay. Sure. So current Stage-1 provisioning has increased to 42 basis point or is that change in -- 42 basis point is additional provisioning that we did in this quarter?

[Unknown Executive]

If compared to quarter 2, it's 22 basis points and Stage-1 is higher for this segment.

[Nidhesh Jain, analyst]

Okay. Secondly, in the personal and consumer loans, how much of business are the -- what percentage of our disbursement and AUM is coming from Paytm, partnership with Paytm?

[Unknown Executive]

We have -- we have multiple partnerships and there is no one large partnership, which we have. So, there is nothing, which is a concentration risk, which we are talking about here. So, we have multiple partners. And we also have direct business, which we have on these digital assets. So it's -- and post DSG guidelines, if you see, I think all the businesses are now, which is - is as good as our own business which we used to do. So everything has gone back to the way we used to do personal and consumer loans. There is no difference. So, yes, these partners can be digital partners.

[Nidhesh Jain, analyst]

Sure. And lastly, in this segment, how the collection infrastructure will stack up because this ticket size of 52,000 unsecured is a difficult segment historically? So what gives us confidence on the sustainability of credit costs and how are the collection infrastructure in this set of products?

[Unknown Executive]

We have a collections infrastructure across our geographies where we are present. And before we launch a new branch, we have a collection infrastructure. If you look at majority of the collections, we've done by telecalling via our automated dialing and all. And wherever it goes to the field collection, we have a field collections team, our in-house collections team, in-house telecalling team. So, we have a quite a elaborate collections infrastructure, which we have built over the last 3 years, 4 years, which will take care of the growth in this segment and we continue to invest in the collections infrastructure.

[Operator]

[Operator Instructions] Next question is from the line of Sameer Dalal from Natverlal & Sons.

[Sameer Dalal, analyst]

Yes. I miss this one number, you said the business that the government has put a cap of INR5 lakhs, what percentage of the overall business is that? And can you also give us some indication of what was that business as a percentage of new business that was going on in the -- at the current times?

[Unknown Executive]

So better numbers -- when you conclude the year of last year like I said, if you take the number of INR5 lakh plus premium, it would roughly be in the range of 17% to 18% of the new business segment. I mean this year not having ended, it would not be appropriate percentage because numbers change in January, February, March. But like I said, like-for-like for the full financial year of last year, it would be about 17%, 18%.

[Sameer Dalal, analyst]

And of the overall insurance business of yours, how much is that as a percentage as of today?

[Unknown Executive]

That's what I said, you take the overall individual...

[Sameer Dalal, analyst]

No, I'm asking 2 questions. One is the overall percentage, which you're saying that is 17%, 18%. I'm saying, last year what was the percentage of sales of the new sales that happened in FY '21, '22?

[Unknown Executive]

Of the new business premium that we did in '21-'22 on the individual life insurance side, that's greater than INR5 lakh is 17% 18%. Obviously, if the -- if I take the entire business, then the number will be insignificantly small. But on pure individual life insurance business, new business that you do has got a new business premium, adjusted [ APE ] business that is already published. For '21-'22, if you take that and INR5 lakhs plus, if we take as the numerator, that number will be 17% to 18%.

[Sameer Dalal, analyst]

[Operator Instructions] Thank you. I would now like to hand the conference over to Ms. Vishakha Mulye for closing comments.

[Vishakha Mulye, executive]

So, thank you all for joining us today evening. Look forward to keep in touch. Thank you.

[Operator]

Thank you very much. On behalf of Aditya Birla Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.