Aditya Birla Capital Ltd

NSE:ABCAPITAL

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 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 Limited. Thank you, and over to you.

[Vishakha Mulye, executive]

Thank you so much. Good evening, everyone, and welcome to the earnings call of Aditya Birla Capital for Q4 FY 2024. Joining me today are senior members of my team, Bala, Rakesh, Tushar, Pankaj, Kamlesh, Mayank, Pinky, Vijay, Ramesh and Sanchita. I will cover our strategy and approach across businesses, and Vijay will cover the financial highlights, followed by the discussion on the performance of our key businesses by our business CEO.

The Indian economy continues to remain resilient even as overall global outlook is challenging, but continuing a geopolitical conflict, discrepancies and trade routes and high public debt burden. The real GDP growth rate of 8.4% in Q3 2024 exceeds all forecasts, leading to an upward revision in the growth estimate for FY '25. GST collections crossed INR 2 lakh crores in April. Inflation is moving closer to the target.

At Aditya Birla Capital, we continue to focus on driving quality and profitable growth by leveraging data, digital and technology. Customer centricity is the key element underpinning our strategy to grow our businesses. We had mentioned in our previous earnings call that we would build on a growth momentum across our businesses with emphasis on good and risk management and return of capital and follow an only channel architecture for distribution.

I'm happy to share our progress during the year against these targets, growth momentum. Our consolidated profit after tax, excluding exception and items, grew by 41% year-on-year to INR 2,902 crores in FY '24. The total consolidated revenue grew by 30% year-on-year to INR 39,050 crores in FY '24. Our NBFC portfolio grew by 31% year-on-year and 7% sequentially and crossed INR 1 lakh crore milestone during Q4 of FY '24.

Our HFC portfolio grew by 33% year-on-year to about INR 18,400 crores. Our mutual fund average AUM grew by 21% to INR 3.3 trillion in Q4 '24. The total premium in life and health insurance grew by 18% year-on-year. Second, prudent risk management is focused on return of capital. Prudent risk management practices from the backdrop of our approach, which enables us to for pursue growth while protecting our capital.

Over the last few quarters, we have made several proactive interventions and tightened our underwriting norms to improve our customer selection. We believe that this practices have held us in a good state in this environment. The gross Stage 2 and Stage 3 ratio of NBFC portfolio declined by 135 basis points year-on-year and 36 basis points sequentially to 4.49%.

Our total credit losses in NBFC businesses were [ 1.43 ] in Q4 FY '24, which within our guidance of 1.5%. The credit quality in our HFC business remains robust with a growth Stage 2 and Stage 3 ratio declining to 208 basis points year-on-year and 63 basis points sequentially to 2.91% as of March end.

Third, omnichannel architecture for distribution. We follow an omnichannel architecture for distribution and provide a complete flexibility to our customers to choose the channel through which they wish to interact with us. We continued to expand our branch network to capture white spaces across customer segments.

Our overall branch count increased by 179 in FY '24, and we had 1,474 branches across all our businesses at the end of March. In line with our One ABC approach, we continue to expand our co-located branches, which increased by 212 during the year to 796 branches across 220 locations.

While we increased our physical footprint, we are also strengthening our digital propositions and launching new platforms [ per channel. ] Our ABCD app, which has been built in a record time of 12 months, went live about a month ago and is available for a download on app stores and play stores. It offers a comprehensive portfolio of more than 20 products and services, such as payments, loans, insurance and investments, along with the comprehensive personal finance tracking, such as My Track.

We have witnessed a robust response for our ABCD with more than 1 lakh registrations till date. Our comprehensive B2B platform for MSME ecosystem, Udyog Plus has scaled up quite well with more than 8 lakh registrations within 9 months of its launch. It has clocked disbursement of about INR 500 crores till date with the ABG ecosystem contributing about 2/3 of the business.

The total portfolio for Udyog Plus has reached about INR 250 crores till date. We are scaling up the business in ABG ecosystem as we expand our market footprint in MSME segment. Our omnichannel collections platform for merchants, Payment Lounge, has crossed INR 2,000 crores [ GNPA ] till March. We have started integrating Payment Lounge with ABG ecosystem, enabling their merchants to make collections seamlessly.

Number four, data, digital and technology. We leverage data, digital and technology to build a deep understanding of our customer profile, provide simplified and holistic financial solutions, superior underwriting and cross-sell and upsell. This has helped us to increase our sourcing from ABG and ABC ecosystem, enhance customer engagement and drive quality and profitable growth across our businesses.

Our business CEOs will cover some of these initiatives and outcomes in detail during their discussion. During Q4 FY '24, Aditya Birla Capital and Sun Life sold about 5% and 6.5% stake in ABSL, AMC, respectively, to an offer [indiscernible] with an objective of meeting the minimum public shareholding requirement by October 2024 as required by SEBI regulation. The sales received an overwhelming response from investors across domestic and foreign funds. It helped us to strengthen our balance sheet by enhancing the capital base by around INR 570 crores.

Our Board of Directors had approved a proposed amalgamation of Aditya Birla Finance with Aditya Birla Capital in March. We have submitted our application to RBI and stock exchanges for their consideration and awaiting their approval.

Going forward, we will continue with our approach of driving quality and profitable growth and sustain the momentum of the past 2 years. Now I request Vijay to briefly cover the financial performance of our subsidiaries for the quarter and our approach going forward. Over to you, Vijay.

[Vijay Deshwal, executive]

Thank you, Vishakha, and good evening, everyone. The total consolidated revenue grew by 30% year-on-year to INR 39,050 crores in FY '24. The consolidated profit after tax, excluding one-off items, grew by 33% year-on-year and 10% sequentially to INR 812 crores in Q4 FY '24 and by 41% year-on-year to INR 2,902 crores in FY '24.

In our NBFC business, disbursement grew by 16% year-on-year to INR 18,123 crores in Q4 of FY '24. The loan portfolio grew by 31% year-on-year and 7% sequentially to INR 1,05,639 crores as of March end. The NBFC business had a healthy ROA of 2.46% and ROE of 17.1% in FY '24. Our housing finance business continues to see strong momentum with disbursements increasing by 64% year-on-year and 45% sequentially to INR 2,933 crores during Q4 of FY '24.

The loan portfolio grew by 33% year-on-year and 11% sequentially to INR 18,420 crores as of March end. ROA was maintained again at a healthy 1.92% and ROE was 13.9% in FY '24. Coming to our AMC business, the average AUM increased by 6.5% sequentially and 20.5% year-on-year to INR 3,31,709 crores of which equity AUM was approximately 46% in Q4 FY '24.

In our life insurance business, our total premium grew by 15% year-on-year. Net VNB margin was 20.2% in FY '24. In our health insurance business, our unique and differentiated health first model led us to deliver a growth of 36% year-on-year in FY '24. Combined ratio was 110% in FY '24.

Going forward, we will continue to make investments in technology to strengthen our digital offerings and platform and expand our brand network. Risk management, as Vishakha said, remains the cornerstone across our businesses. Number one, in the NBFC business, we will leverage our digital platform, ABCD and Udyog Plus, the extended ABG and ABC ecosystem, and our pan-India based branch network to grow our loan portfolio. We'll also look to grow the corporate and mid-market portfolio based on opportunities.

As we have stated earlier, we remain confident of doubling the March '23 portfolio by March '26 and continuing the credit cost within 1.5%. In the HFC business, we leveraged the extended ABG and ABC ecosystem to accelerate growth in prime and affordable segments. We have made significant investments in hiring people and in improving our digital capabilities to enhance customer transacting experience and reduce turnaround time. We will build on these capabilities going forward to further accelerate the growth in the portfolio going forward.

In our AMC business, we strengthened our team by hiring a co-CIO equity and a retail sale set to build on our strong presence in the distribution network. We have also strengthened our alternative assets team. We have seen strong momentum in Q4 on the back of an uptick in equity performance, coupled with a very established fixed income franchise and a robust sales engine.

Going forward, we will scale our retail franchise, leverage digital platforms for seamless delivery and grow alternative assets, including AIF, PMS and real estate. In our life insurance business, we will grow our traditional products in retail segment and grow credit life in the group segment. We'll continue to make investments in direct channels and diversify our distribution mix and increase our productivity. Our endeavor would be to grow the top line at a CAGR of more than 20% over the next 3 years and sustain VNB margin in the range of 18% to 20%.

In the health insurance business, we will follow our differentiated Health-First and Data-driven approach for better risk selection and risk tool management and diversify distribution with focus on proprietary channels. Our endeavor is to achieve a combined ratio of 100% by FY '26.

I'll now hand over the call to Rakesh Singh, MD and CEO of ABFL, to discuss the ABFL performance. Over to Rakesh.

[Rakesh Singh, executive]

Thanks, Vijay, and good evening, everyone. In our NBFC business, we saw a 7% quarter-on-quarter and 31% year-on-year growth in our AUM, taking it to INR 1,05,639 crores in quarter 4. Our retail and SME segment AUM grew by 31% year-on-year and now stands at INR 70,547 crores, contributing to 67% of the overall AUM mix. We continue to focus on growing business loans to MSME customers, and the AUM for this segment has grown at a healthy 13% quarter-on-quarter and 39% year-on-year and comprises 53% of overall portfolio.

Large share of this growth has come from secured products and primarily through our direct sourcing channels. Secured loans to MSME customers grew 14% quarter-on-quarter and 42% year-on-year. In quarter 4, we disbursed INR 18,123 crores, which is 16% higher than previous quarter. For the full year, we disbursed INR 64,387 crores, which grew at a healthy 31% year-on-year despite the calibrations initiated in personal and consumer loan segment in quarter 3. Disbursements grew by 38% year-on-year in business loan segment and by 19% year-on-year in personal and consumer loan segments.

We continue to focus on direct sourcing. Nearly 50% of the disbursement in overall business loans segment in FY '24 was done directly, and we expect this to continue to inch upwards as we scale up our B2B platform for MSME, Udyog Plus. We launched Udyog Plus last year. And as on date, we have nearly 8 lakh MSMEs registered on this platform, and we have disbursed more than INR 500 crores in the last 9 months on this platform.

Our net interest margin was at 6.9% for FY '24, which has grown by 6 basis points year-on-year despite increase in cost of funds of 88 basis points. Last quarter, we passed on 20 basis points in our new disbursement deals across all product segments to accommodate increase in our cost of funds.

Our OpEx-to-AUM ratio is at a healthy 2.17% for the year and has decreased by 7 basis points year-on-year despite our continued investment in branches to scale up direct sourcing in emerging markets. We added 89 branches in the year, taking our total branch count to 412 as of March 2024. Our cost-to-income ratio for the year stands at 31.08%, which has improved by 104 basis points year-on-year.

Our profit after tax for the year was INR 2,221 crores, growing by 43% year-on-year. The return on equity for the year expanded by 233 basis points year-on-year to 17.10%. The ROA for the year was sustained at 2.46%. We infused capital of INR 1,600 crores in FY '24. Our Tier 1 capital adequacy stands at 14.13% and has improved by 21 basis points year-on-year despite increase in risk weights on personal and consumer loan segments in November last year.

Our asset quality has also shown consistent improvement with our Stage 2 and Stage 3 book reducing by 135 basis points year-on-year and 36 basis points quarter-on-quarter to 4.49%. The gross Stage 3 book stood at 2.5% in quarter 4 compared to 3.12% for the same period last year. We have maintained our Stage 3 PCR at 50%, which is higher by 374 basis points over quarter 4 last year. Credit costs for FY '24 was at 1.5%, and it has been on a steady decline over the last 2 quarters.

Going forward, we will continue to build a granular portfolio and enhance our retail and SME segment mix with scaling up of Udyog Plus B2B platform and investing in our distribution presence in emerging geographies to fuel growth. Our growth strategy in personal and consumer loans segment will pivot to a platform-based customer acquisition approach through our branches, ABG ecosystem, and our newly launched ABCD app. All our digital sourcing journeys on the app and on Udyog Plus are designed for end-to-end control from underwriting to collections, giving us complete ownership of the customer.

As we build scale, enhance capacity and invest in technology, we remain committed to delivering sustainable returns for the forthcoming quarters. With that, I will now hand it over to Mr. Pankaj Gadgil, MD and CEO of our Housing business.

[Pankaj Gadgil, executive]

Thank you, Rakesh, and good evening, everyone. I'm happy to share that at ABHFL, we have made consistent progress across key aspects of book growth, asset quality and profitability. Key highlights for FY'24 are as follows: we witnessed accelerated growth in disbursements across product segments. In FY '24, we disbursed INR 8,450 crores, marking a significant 59% increase Y-o-Y. Our AUM as of March '24 stands at INR 18,420 crores, an increase of 33% y-o-y. The customer base is now at 64,900 and has grown by 90% Y-o-Y.

We continue to focus on granularity with the ticket size of about INR 28 lakhs.. PBT for the year is INR 376 crores, an increase of 22% Y-o-Y. Average cost of borrowing for the year is at 7.66%, and we are consistently rated AAA for the seventh consecutive year by both ICRA and India ratings. Asset quality has improved with Stage 3 reducing to 1.82%, which is 141 basis points reduction Y-o-Y. The ROA for FY '24 is 1.92% and ROE is at 13.87%. For more detailed financial information, please refer to Slide 28 of the presentation.

Now let me provide you an update on our organizational road map. You can find the details of the same on Slide [ 29 ]. In terms of distribution, we have witnessed impressive growth across segments with a 64% Y-o-Y increase in disbursements in Q4 FY '24. Also, I'm happy to share that 9.8% of the retail disbursals are generated from the ABG ecosystem in FY '24.

Moving on to digital reinvention. As you can see on Slide 26, we have launched 4 significant platforms during FY '24. Our flagship platform, Finverse, an end-to-end unified digital lending platform, which had gone live in the record 9 months, achieved 100% adoption within 3 months of its launch, with over 1,800 design hours invested. Finverse further enhances our predictability throughout the customer life cycle.

Our second platform, Sales CRM, has also shown promising results with a 24% increase in productivity and 2.1x increase in our channel partner base to 12,000 plus today. Our third platform, ABHFL Finserve aids in our efforts to be the most preferred choice of our customers by ensuring service guarantee within hours, which has resulted to a significant rise in our Net Promoter Score to 69 in March 24.

The fourth platform, ABHFL FinCollect, is an end-to-end debt management platform, offering mobility-led solutions for field staff, including system-generated payment links and instant receipting, with a robust net service framework and pre-delinquency management, the correction efficiency is consistent at 99% plus in FY '24.

On data and analytics, we have successfully deployed 9 data marts and 16 models during FY '24, spanning across the customer journey from demand generation to collection. For example, our Pre-Delinquency model and Flow Prediction model have played a very important role in improving our portfolio quality, resulting in 208 basis points Y-o-Y reduction in Stage 2 plus Stage 3 as compared to FY '23. For further details on data and analytics, please see Slide 27.

As you can witness, we have demonstrated 7 quarters of consistent growth across segments with improved portfolio quality and customer advocacy. With these building blocks now in place, we would be focused on increasing our scale of operations by accelerating investments in digital technology, analytics and manpower, while simultaneously improving productivity in FY '25.

Thank you for your attention. And with that, I now hand over to Bala, MD and CEO of our Asset Management Company.

[A. Balasubramanian, executive]

Thank you, Pankaj. In AMC business, our focus has been to strengthen our main levers of growth in the organization by bringing the right talent and making strategic changes in certain leadership roles. In fact, our momentum in the last quarter is in the back of uptick in equity performance, coupled with the well-established [indiscernible] a robust sales engine inclusive of [indiscernible] connection, tech-enabled services and a growing digital business network. Building on this synergy and energy, the business is on a meaningful momentum, and our team is geared to make the most of it.

In Q4, FY '24 of our overall assessment management encompassing alternate assets reached INR 3.46 lakh crores, reflecting 29% year-on-year growth, notably our mutual fund quarterly average AUM reached INR [ 3,32,000 ] crores, the equity quarterly average AUM standing at INR [ 1,22,000 ] crores. I'm happy to say that our SIP numbers for the quarter have witnessed good uptick moving from INR 1,005 crores in the month of December 2023 to INR 1,252 crores in March 2024, marking a 25% quarter-on-quarter increase.

We have added around 6 lakh new SIPs with approximately 2.5x increase compared to the previous quarter. Individual investors, an average AUM of INR [indiscernible] crores have contributed about [ 22% ] of total assets. Additionally, the contribution from [indiscernible] stands at 17.5% as of March 2024. And the alternate business, our good investment performance experienced in PMS, helped us in getting our products being shown in some of our [ authorized ] channels through the launch of ABFL equity [indiscernible] opportunity to fund [indiscernible] assets stands at about INR [ 22,900 ] crores, [indiscernible] customer base or [indiscernible] offering.

Moving on to financials. We, at ABSLAMC, are happy to inform that we have achieved our highest ever profit in FY '24. Profit before tax is at INR 1,008 crores up 27% year-on-year. Profit after tax at INR 780 crores, up 31% year-on-year. For FY '24, total revenue is at INR 1,640 crores, up 21% year-on-year. In Q4 '24, total revenue at INR 440 crores, up 34% year-on-year. Q4 FY '24 profit before tax at INR 268 crores, up 48% year-on-year. Profit after tax is at INR 208 crores, up [ 51% ] year-on-year. We are also pleased to announce that the Board has proposed dividend of [ 7.5% ] for the year FY 2024.

With this, I'll now hand it over to Kamlesh Rao, MD CEO, Aditya Birla Sun Life Insurance Company.

[Kamlesh Rao, executive]

Thank you, Bala, and good evening to all of you. The premium growth for the life insurance industry was muted in financial year '24 as compared to the previous year. Individual first year premium growth for the overall industry was at 5%. And for the private industry was at 8%. Individual first year premium growth of ABSLI was 2%. The growth in the policy count was 17% for last year, which was part of our strategy to manage the reduction of the greater than 500,000 business in our portfolio post regulatory changes last year.

Over a 2-year period, ABSLI has clocked a CAGR of 18% in the individual business compared to the overall industry at 12% and the private industry at 16%. In the group life insurance segment, the private industry saw a growth of 20% last year. Overall industry showing a growth rate of 1% and ABSLI registered a growth rate of 9%. We continued to remain #1 in the ULIP AUM in the industry at an AUM size of close to INR 12,000 crores.

Our total premium of INR 17,260 crores has registered a growth rate of 15% over the last year same period with a 2-year CAGR of 19%, demonstrating our increasing business growth. The growth came from new business growth as well as renewal premium, which grew at 24% last year.

Our digital collections now account for 80% of our renewal premium. We continued to work on customer lifetime value, which is reflected in our upsell ratio, which touched 29% and helped productivity growth in both our proprietary as well as partnership channels. In the product mix of the individual business, traditional business contributed 73% and was ULIP was 24%. A robust performance of the equity markets saw an uptick in the sales of ULIP products across the industry. At ABSLI also, we witnessed a similar trend.

The proportion of ULIP after remaining at about 21% for the first 9 months of the year increased to 24% for the full year. I had mentioned in an earlier quarter's earnings call that there have been some slowdown of business [ source ] to our biggest banca partner in Q2, which slowed down our overall growth rate for last year. As the year has ended, the business has settled in this counter. We continue to invest in higher capacity in our proprietary channels and other banca partners.

Axis Bank will begin sourcing business for us as we speak in the month of May. Bank of Maharashtra and IDFC First Bank, the other 2 banks that we signed last year, are already live from the last quarter of last financial year, and we are in the process of scaling them up.

The decrease in G-Sec rates in Q4 along with a higher proportion of ULIPs led to a decline in net VNB margins to 20.2% in financial year '24 from 23% the previous year. On the back of strong quality of the in-force book, the emitted value for ABSLI increased by 28% Y-o-Y, and we are now at an embedded value of INR 11,539 crores as on March 31, 2024, and the return on embedded value, the ROEV was 18.8% last year. Persistency across all buckets did well with the 13th month now at 88% and the 61st month at 65%.

Our assets under management now stand at close to INR 86,161 crore with a Y-o-Y growth of 23%, 26% of this AUM is in equity and the balance 74% in debt. Our investment performance has been better than respective benchmarks across all 3 categories of equity, debt or even balanced funds either from a 1-year perspective or a 5-year perspective.

Our digital adoption across various areas is demonstrated in Slide 47 of the presentation, 100% of the new business customers are onboarded digitally. 83% of all our services are now available digitally, covering about 67% of our customer transactions, and our customer self-service ratio now stands at 91%.

Going forward, we will drive our premium growth from a diversified mix of both proprietary and partnership channels, backed by both productivity and capacity. We will continue to invest in proprietary channels. Further, we expect to see new banca partners that we signed last year, which is Back of Maharashtra, IDFC First Bank and Axis Bank, to contribute 10% to 15% of our top line in financial year '25.

We expect continued improvement in the quality of our book. Our endeavor is to grow the business at a CAGR of more than 20%, helping us to close to doubling our size from where we are present today over the next 3 years. We believe that the VNB margins will settle in the range of about 18% to 20% based on our expectations of G-Sec rates and product mix. Our absolute net VNB growth will also be close to double, in line with our new business growth expectations. We will continue to be best in class in our digital infrastructure, cross prospecting and onboarding and sales, underwriting, customer service as well as ULIPs.

With this, I'll now hand over to Mayank Bathwal, CEO of our Health Insurance Company.

[Mayank Bathwal, executive]

Thanks, Kamlesh. In our health insurance business, the growth and momentum, which we witnessed in Q3, continued in Q4 as well, and we clocked an impressive 52% Y-o-Y growth, solidifying our position as the fastest-growing SAHI player during the quarter. For FY '24, we achieved a gross premium of INR 3,701 crores, experiencing a strong 36% Y-o-Y growth. So over a 3-year period now, our sales CAGR stands at 42%.

As I had guided at the beginning of the year that we make the model changes, structural adjustments post introduction of the new EOM guidelines, so after a slightly muted H1 with a 23% growth rate by our own standards, ABHI registered consistent growth, high growth of 43% in Q3 and 52% in Q4 with an overall growth of 48% in H2. We were the fastest-growing insurer in both of these quarters.

Our market share in SAHI in FY '24 was from 10.4% to 11.2%, an increase of 82 basis points for the year. The high growth in H2 is driven by a strong growth in the retail business, registering an impressive 34% growth in Q3 and 43% in Q4 with an overall H2 growth of 39%.

The growth in retail is driven by our larger retail channels, especially the proprietary channel, which saw a 43% Y-o-Y increase. Our proprietary channel share increased to nearly 31% compared to 27% in the previous year. In addition, all our large bank and digital alliance partners have experienced good growth. In FY '24, we also activated large new relationships of India Post Payment Bank and Yes Bank.

Our focus on diversifying our product portfolio for the launch of Activ One, the most comprehensive [ remedy ] product in the industry, 7 variants targeting various customer segments. Positioned on a theme of 100% health and 100% health insurance, the product has been well received by the market and has, within a short period of 5 months, gained significant traction, which is reflected in our market share increase. The early success of the product gives us confidence of growth in the coming year as well.

With an emphasis on product mix, our fixed benefits product contribution increased to 17% compared to 13% in the previous year, and this will contribute positively to our profitability in the coming quarters. Our corporate business experienced 49% Y-o-Y growth, driven by a sharp focus on profitability through careful customer segmentation, cross sell, upsell, corporate values initiative and our industry-leading OPD business. We are strategically concentrating on net corporate and SME segments to build a sustainable and profitable corporate and affinity business. We believe we have set up one of the very few profitable corporate businesses in the industry.

Balancing growth and profitability, our net loss, our improvement with loss of INR 183 crores from INR 220 crores in the same period last year. In fact, in quarter 4, we had a profit of INR 88 crores. The limited movement in [ core ] is on account of seasonality and business mix. Our claims and expense ratio at the company level have trended well, and we anticipate the cohort to continue to improve in the coming years, and we expect a call of 100% by March '26.

Our Health-First model continues to show signs of maturity. The improved outcomes for some of the intervened cohorts are now visible. Customers participating in active days exhibit lower loss ratios ranging from 10% to 35% or more. Likewise, customer earnings health incentive experienced lower loss ratios of up to [ 35% ] than the baseline. Similarly, persistency trends for intervened cohort continue to be encouraging with improvements of up to 800 basis points as compared to the baseline score, which is shown in Slide 56.

Overall, this has kept our loss ratio well in control, and our endeavor is to increase this effort over a larger cohort of our customers. We are sharing some more insights this time on our Health-First model on Slide 57. We have invested in building deep capabilities and managing customers with high risk through a combination of first-of-its-kind product offerings and human stroke digital capacities to manage the disease burden of these set of customers.

Through a combination of our in-house health coaches and our partners, we have intervened in nearly 100,000 high-risk lives to improve their health vitals along with claims ratio. Our industry-leading claim settlement ratio of 96% reflects our commitment to prioritizing customer experience. To enhance the customer experience and more importantly, manage claims cost better, we've invested in our state-of-the-art AI and ML-driven claims of the adjudication engine, which went live in March '24.

As a track-driven data in a digital-enabled data-centric Health-First business, we are committed to continuous investment in our tech and digital capabilities. Our consumer-facing app downloads have increased by 41% Y-o-Y and MAU has also grown by 102% Y-o-Y. Our self-service transactions stand at an all-time high of 86% in the previous year. Leveraging high-end analytics tools, we make informed decisions that positively impact our customers' lives through personalized product offerings, targeted health and wellness intervention and a personal service approach resulting in better customer experience.

Investments in data augmentation and analytics are enhanced -- are enhancing our cross-sell retention and fraud management as is shown in Slide 60. There are many changes being proposed by the regulator for health insurance sector, which are pro-consumer and will help in increasing penetration for the category. However, some of them may lead to some adjustments in the short term. We continue to be very positive on the growth outlook for the industry and more so given our differentiated and resilient business model.

Our vision is to aggressively expand our franchise, but we will continue to hold our best-in-class unit economics.

Thank you, and I will now hand it back to Vishakha for our closing remarks.

[Vishakha Mulye, executive]

Thank you, Mayank. This concludes our remarks on the Q4 FY 2024 performance, and we will be now happy to take if there are any questions.

[Operator]

[Operator Instructions] We'll take a question from the line of Nischint Chawathe from Kotak Institutional Equities.

[Nischint Chawathe, analyst]

I hope I'm audible.

[Operator]

Yes, please go ahead.

[Nischint Chawathe, analyst]

Yes. The first question, I [indiscernible] finance business for around 17% of ROE for this year. And now with the merger, again, your ROE will come down. So what kind of a ROE guidance will you give us for the next 3 years?

[Unknown Executive]

See, Nischint, right now, we are not making any ROE guidance. What we are focused on that on each one of the businesses, we continue to improve our operating performance.

As we mentioned earlier also, Rakesh has been saying that the ROA that we have in the NBFC at 2.5% broadly right now, our endeavor is to expand it to about 3% over the next 3 years. So that's what we'll be focused on. ROE will be a resultant of the overall capital structure. And I think that we will have to wait for how it will emerge.

[Nischint Chawathe, analyst]

No, I know, but if we really go back 3, 4 years in time, there was a very strong concerted effort to improve profitability or take the ROE to sort of 17%, 18% level, and we have actually achieved that and now with this capital coming in, probably, we'll probably take a couple of more years to get back to these levels. And that's where I think the question was.

[Rakesh Singh, executive]

Nischint, it's very natural that when you augment your capital, and there is an augmentation in capital base. In the interim, the ROE may look in the mid-teens, but eventually, it will directionally move towards high teens as the leverage keeps on going up.

[Nischint Chawathe, analyst]

Sure. Just a second small question was essentially on the GST and DSP in the consumer unsecured business. We are seeing a fairly sharp rise on the sequential on a year-on-year basis. So any color or any commentary on this.

[Rakesh Singh, executive]

Nischint, your question is on personal and consumer, the Stage 2 and Stage 3 increase? So -- see, if you look at -- that has gone from 2.2% to 2.9% and 2.2% to 2.8%, but that's primarily on the reduction in the book. So if you see in quarter 3, our personal and consumer book was INR 19,600 crores, and it came down to INR 17,000 crores something. So that is a denominator effect, and there is -- we haven't seen any increase in delinquency in personal and consumer.

[Nischint Chawathe, analyst]

So sir, if I look at [indiscernible] numbers, your loan book in this segment is down 11% quarter-on-quarter, but your GS 2 is up 17% quarter-on-quarter, and GS 3 is up 13% quarter-on-quarter. So the point essentially is that are they kind of closer to the [indiscernible]? Do you see these ratios going up when you're really looking at the static pools, probably that you have [indiscernible]

[Rakesh Singh, executive]

No. So it's primarily a denominator effect. And we had -- as we had mentioned earlier, that we looked at the small ticket unsecured loan and we calibrated below INR 50,000 ticket size. And that's what we had really -- and we continue to grow our personal loans through our branches, through our ecosystem and now the ABCD app, which we have launched, we will continue to grow this, yes.

[Nischint Chawathe, analyst]

So is this like the bottom and it picks up from here? Or do you expect it to sort of run down a little bit more before the book starts slowing and the ratio start improving?

[Rakesh Singh, executive]

So INR 50,000 and above, there is nothing which is left now. So if you look at our VNB, book is less than 1%, it's 0.7%, so INR 129-odd crores is left and that also by April, it would have gone off. So there is nothing -- this is already -- it's not there in the portfolio now, the small ticket less than INR 50,000 loan.

[Nischint Chawathe, analyst]

And the final one on the life insurance side, if I can squeeze in, and the margin compression that we've seen this year, is it purely because of the increase in share of units or would you also kind of say that payouts to distributors have gone up, which is one of the things that some of the others players in the industry have been talking about.

[Kamlesh Rao, executive]

It has no this on bearing because of any payout to the distributor that has gone up. That's not the trend that we are seeing. Largely on 2 factors. One is that ULIP for the year went to 24%, which obviously means for the last quarter, it would have touched about 30%. So larger ULIP share in the last quarter and the fact that in Q4, the G-Sec was lesser than where it is even standing today. Some impact of that on gross margins and product mix on account of ULIP is where the VNB is now at 20.2%.

[Operator]

We'll take a next question from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

The first question is on your acquired portfolio. If I see, you have almost acquired like INR 4,500-odd crores, consisting of 1.5 lakh accounts over the last 1 year. If you can just help us understand about what kind of a loan from what kind of lenders you have acquired these portfolios. So that's question one.

The second question would be if you were to look in the housing finance business, I mean, of course, the AUM is going and -- but you are still sort of investing back in people, so that cost ratio is also on rise. Right now, of course, the negative credit cost as kind of driven that ROE is still being comparable to where it last year? So if you can sort of provide clarity or color on how this cost OpEx ratios are going to behave over the FY '25.

[Unknown Executive]

We understood your second question, well. If you can reframe your first one, it will be helpful.

[Avinash Singh, analyst]

Yes. So first one, I mean, if I look at the NBFC disclosures, you have acquired nearly INR 4,500 crores of loans in last 1 year, consisting of some 1.5 lakh, 1.6 lakh number of loan accounts. I just wanted to know what kind of loans, I mean, product, customer you are acquiring in these sort of loan and what kind of a lender or [indiscernible] from which you are acquiring?

[Rakesh Singh, executive]

These are small ticket loan against property primarily, that's the nature of the business -- the nature of the loans, which we would have acquired. These would be seasoned portfolio, where we do 100% sampling, and we cherrypick the portfolio. So that's how we really look at and this can be across different institutions.

[Avinash Singh, analyst]

Is it ticket size, I mean, if I look at 1.5 lakh, like the average ticket size works out to be close to 3-odd lakhs. And also if I look at the disclosure in terms of the security cover, it suggests less than 100%, that means a reasonable size of unsecured also, that is where my question was that, I mean, if it's a mix of unsecured and secured, then what kind of unsecured book we're acquiring?

[Rakesh Singh, executive]

So unsecured, if you look at it's -- out of this is a small portfolio of unsecured and which has -- I can get back to you with the exact, but this is a small portfolio, INR 798 crores out of this is unsecured, remaining is secured.

[Avinash Singh, analyst]

Okay. Okay. And my question on how to finance OpEx?

[Unknown Executive]

So I think the question that you had asked was about the ROA and how we manage the credit cost and I was just going to...

[Avinash Singh, analyst]

No OpEx despite a strong increase [indiscernible].

[Unknown Executive]

So as you would have observed, I think the growth trajectory is clearly back at ABGFL. And the last year, we grew by 14%, this year we grew by 33%. So while that is clearly happening, you would have also seen that the NII for us, which was 5.3% of last year, we have actually grown it to 5.39% this year, which is, of course, a combination of how have we been able to price our loan products.

And also the other income that we are kind of capturing though what we are sourcing. So the way I think we've been articulating earlier as well, I think the strategy for us has been to focus on opportunities across the spectrum. So across the segments, prime affordable informal and CF, I think we are looking at maximizing the opportunity.

And when we do that, I think we are very, very conscious about, a, working on our existing portfolio. And therefore, you would have seen, the credit quality has significantly improved in the last almost 6 quarters, both sequentially as well as on a Y-o-Y basis. That gives us, of course, room as far as credit cost is concerned.

So the strategy for us really was to get the growth momentum back, which is a double take that we have kind of got a very, very clear hold as far as the credit cost is concerned, both on portfolio and also origination. And if you would know, each time, we've been talking about what percentage of customers do we originate at 700 plus in NTC. And clearly, that is significantly better as compared to the market.

So while we have established both the origination as well as portfolio quality that we are talking year-over-year, the idea is to -- as the book grows further, of course, the fixed cost will get a portion towards the larger book. We'll get an operating leverage in times to come. And of course, then the ROEs will stabilize further. So that's kind of the guidance. Of course, in the short term, it may slightly come down because we are observing, as you would see in Q4, if you look at the ROA, it's a 1.76% versus 1.92%, it's already there in the financials.

So we are touching some NIM compression, but as the book grows with the right portfolio quality. I think there are lots of reasons for us to come to the conclusion, and then really focusing towards getting the ROA back to the trajectory of 2%, 2.1% in the next 12 months or 6 months.

[Avinash Singh, analyst]

Okay. Just one follow-up on life insurance. So in our work, I mean if you can just help sort of a breakdown of your operating and economic [indiscernible] changes. And also, I mean your rate of unwind at, I mean, 9% plus is relatively higher to your peers. So if you can shed some color on that?

[Kamlesh Rao, executive]

So the 18.8% roughly is yes, unwind. Obviously, our operating variance has been positive of about contributing 1.5%, and it has been positive for the last 3 years consecutively. The remaining part is the net VNB contribution of about absolute INR 700 crores. So 18.8% is roughly 9.5%, about 8% from there and 1.5% from the operating variance.

The reason we unwind on the book is a little higher because we carry a reasonable book on non-par and if the non-par book for our portfolio is slightly higher, then obviously the rate of unwind in that -- we would see slightly about 100 to 150 basis points higher than some of the peers that you must be seeing. So that's the rough breakup in the RoEV of 18.8%.

[Avinash Singh, analyst]

Yes. And in operating variance, if you can sort of provide some breakup, like how much is that from cost, persistency and mortality -- I mean, yes, because it's a reasonably good number.

[Unknown Executive]

So our mortality assumption is positive. But one from the upside actually is coming from all our variances, which are better in terms of low losses, better persistencies -- so one of the operating variance is coming from our assumptions, experience being better than what we would have planned for, and mortality is not giving any negative dig in the operating variance.

[Operator]

We'll take a next question from the line of Manoj Bahety from Carnelian Asset Management.

[Manoj Bahety, analyst]

Am I audible?

[Operator]

May I request you to use your handset mode, please.

[Manoj Bahety, analyst]

Hello. Is it better?

[Operator]

Yes, please go ahead.

[Manoj Bahety, analyst]

Vishakha, first of all, congratulations on a good set of numbers and as well as a good asset quality. So I have 2 questions. First question is if I see like last 4, 5 quarters, the kind of acceleration, which we have seen in our overall loan growth and especially a large portion of the loan growth is coming from retail, personal, SMEs and as well as the unsecured portion.

So just wanted to get some understanding, like when -- like with this pace of growth, obviously, you need to introduce new risk controls, whether it may be technology-driven whether it may be like some other majors of control. So if you can help us understand what kind of additional risk controls at a corporate level you have introduced, which will tackle your balance sheet, which will be like 3x of its size in the next few years.

[Rakesh Singh, executive]

So if you look at the growth, in fact, and that's what I mentioned it in my opening remarks, on the personal and consumer segment, especially unsecured small ticket segment, we have really dialed down. And if you look at in December '23, our book was INR 19,606 crores, which we have brought it down, we tightened our underwriting. We tightened our scorecards and sourcing. And we have brought it down to INR 17,434 crores. So it's almost 11% decline quarter-on-quarter.

So it's not -- and if you look at we were growing quite strongly in quarter 1, quarter 2, and the trajectory has moderated in terms of -- because of this dialing down of the small ticket unsecured credit. So we are very, very mindful of the credit quality. We will continue to grow within our risk appetite and in terms of managing our portfolios through the cycle.

So tightening of underwriting, tightening of our scorecards, also the collections infrastructure and the capacity building, which we have done in collections. So we have taken all the right calls in terms of building our very strong and robust underwriting process for our retail and MSME business.

[Vishakha Mulye, executive]

Yes. So Manoj, now, of course, at the platform level or [indiscernible] approach clearly, we had said that return on capital is important, but return on capital is going to be the cornerstone of our strategy. So a couple of things. One is controlling the origination, as Rakesh said, so we are very, very focused on to say that which class of assets we originate. So if you see, we'd be on our own -- before even the whole thing started on the small ticket size unsecured loan. We had started bringing down that portfolio for us in the last 4 quarters.

We had also brought it out in our September call to say that most of these loans are less than 30 to 60 days, and we would be able to actually wind down that portfolio. As Rakesh said that today, that portfolio is virtually nil in our book. So one is identifying the allocation of capital to the -- which class of asset is very, very critical and taking those quick decision. Second is actually controlling your underwriting models, and we continuously look at our underwriting model, look at our experience and really try to fine-tune them as we go forward. So that is the second thing that we keep doing.

Third important thing is monitoring of the portfolio. So we have a separate team whether it is on the retail side or on SME side or on the corporate side, we continuously monitor our portfolio to say that if we need to intervene and take certain decisions. And the fourth, as Rakesh said, is now we have virtually in housed the entire collection. We have something called pre-delinquency management that is by using the data, digital, we try to identify the customers who we believe will they have the propensity to default and start actually allocating those customers even before the due date.

So we start our engagement with the customer almost 30 days before even the payments are due. And of course, there are various other initiatives that we have taken on the digital and analytics side to identify the customer. We also, in case of many customers, we do the [indiscernible] much more frequently. We look at the total -- the liability that the customers have at that level. We look at what are the loans that they have of us and on us.

So these kind of measures that we have taken, I think we'll go a long way in managing the portfolio, and I'm very happy to say that already reflected in our asset quality, but I think these are the 4 steps that we will continue to follow as we go forward.

[Manoj Bahety, analyst]

Great. That's very insightful, Vishakha and Rakesh. I have 2 more questions. First one is a quick one. For our health insurance, what is the path to profitability. Already, I think we are at almost INR 3,600 crores, INR 3,700 crores kind of GWP. So when can we expect this to start contributing on a bottom line basis?

[Mayank Bathwal, executive]

Yes. So as I mentioned earlier and even Vijay mentioned that we're looking at 100% core by FY '26 in the next 24 months.

[Manoj Bahety, analyst]

Okay. Okay.

[Mayank Bathwal, executive]

So the fact that like in last quarter of FY '23, we had a margin loss. In the last quarter of FY '24, we had a profit of INR 88 crores. Clearly, that our unit economics are working very well, which should put us well on course for this guidance that I've just given.

[Manoj Bahety, analyst]

Okay. So next 24 months, we can expect this entity to start generating profits, right?

[Mayank Bathwal, executive]

Yes.

[Manoj Bahety, analyst]

Okay. Okay. And last question is on our distribution strategy on the -- especially personal loans or BNPL or SMEs. So earlier, I think everybody in the system was using aggressively fintech partners. With RBI tightening norms on fintech partners, is there a significant change in our strategy and how we are dealing with the situation. So if you can help me some insights into this.

[Rakesh Singh, executive]

So our distribution for personal loans, if you look at, as I mentioned in my opening remarks, we are looking at our branches. The branch distribution which we have, the direct sales team which we have, the entire ecosystem platform which we have created, now ABCD which has gone live, it will have the entire load journey end-to-end on this platform for personal loans and for business loans.

So clearly, we are looking at in-house distribution for building our personal and consumer business. There we will still leverage some ecosystems where we have comfort and which -- where we have 100% ownership of the customers and 100% ownership of the processes, we will still look at those. But as you mentioned, clearly, post the DLG guidelines and all, we have -- we look at all our partnerships. And BNPL, you can see the numbers, that's come down significantly. It's almost negligible at this point in time. So we don't have -- we've small -- so just to answer, we will look at our internal ecosystems, branches, ABCD app, Udyog Plus, all of these platforms in which we will really source business.

[Operator]

We'll take our next question from the line of Anuj Singla from Bank of America.

[Anuj Singla, analyst]

So I think a couple of questions on the lending business first. So I don't recall if I missed the growth target for NBFC and HFC side for the next year. Have you articulated any numbers there?

[Rakesh Singh, executive]

On the loan book growth, we have given a guidance that we will double our loan book in 3 years. From March '23 to '26, we will double our loan book.

[Anuj Singla, analyst]

Okay. Okay. Okay. Got it. And Rakesh, a second question on the personal and consumer loan. Obviously, you have managed the book well on the small ticket size loans, and these consist now of 17%. How should we look at the growth trajectory from here? Is this -- should the proportion stabilize here in terms of the percentage of the AUM? And secondly, what does that imply for NIMs because this is obviously the higher lending book. And we also have seen some cost of funding pressure. So how should we see the NIM trajectory maybe for FY '25?

[Rakesh Singh, executive]

So we are quite positive on the loan book growth, and we will continue to focus on MSME and retail and consumer segment. Yes, small ticket loans -- small ticket unsecured loans comes at a higher margin, so higher yield, so you have a better margin on that. But I think the credit cost also is associated in similar proportion. So if we slow down that and we will dial down on that business, the other business, which we will onboard will have similar kind of margins, not high unsecured margins or yields.

But our B2B and MSME unsecured business, which we are growing now. And if you look at the B2B platform, which we have built and we are really looking at growing our small business loans on that platform, that also comes at a very attractive rate. And the credit cost also is quite well within control. So we don't see any challenge on both growth and the margins. So we should be able to manage both growth and margins.

[Anuj Singla, analyst]

Okay. Okay. Got it. Secondly, on the health side, so just one question. You have guided for 100% combined ratio by FY '26. Can you also give some more details? Is there some kind of price hikes we are building in this guidance? Or this is more driven by gaining scale and operating leverage?

[Mayank Bathwal, executive]

No. I mean, our growth has been consistent. As I said, we've had a growth of about 42% CAGR in the last 3 years. That growth will continue given the opportunity. Price hike is a subject of regular action that insurance companies take like and like all other health insurance companies, if the medical inflation does demand that the claims ratios are going up and we need to reprice, which has always been in line with market, we will do that.

So it's not something unusual all in short coming to. In fact, our price hikes have been generally slightly below what you see in the industry, which means that we have managed our portfolio and the quality of it and the related loss ratio is reasonably well. This year also, our retail claims ratio has trended very well because of all the actions that we have taken.

[Anuj Singla, analyst]

Yes. So the context here is that one of the largest SAHI companies have taken a 25% price hike in one of the major products. They are talking about more price hikes in the coming quarter. So I thought given that the industry price levels are going there, you might also be contemplating. So just to understand, is that one of the key drivers towards moving that 100% combined ratio?

[Mayank Bathwal, executive]

No, I'm not able to comment on the other company. I can only say that we have managed our portfolio quality, business mix, product mix, reasonably well for us to -- in fact, a large price hikes have been in the range of 10% to 12%, which is actually well below the medical inflation that we've seen.

[Operator]

We'll take our next question from the line of Bhaskar Basu from Jefferies.

[Bhaskar Basu, analyst]

I had 3 questions. So firstly, just drilling back on one of the questions in the -- one of the earlier questions essentially around the portfolio acquired. This quarter, it seems you've acquired about INR 2,300 crores, works out to average ticket size of about 6.5 lakhs with an average tenure of about 12 years.

So just wanted to understand, and this is -- I mean, it seems to be almost 50% of the sequential growth, if I assume this is all secured and coming from SME. So if you could give a little more texture around these loans? What kind of leads do they generate? Because at the ABFL level, there seems to be any yield compression on a sequential basis. So that was my question one.

Secondly, in the same context, what is the product mix or loan mix in the next 3 years, given that you're dialing down on the personal side? And third was just a housekeeping question on the write-off number for the quarter.

[Rakesh Singh, executive]

So first of all, the buyout portfolio, these are in quarter 4, all secured portfolio, which is what we have acquired. And in terms of what yield, it will differ, but it will be in the range of what we acquired. So the customer yield will be 11% to 12% for these portfolios. Your second question was how do we see the product mix. We have guided for 75% of retail and SME product mix in the next 2 to 3 years, we continue to stay guided on that.

We have dialed down our consumer and personal loan business, primarily on the small ticket unsecured business, especially below INR 50,000 ticket size. We will continue to do business in the consumer side, especially personal loans, business loans and all. So we don't see any change in our guidance from 75% of retail and SME business.

[Bhaskar Basu, analyst]

Okay. And just the write-off number, please?

[Rakesh Singh, executive]

Write-off numbers -- just give me a minute. So it's around INR 400 crores. It's in line where with earlier quarters. It's INR 411 crores.

[Operator]

We'll take a next question from the line of Sameer Bhise from JM Financial.

[Sameer Bhise, analyst]

Congrats on a good quarter. Just wanted to give it a sense on the coverage levels at ABFL. How do you see it moving ahead? We've stabilized at around 50% level. So some direction here would be helpful. And also, if you could share Stage 1 and Stage 2 coverage on an overall basis.

[Rakesh Singh, executive]

So if you look at -- and we have provided the segment-wise provision cover, which we have provided in our presentation and if you look at for personal and consumer, we have a provision cover of 83%. Unsecured business is 35.3%. But this is, we have to take into account that business loans. If we are out of the -- and that also we have mentioned on our slide where 43% of this book is covered under CGT SME, which is a guaranteed premium which we paid to SEBI and 75% of the principal is guaranteed.

So if you exclude that, then the provision will look quite good in the unsecured business as well. Secured business is 38.8%. This is as per our ECL model and our data, which has been there over the last 5, 6 years. And on the corporate and mid-corporate, it's almost close to 50%. So we think since our close to 70% of the portfolio is secured by real estate collateral and listed securities, we believe this is quite an adequate provision cover.

[Sameer Bhise, analyst]

So fair to assume that 50% is a good threshold to have over the medium term?

[Rakesh Singh, executive]

Yes. It also depends on how things pan out. But at this point in time, it looks quite adequate.

[Operator]

We'll take our next question from the line of Pranuj Shah from JPMorgan.

[Pranuj Shah, analyst]

So 3 questions here. First one is on the construction finance. That book has grown very sharply quarter-on-quarter and year-over-year. So could you give a sense of the average ticket size over here? And what kind of vintage of the developers that you look at when you finance? And also is there any difference in the customer profile between the NBFC construction finance and the housing finance book?

[Rakesh Singh, executive]

Yes. So I think there will be a difference between the 2 entities. Construction finance and the NBFCs is primarily to category A developers and this is primarily in Bangalore, Chennai, Mumbai, Pune. So that's where the segment is and see this business if you might see from 18%, it might have gone to 20% of our -- but -- this is -- we sanctioned it throughout the year depending on when the construction and when the pickup demand is that the customer utilizes. So that's how it is. If you look at overall of our corporate book, this is 20% is what -- and the average ticket size will be around INR 60 crores, INR 70 crores in this segment.

[Mayank Bathwal, executive]

For us [indiscernible] housing finance, the portfolio contribution is about 11% of the total book. And the ticket size is quite granular here. So our ticket size on disbursement is about INR 24.5 crores. AUM, it is INR 9 crores. So typically developers who are doing projects which are -- the cost of construction is about anywhere between INR 150 crores, INR 200 crores typically for whom the requirement of this year will be about INR 25 crores to INR 30 crores are the average profile that we look at.

Of course, it's very diversified. So across all the major centers of the country, starting from Ahmedabad to Bombay, Pune, Bangalore, Hyderabad, Chennai, Delhi, I think we have presence in all these markets. And I think when I was talking about the digital platforms, I think one thing that we have realized is that of course, we have to make sure the monitoring in this portfolio has to be top of the line. And therefore, we have launched a platform, which is [indiscernible], which actually helps us to monitor the platform both on event-based and frequency-based figures. So I think that gives us the confidence to keep growing this book, of course, with fully keeping in mind return on capital.

[Rakesh Singh, executive]

And for NBFC, this portfolio is around 6% of our overall loan book.

[Pranuj Shah, analyst]

Is there a vintage of developers that you also look at like they need to have minimum x number of years of development experience and then you sort of [indiscernible] or there's no such criteria?

[Unknown Executive]

So there are 2 things. One, we have kind of created a proprietary model, which has both qualitative as well as quantitative aspects when we look at the developer. And we look at it from both the dimensions. One is the developer profile, which includes the vintage, which includes the number of square feet that they have kind of already built in the market. We also look at type of projects that they have also undertaken, the quantum of residential units that they have done, the experience in commercial versus residential, the experience that they have in a public catchment.

I think the other things that we anyway look at and then we look at also the viability of individual projects. So it's going to be underwriting, which is 2 dimensional. One it is developer profile. And second, it has to do with the project [indiscernible]. And I think [indiscernible] extensive interactions that happen. And basis the model that we have kind of created, we actually rate these developers internally and then we appropriately take [indiscernible].

[Rakesh Singh, executive]

And similar for NBFC, these developers are all A+ -- A category developers, so primarily the top developers in these markets, which I mentioned.

[Pranuj Shah, analyst]

Second one was on the yields, like assuming [indiscernible] average yield we are assuming the RBI guidelines are implemented as it is and there is a relaxation over here.

And if you pass it to 100% to the developers, what could be the rise in yields from there on, if there's some sort of a calculation that's already done.

[Rakesh Singh, executive]

So these are still in draft guidelines and RBI has asked for the inputs from all the institutions. Since we are on [ India's ] -- and also we don't see any impact on our books.

[Pranuj Shah, analyst]

But there would still be a capital requirement, if I'm not wrong.

[Vishakha Mulye, executive]

No, it's a provisioning.

[Unknown Executive]

It is a provisioning, which is 2, 3 years as the recommended one [indiscernible]

[Pranuj Shah, analyst]

Okay. Understood. Sir, and one last question on the unsecured business loans, your disbursals have -- you have moderated a bit quarter-on-quarter, however, year-over-year, it's 6%. So is there a call that you're making at a company level just to stay away from unsecured loans in [indiscernible], business or personal?

[Rakesh Singh, executive]

No, we are not seeing that. And again, I mentioned that if you look at personal and consumer portfolio was growing quite strongly, and if you look at quarter 4 of not last year before that year was -- we were growing at 21%, and we brought it down to 15%, then 9% and 1%. And last quarter was negative 11%.

And the reason for that was because of the risk weights and the noise around small ticket unsecured loans because we had not seen any performance [ deterioration ] on our books, but -- still looking at the environment, looking at we dialed down and we tightened our sourcing on this book. But we still continue to be bullish on the consumer and retail business. And we will continue to do that in a much more controlled environment. As I mentioned, through our branches, through our digital platforms and through our ecosystem.

[Pranuj Shah, analyst]

Sir, I was looking more from an unsecured business loan perspective. Consumer, I think you well explained it even earlier. On the unsecured business loans?

[Rakesh Singh, executive]

So unsecured business loan, we will continue to grow that business. If you look at, it's INR 10,000-odd crores of portfolio, which we have in unsecured business out of that, if you look at INR 2,000 crores, INR 2,500 crores in supply chain business, which is a very short-term 60, 90-day loan and within the [indiscernible] ecosystem also. So meaning, if you look at the business loans, which we do almost 80-odd percent of our business loans is backed by a credit guarantee provided by SEBI. So we take guarantee premium repay or guarantee premium for these loans. So we are quite confident and quite -- and we have seen over the last 6, 7 years, during COVID also, we have seen the performance of this portfolio, and we have managed it quite well.

So looking at the way the formalization of economy is taking place and the way the GST collection is growing, and we have also build a B2B platform, Udyog Plus, to really onboard small businesses, which grows as the economy grows. So we are quite confident and bullish on this segment.

[Operator]

We'll take our next question from the line of Kunal Shah from Carnelian Asset Management.

[Kunal Shah, analyst]

No. No. My questions have been answered.

[Operator]

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Ms. Vishakha Mulye for closing comments. Over to you.

[Vishakha Mulye, executive]

Thank you, everybody, for joining us today evening. And if any of you have any questions, please feel to reach out to any of us. Thank you.

[Operator]

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