ADITYA BIRLA CAPITAL ​Systemic

RESULT UPDATE ​

concerns but navigating well ​ COMPANYNAME India ​

Equity Research| Banking and Financial Services

Aditya Birla Capital (ABCL) reported below-expected Q2FY20 profitability following
impact of DTA and slightly higher-than-anticipated credit cost. In the lending business,
though growth momentum softened, sustained focus on profitability (broadly steady
NIM) cushioned revenue traction–a sound strategy amidst current challenges.
Meanwhile, performance across protecting (20% individual APE growth in life insurance;
turned net VNB
EDELWEISS 4D RATINGS
Absolute Rating BUY ​Rating Relative to Sector Outperform Risk Rating Relative to Sector High Sector Relative to Market
Overweight
positive) and investing (profitability in AMC sustained at 27bps despite recent
regulations) businesses was steady. Concerns on systemic risk to
MARKET DATA ​(R: ADTB BO, B: ABCAP IN) ​construction financing, LAP and structured credit
portend challenge, but
CMP : INR 85 ​ABCL’s performance indicates that it is relatively better positioned to
Target Price : INR 121 ​navigate them given: a) strong parentage; b) robust risk framework; and
c) <1% exposure to the group entities. Maintain ‘BUY’ with TP of INR121.
52-week range (INR) Share in issue (mn) M cap (INR bn/USD mn) : 117 / 76 : 2,202.6 : 187 / 2,629
• ​Aditya Birla Finance (ABFL): ​ABFL reported PAT of ~INR2.2bn, lower than estimate
Avg. Daily Vol.BSE/NSE(‘000) : 2,352.5 ​on DTA (INR550mn) and higher credit cost. While loan growth was below
trend (flat YoY), steady NIM (product mix change and better pass-through) cushioned revenue
SHARE HOLDING PATTERN (%) ​traction. GNPL (excluding IL&FS) rose a tad to 1.39% (1.24% in Q1FY20);
Current Q1FY20 Q4FY19 ​management expects further additions of 15bps over the next quarter. We will
Promoters * 72.7 72.7 72.7 ​keep tabs on asset quality given exposure to real estate, LAS and structured
MF's, FI's & BK’s 8.5 8.3 7.6 ​finance, though management is confident of no such structural concerns.
FII's 2.8 2.9 3.6
• ​Aditya Birla Housing (ABHFL): ​ABHFL posted steady growth (up 22% YoY, albeit
Others 16.0 16.1 16.1 ​below trend) and is gaining scale (AUM ~INR120bn). Home loans now constitute
* ​Promoters pledged shares
(% of share in issue) ​55%,
additionally growth in affordable housing sustained (now 16% of book). Asset quality rose
a tad with stage 3 at 0.85% (0.67% in Q1FY20).
• ​Aditya Birla SunLife Insurance: ​Growth momentum sustained (Ind APE growth of 20%). Other core metrics:
a) rising protection mix at 7% (aiding margin); and b) persistency (13​th ​month at 80%), sustained improvement.
Importantly, the company turned net VNB positive (sustainability key) and reported RoEV of >14%.
• ​Aditya Birla AMC: ​Growth was softer given slower domestic AUM growth and lower offshore/alternate AUM
(down >10% YoY). That said, profitability was maintained at 27bps despite recent changes, which is
impressive.
Outlook and valuation: Systemic challenges; maintain ‘BUY’ ​ABCL has been reporting
steady performance with sustained focus on quality over growth. Headwinds with respect to a few
segments—real estate, LAS and structured finance demand caution—though managed well. We maintain
‘BUY/SO’.
November 7, 2019
: ​NIL
 PRICE PERFORMANCE (%)
Stock Nifty
EW Banks and Financial Services Index
1 month (14.6) 1.2 (0.3) 3 months (8.0) 2.9 1.5 12 months (18.5) 14.3 20.1
Kunal Shah ​+91 22 4040 7579 ​SOTP
kunal.shah@edelweissfin.com
Business Method Value (INR mn) Value per share
Prakhar Agarwal ​ABFL P/BV ABHFL P/BV 1,05,291 32,204 48 15
+91 22 6620 3076 prakhar.agarwal@edelweissfin.com
BSLI AV 45,400 21
Prashant Ghuge ​ABAMC (%) of AUM Others 79,939 2,636 36 1
+91 22 4063 5517 prashant.ghuge@edelweissfin.com
Net value 121
Edelweiss
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Securities Limited

Banking and Financial

Services

Aditya Birla Finance (ABFL): Growth moderation

sustains
• ABFL reported PAT of INR2.18bn, up 6% YoY, impacted by impact of DTA
(INR550mn versus our estimate of no impact) and relatively higher credit cost.

• Moderating trend in loan growth sustained (flat YoY, third consecutive quarter of
declining growth). This was largely to do with run-down in corporate segment, while
SME (up 5%) plus retail (up > 30% YoY) plus HNI growth was better at 14% YoY,
leading to them constituting 51% of overall portfolio. Going forward, management
expects sustained momentum in SME and retail segments, while corporate growth
will be limited.

• Additionally, focus on maintaining profitability sustained, reflected in broadly steady

NIM (including fees) at 5.28% (5.39% in Q1FY20), which cushioned revenue
momentum.

• Asset quality (excluding IL&FS) rose marginally with stage 3 (excluding IL&FS)
being 1.39% (1.24% in previous quarter). Management estimates further 15bps
addition in GNPL in ensuing quarter. Going forward: a) further haircuts on exposure
to IL&S (of overall exposure of INR3.88bn, it has classified INR2.2bn to four IL&FS
entities as stage 3 and made INR620mn provisions against it till date); and b)
systemic concerns around construction finance, LAP and LAS book warrant close
monitoring. However, management is confident of no signs of concern in LAS and
LAP and even in construction financing, and gave new disclosures stating: a) ​no
stage-3 exposure in Top 20 exposures​; b) ​exposure to Aditya Birla Group
companies < 1% (including towards telecom) of overall loan book​; and c) ​no
stage-3 exposure in construction finance​, which lends some comfort.

Table 1: Aditya Birla Finance – Key

metrics
 INR mn Q2FY20 Q2FY19 ​YoY Q ​ 1FY20 ​QoQ P ​ BT 3,170 3,170 ​0.0 ​4,010 ​(20.9)
​ ,01,710 ​(3.6) ​Networth 78,900 69,030 ​14.3
Loan book 4,83,680 4,80,610 ​0.6 5
76,730 ​2.8

Table 2: Growth driven by retail/SME/HNI segment – Proportion rising to

51% levels
(%) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 ​Retail 12.0 13.0 13.0 15.0 16.0
SME 27.0 26.0 27.0 27.0 28.0 Large & Mid Corporate 49.0 49.0 47.0 47.0 46.0
Promoter & Ultra - HNI 10.0 10.0 10.0 8.0 7.0 Others (Incl. Investment/DCM) 2.0
2.0 3.0 3.0 3.0
Source:
Company

Aditya Birla Housing Finance (ABHFL): Steady

performance
• ABHFL posted steady growth momentum (up 22% YoY, albeit below trend) and is
steadily gaining scale (AUM of ~INR120bn). Home loans make up 55% and
additionally affordable housing logging notable growth and now forming 16% of book,
a trend management expects to sustain.

• Overall, the company reported PBT of INR380mn (up >70% YoY on a low base),
still a drag on overall RoE (albeit reducing) given ABHFL is in investment phase.

2 ​Edelweiss Securities Limited

Aditya Birla Capital

• ABHFL has been clocking steady growth, but headwinds and the challenging environment keep us wary in a
few segments, viz., construction finance (6% of book) and LAP (24% of book) of portfolio.
Table 3: Aditya Birla Housing Finance: Key metrics
Q2FY20 Q2FY19 ​YoY Q ​ 1FY20 ​QoQ ​PBT 360 210 ​71.4 3 ​ 90 ​(7.7) ​Loan book 1,20,790 98,840 ​22.2 ​1,18,270
2.1 ​Networth 12,430 11,360 ​9.4 ​12,150 ​2.3 ​GNPLs (%) 0.9 0.7 0.7 NNPLs (%) 0.6 0.3 0.5
Table 4: Higher focus in affordable housing segment
(%) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 ​Home Loan 58.0 59.0 57.0 56.0 55.0 Loan against
Property 25.0 23.0 23.0 23.0 24.0 Construction Finance 8.0 7.0 7.0 7.0 6.0 Affordable Housing 9.0 11.0 13.0
14.0 16.0
Source: Company
Chart 1: Headwinds in real estate, LAS & structured finance demand caution
Home Loans
Unsecured and 10.9%
Project Loan
Digital
6.8% ​6.7%
LAS
 Construction ​Finance 6.3%
11.7%
LRD 5.2% ​Structured
Finance 4.0% LAP 14.8%
Affordable ​3.2% ​Supply Chain ​Finance 2.2%​TL/WCDL
Broker Funding

Treasury 25.7%
​
0.4%
2.1% ​Source: Company
Aditya Birla AMC: Overall growth soft; outlook cautious
• Growth was soft (flat YoY) as offshore/alternate AUM declined (down >10% YoY) and domestic AUM was flat.
Within domestic AUM, there was decline in equity AUM (down 2.7% YoY), while fixed income grew 1.3% YoY.
Going forward, we will monitor the challenging operating environment and the impact of recent regulations.
3 ​Edelweiss Securities Limited

Banking and Financial Services

Table 5: Growth momentum softer
(INR mn) Q2FY20 Q2FY19 ​YoY Q ​ 1FY20 ​QoQ D ​ omestic AAum 25,38,280 25,42,070 ​(0.1) ​25,39,650 ​(0.1)
Domestic Equity AAum 8,85,390 9,09,790 ​(2.7) 9 ​ ,24,740 ​(4.3) ​Total Income 3,230 3,870 ​(16.5) ​3,150 ​2.5
​ ,400 ​5.7 ​Earnings before tax 1,750 1,550 ​12.9 ​1,750 ​0.0 ​SIP book size Mkt.
Costs 1,480 2,320 ​(36.2) 1
Share (%) 11.0 11.7 11.5
Source: Company
Aditya Birla SunLife Insurance: Net VNB turns positive, sustenance key
• The quarter marked steady growth momentum (individual FYP grew 20%) following improving contribution
from bancassurance partner HDFC Bank. Going forward, the focus will be on scaling up bancassurance via
HDFC Bank, which should help the life insurance business maintain momentum.
• Gross VNB margin came in at 37.7% (versus 35.9% in H1FY19). Moreover, the company reported net VNB
margin of 0.2% (versus negative 2.3% in H1FY19), following higher protection mix and improving productivity.
The company expects to close FY20 with early teens net VNB margin. We believe the improvement is
encouraging, but a sustained improvement in post-cost NBM is critical for improved profitability.
• The company reported EV of INR50.31bn ( versus 43.97bn in H1FY20), with RoEV of 14% plus
Table 6: Strong growth in premiums, sustainability key
(INR mn) Q2FY20 Q2FY19 ​YoY Q ​ 1FY20 ​QoQ I​ ndividual First year Premium 4,230 3,790 ​11.6 3 ​ ,220 3
​ 1.4
Group First year Premium 4,910 6,560 ​(25.2) 1​ ,880 ​161.2 R
​ enewal Premium 9,110 7,710 1
​ 8.2 ​7,510 ​21.3
​ 2,610 4
Total Gross Premium 18,250 18,060 ​1.1 1 ​ 4.7
Source: Company
Table 7: Valuations (December 2020E)
AUM/earnings/
Dec 2020E (INR mn) Valuation method ​
Multiple (x times) Business valuation Stake Value Per share ​
book/AV ​ (INR) ​ABFL Book Value 1,04,249 1.0 1,05,291
100% 1,05,291 48 ABHFL Book Value 21,469 1.5 32,204 100% 32,204 15 Birla Sun Life Insurance Appraisal Value
59,347 1.5 89,020 51% 45,400 21 Birla Sun Life AMC Total AUM (%) 31,66,519 5.0 1,56,743 51% 79,939 36 Aditya Birla
Money Mcap (Listed) 3,514 75% 2,636 1 ​Overall Value 121 ​Source: Edelweiss research
4 ​Edelweiss Securities Limited

Aditya Birla
Capital
Financials snapshot (INR mn)
Q2FY20 Q2FY19 ​QoQ (%) ​Q1FY20 ​YoY (%) ​FY19 FY20E FY21E ​Net revenue
28,139 26,032 ​8.1 ​24,783 ​13.5 1
​ ,32,361 1,56,430 1,82,215 Opex 22,108 20,524 ​7.7 ​17,894 ​23.6 1 ​ ,14,351 1,38,341
1,57,144 Employee cost 1,883 2,039 ​(7.6) ​2,010 ​(6.3) ​18,034 22,070 27,046 Other cost 1,184 1,163 ​1.9 ​1,097 ​8.0 9
​ 6,318
1,16,272 1,30,097 PBT 2,964 2,307 ​28.5 ​3,782 ​(21.6) ​18,010 18,088 25,071 Tax 1,289 1,307 ​(1.4) ​1,810 ​(28.8) ​6,303
​ ,520 ​(31.0) ​11,706 12,956 18,803
5,132 6,268 PAT (excl. non-controlling int.) 1,048 796 ​31.6 1
 5 ​Edelweiss Securities Limited

Banking and Financial

Services

Q2FY20 earnings concall

highlights
With respect to
growth/strategy/outlook

• The overall growth has been muted as the company ​cautiously reduced
corporate exposure to reduce risk​. However, the focus segments of retail and
SME (except some stressed sub-segments) have grown quite well.

o ​If and when the stress in corporate segment reduces, will increase the book
again.

• Given the challenging environment, the company has taken various steps such as
securing long-term growth capital, strategic management or risk, maintaining
sufficient liquidity, and optimising overall portfolio with strong focus on
quality.

Aditya Birla Finance

(NBFC)

• Will focus on retail segments going forward in the overall lending book
(NBFC+HFC)

• Next 3 year aspirations – Continue to grow retail loan book with expansion of NIM,
open ~100 branches in line with retail growth strategy, leverage tech platform to
manage cost effectively

• SME and retail book remains a focused area and witnessed a growth of 14% YoY
(despite flat overall book)

​ he
• ​The corporate book will remain flat (or decline) for rest of the year. T
disbursements are being made in project loans and construction finance but very
selectively.

SME and retail

book –

• SME – ATS is now at ~INR50mn (down 24% YoY) with focus now on TL/WCDL
segment.

• LAP & LRD – ATS is INR230mn (down 27% YoY) with LTV of ~50% and the
approach remains selective.

• Retail – ATS is INR0.6mn and have identified new segments for growth – travel,
healthcare, and education

• LAS – Overall book contracted by ~27% YoY with no stage-3

exposure.

Corporate
book -
 • Top 20 customers in large and mid corporate segment contribute ~10% of overall
loan book.

• ​There is no stage-3 exposure in these top 20

accounts.

• Structured Finance book was run-down by ~INR17bn over last one

year.

• ​Within project loan and construction finance book, there are no stage-3
exposures.

Aditya Birla Housing Finance

(HFC)

• The housing book is ~94% retail (home loans and LAP) and ~6% is construction
finance.

• ​There is no stage 3 exposure in construction finance book (no NCR exposure

other than Noida).

• Average ticket size – affordable housing INR1.2mn and other loans

INR3.5mn.

6 ​Edelweiss Securities Limited

Aditya Birla
Capital

Aditya Birla Sun Life

AMC

• The strategy remains to increase proportion of retail and equity going

forward.

• Market share – overall was maintained at ~10.5% (increase in fixed income while
decline in equity).

• Have taken various digital initiatives for improving distribution and customer
experience leading to ~75% transaction being digital.

• ​Currently, there are no plans to demerge the

business.

Aditya Birla Sun Life

Insurance

• Gained market share (APE growth of 20% compared to industry growth (ex-LIC) of
11%
• Factors like higher volumes and productivity combined with better channel mix and
product mix has resulted in improvement in net VNB (turned positive this quarter).

• Improvement in persistency across buckets (13​th ​month at 80%) – HDFC Bank

experience is expected to lead further improvement.

• Will look to increase protection business in

H2FY20.

Aditya Birla Health

Insurance

• The growth has been steady with aim to breakeven by

FY21-22.

• Focus remains on diversification across channels, geographies, products customer

segments.

• Combined ratio for H1FY20 stands at 155% compared to 180% in

H1FY19.

Other
businesses

• Other businesses – on a combined basis, ​the businesses have turned positive at

PBT level (compared to a loss in Q2FY19).

• ARC platform has become profitable within first year of

operation.

With respect to liquidity and

borrowings

• The company has raised long-term funds to the tune of ~INR60bn in H1FY20 in
NBFC and ~INR21.5bn HFC.

• In NBFC, there are undrawn CC/WCDL of INR30bn+ which is not considered for
ALM.

• ​The ALM remains comfortable for both NBFC and HFC

businesses.

With respect to asset

quality

• Given the stress in the overall economy, ​15-20bps further slippage in gross
stage-3 assets in Q3FY20 can be expected (​ from 1.39% in Q2FY20 ex-IL&FS).

• ​Exposure to Aditya Birla Group companies < 1% of overall loan book

(including non- fund base exposure).
 • Write-off in NBFC business ~INR1bn compared to ~INR700-800mn in
Q1FY20.

7 ​Edelweiss Securities Limited

Banking and Financial

Services

Q1FY20 earnings concall

highlights
Overall performance is driven by steady performance across various segments (
NBFC grew 20%, AMC up 20%, Life Insurance 13% YoY, Housing 3x YoY among
others)

NBFC
business

• ​Loan growth of 13% but SME plus retail growth sustained at 25% YoY ( a trend that
will likely continue). With this SME forms 27% of book and retail forms 15% of book.
This along with better NIMs has supported revenue traction.

o ​Overall LAS book reduced by ~10% in

Q1FY20.

• ​Gross Stage 3 (excl. IL&FS) at 1.24% (1.05%) , due to slippage of

one-mid-corporate account. This along with higher growth in retail and SME
where ECL is higher impacted credit cost.

• ​The company has INR2.2bn of exposure to 4 IL&FS entities categorized as

stage 3 and has already made INR620mn under ECL for this exposure
(INR590mn in previous quarter).

• ​The company recently raised long term borrowing of ~INR35bn in

Q1FY20

• ​The structured finance book does not include any exposure to real
estate.

• ​Not seeing any signs of concerns either on LAS or LAP portfolio. Even in
terms of construction finance they don’t see any incremental red flags in their
portfolio.

• ​The portfolio mix change has helped NIMs; management expects this trend to
continue.

Housing
 finance

• ​Loan growth of 29% YoY, with total AUM of INR118bn (affordable book at
INR17bn).

o ​ATS for Affordable Home Loans INR

1.2mn

o ​39% of affordable HL portfolio eligible for PMAY

subsidy

• ​Gross stage-3 asset stable at 0.67% - no hiccup in asset

quality.

• ​In affordable housing segment the ​company does not cater to economically
weaker sections ​– hence ATS is higher than peers.

• ​The ability to change product mix and pass on cost has resulted in higher
NIMs.

• ​Raised long term borrowing of INR8bn. Further the company has undrawn
CC/WCDL of ~INR15bn.

Life
insurance:

• ​Muted group business has impacted overall growth premium in life insurance.
Growth in individual APE at 30% YoY growth – largely driven by higher contribution
from HDFC Bank

o ​The management expects that HDFC bank utilisation to increase which is still
at
only 50%
levels

• ​The net VNB margin was (7.8%), which is an improvement of 157bps YoY. For the
full year management expects to tace early double gi

8 ​Edelweiss Securities Limited

Aditya Birla
Capital

• ​FY19 was a strong year in terms of top-line and bottom-line – ​would see at least
one more year of high growth.

• ​Operating efficiencies have helped keep PAT steady despite significant

investments in HDFC partnership.

• ​Currently the business is carried through all branches of HDFC Bank (except
for rural branches).

Health Insurance
business:

• ​Growth has been very strng with improving retail

mix.

• ​Combined ratio came in at 146% versus 190% in Q1FY19, largely supported

by higher retailisation of the book. This gives management confidence of
steady progress in this business, t​ hereby aiming to break-even in 3 years​.

• ​Currently, the company has ​largest 3rd party distribution capacities ​– incl. large
banks like HDFC Bank, Axis Bank.

Asset
management:

• ​Domestic Equity AAUM mix steady at

36%

o ​SIP Book share of domestic equity :

34%

• Going forward, there would be continued focus on retail and B-30

cities.
 9 ​Edelweiss Securities Limited

Banking and Financial

Services

Company
Description
ABCL has grown into a financial conglomerate with strong presence across
businesses which include life insurance, asset management, private equity,
corporate lending, structured finance, general insurance broking, wealth
management, equity, currency and commodity broking, online personal finance
management, housing finance, pension fund management and health insurance.

Anchored by over 12,000 employees, ABCL has a nationwide reach via over 1,300
points of presence and more than 142,000 agents / channel partners. The company’s
strategic focus is on expanding scale by surpassing industry’s growth and capturing
incremental market share

Investment
 Theme
ABCL has been reporting steady performance with sustained focus on quality over
growth. Headwinds with respect to a few segments—real estate, LAS and structured
finance demand caution—though managed well. We maintain ​‘BUY/SO’​.

Key
Risks
Few of the businesses are at transformational stage namely HFC, life insurance and
few in incubating stage viz health insurance and ARC, successful scale of which will
be incremental delta to earnings and valuations. Also strategic initiatives embarked
upon to entail multiplier effect will be key to achieve long term sustainability of
performance.

Increase in corporate tax rate from 12.5% currently to 30.0%, as proposed, could
impact Aditya Birla Sunlife’s margin and profitability.

One of the key monitorables for the life insurance business is the scalability potential
of its bancassurance channel (recent tie up with HDFC Bank). Any blip in that could
potentially slow the improvement.

10 ​Edelweiss Securities Limited

Aditya Birla Capital

Financial Statements
Income statement (INR mn)
Networth (INR mn) ​Year to March FY18 FY19 FY20E FY21E
 Year to March FY18 FY19 FY20E FY21E ​Net revenue 1,06,141 1,32,361 1,56,430 1,82,215
Standalone 71,441 71,418 83,379 72,342 ​Opex 90,604 1,14,351 1,38,341 1,57,144
NBFC 63,212 74,559 89,696 1,09,100 ​Employee cost 14,994 18,034 22,070 27,046
HFC 7,501 11,915 17,059 22,940 ​Other cost 75,610 96,318 1,16,272 1,30,097
AMC 10,327 14,548 18,340 22,743 ​PBT 15,537 18,010 18,088 25,071
Life Insurance 20,118 20,130 21,195 22,501 ​Tax 5,499 6,303 5,132 6,268
Broking and Money 547 831 1,227 1,715 ​PAT 10,038 11,706 12,956 18,803
Health Insurance 894 1,041 827 3,353 Others/ Eliminiation 90,081 1,02,646 1,11,195 1,17,230 ​PAT (INR mn)
Total 83,958 91,795 1,20,527 1,37,463 ​Year to March FY18 FY19 FY20E FY21E
Networth (%) proportion FY18E FY19 FY20E FY21E ​Standalone 615 (22) 460 463
Standalone 85.1 77.8 69.2 52.6 ​NBFC 7,308 8,699 9,637 11,904
NBFC 75.3 81.2 74.4 79.4 ​HFC 326 748 1,144 1,881
HFC 8.9 13.0 14.2 16.7 ​AMC 3,303 4,468 5,720 6,640
AMC 12.3 15.8 15.2 16.5 ​Life Insurance 1,656 1,065 1,306 1,422
Life Insurance Specific 24.0 21.9 17.6 16.4 ​Broking and Money 101 283 397 487
Broking and Money 0.7 0.9 1.0 1.2 ​Health Insurance (1,892) (2,579) (2,346) (1,160)
Health Insurance 1.1 1.1 0.7 2.4 ​Others/ Eliminiation (1,378) (954) (3,362) (2,834)
Others/ Eliminiation 107.3 111.8 92.3 85.3 ​Total 10,038 11,706 12,956 18,803
Total 100.0 100.0 100.0 100.0 ​PAT (%) proportion FY18 FY19 FY20E FY21E ​Standalone NBFC HFC 6.1 72.8 3.2 (0.2) 74.3
6.4 3.6 74.4 8.8 2.5 63.3 10.0
Key ratios Year to March ​EPS (INR) ​FY18 FY19 FY20E FY21E ​4.2 4.9 5.4 7.8 ​AMC 32.9 38.2 44.1 35.3
-growth (%) 45.2 16.6 10.7 45.1 L​ ife Insurance Specific 16.5 9.1 10.1 7.6
RoA (%) 1.2 1.2 1.1 1.4 ​Broking and Money 1.0 2.4 3.1 2.6
RoE (%) 13.2 12.9 11.8 14.1 ​Health Insurance (18.9) (22.0) (18.1) (6.2)
BV per share (INR) 35.9 39.4 51.7 59.2 ​Others/ Eliminiation Total (13.7) (8.2) (25.9) 100.0 100.0 100.0 (15.1) 100.0
P/E (x) P/BV (x) 20.4 17.5 15.8 10.9 2.4 2.1 1.6 1.4
*Note: FY18 is as per I-GAAP while FY19/FY20/FY21 is as per IND-AS
11 ​Edelweiss Securities Limited

Banking and Financial

Services

Peer comparison
valuation

Market cap Diluted P/E (X) P/B (X) ROAE (%) Name (USD mn) FY20E FY21E FY20E
FY21E FY20E FY21E ​Aditya Birla Capital 2,629 15.8 10.9 1.6 1.4 14.4 12.6 Aavas Financiers 1,702 46.0 35.5 5.7 4.9 13.3 15.0 HDFC 54,780
22.7 17.5 2.6 2.3 16.6 15.8 Indiabulls Housing Finance 1,436 4.3 4.4 0.7 0.6 15.9 14.8 L&T Finance Holdings 2,793 9.3 6.6 1.3 1.2 15.3 18.8 LIC
Housing Finance 3,114 8.5 6.5 1.2 1.1 15.0 17.2 Magma Fincorp 186 4.4 3.3 0.4 0.3 9.0 10.8 Mahindra & Mahindra Financial Services 2,963
16.9 11.7 1.9 1.7 11.2 15.2 Manappuram Finance 1,986 14.0 11.1 2.8 2.3 21.4 22.7 Muthoot Finance 3,870 12.5 11.0 2.5 2.2 22.1 21.3 Repco
Home Finance 269 7.0 6.1 1.1 0.9 16.4 16.2 Shriram City Union Finance 1,239 7.2 6.3 1.2 1.0 17.7 17.4 Shriram Transport Finance 3,685 8.6
7.4 1.5 1.3 18.7 18.6 Median - 9.0 7.0 1.4 1.2 16.2 16.7 AVERAGE - 14.0 11.5 2.1 1.8 16.0 17.0
Source: Edelweiss
research
 12 ​Edelweiss Securities Limited

Aditya Birla
Capital

Additional
Data
Directors Data ​Kumar Mangalam Birla Chairman & Non Executive Director Sushil Agarwal Non- Executive Director Vijayalakshmi
R Iyer Independent Director Santrupt Misra Non- Executive Director S.C.Bhargava Independent Director Arun Adhikari Independent
Director P.H. Ravikumar Independent Director

Auditors - Deloitte Haskins & Sells

LLP
*as per last annual
 report

Holding - Top
10
Perc. Holding Perc. Holding ​Premji Investments 3.77 Life Insurance Corporation of India 2.43 Vanguard Group 0.79 St James's Place Unit Trust Group 0.57
Dimensional Fund Advisors 0.41 UTI Asset Management 0.30 Aditya Birla Sun Life Asset Management 0.30 Reliance Nippon Life Asset Management 0.30 Franklin
Templeton Investments 0.30 London LGPS CIV 0.15 ​*as per last available data

Bulk
Deals
Data Acquired / Seller B/S Qty Traded Price

No Data
Available
*in last one
year

Insider
Trades
Reporting Data Acquired / Seller B/S Qty Traded

No Data
Available
*in last one
year
 13 ​Edelweiss Securities Limited
Relative Company Absolute
reco
Risk
Aavas Financiers HOLD SP M Aditya Birla Capital BUY SO H
Axis Bank BUY SO M Bajaj Finserv REDUCE SU L
Bank of Baroda REDUCE SU M DCB Bank HOLD SP M Equitas Holdings BUY SO M Federal Bank BUY SO L
HDFC BUY SO L HDFC Bank BUY SO L
ICICI Bank BUY SO L IDFC FIRST Bank BUY SP L
Indiabulls Housing Finance HOLD SU M IndusInd Bank BUY SO L Kotak Mahindra Bank BUY SP M L&T Finance Holdings HOLD SP M
LIC Housing Finance BUY SO M Magma Fincorp BUY SP M
Mahindra & Mahindra Financial Services BUY SP M Manappuram Finance HOLD SU H
Max Financial Services BUY SO L Multi Commodity Exchange of India HOLD SU M Muthoot Finance BUY SO M Power Finance Corp BUY SP M
Punjab National Bank REDUCE SU M Repco Home Finance BUY SP M
REC HOLD SU M Shriram City Union Finance BUY SP M
Shriram Transport Finance BUY SO M South Indian Bank BUY SP M State Bank of India BUY SO L Union Bank Of India HOLD SU M
Yes Bank HOLD SU M

RATING & INTERPRETATION

ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
14 ​Edelweiss Securities Limited
Relative reco
 Relative risk
Company Absolute
reco
Relative reco

Aditya Birla Capital

Edelweiss Securities Limited, ​Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91-22) 4009 4400​, ​Email​: research@edelweissfin.com
Aditya Narain
Head of Research
aditya.narain@edelweissfin.com
​ anking and Financial Services
Coverage group(s) of stocks by primary analyst(s): B
Aavas Financiers, Aditya Birla Capital, AU Small Finance Bank Ltd, Axis Bank, Bajaj Finserv, Bank of Baroda, DCB Bank, Equitas
Holdings, Federal Bank, HDFC, HDFC Bank, ICICI Bank, ICICI Lombard General Insurance Company Ltd, IDFC Bank, Indiabulls
Housing Finance, IndusInd Bank, Kotak Mahindra Bank, LIC Housing Finance, L&T Finance Holdings, Max Financial Services,
Multi Commodity Exchange of India, Manappuram Finance, Magma Fincorp, Mahindra & Mahindra Financial Services, Muthoot
Finance, Punjab National Bank, Power Finance Corp, REC, Repco Home Finance, State Bank of India, Shriram City Union
Finance, Shriram Transport Finance, South Indian Bank, Union Bank Of India, Yes Bank
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 161 67 11 240 * 1stocks under review
Market Cap (INR) 156 62 11

ADITYA
Digitally signed by ADITYA NARAIN DN: c=IN, o=EDELWEISS SECURITIES LIMITED, ou=SERVICE, 2.5.4.20=3dc92af943d52d778c99d69c4 8a8e0c89e548e5001b4f8141cf423fd58c ​NARAIN
07b02, st=MAHARASHTRA, serialNumber=e0576796072ad1a3266c 27990f20bf0213f69235fc3f1bcd0fa1c30 092792c20, postalCode=400011,
cn=ADITYA NARAIN Date: 2019.11.07 22:19:15 +05'30'

Recent Research
Date Company Title Price (INR) Recos
06-Nov-19 ​Indiabulls
Housing Finance
Operational challenges to persist; ​Result Update
219 Hold
06-Nov-19 ​Manappuram
Finance
Strong show; super normal growth a concern ; ​Result Update
168 Hold
06-Nov-19 ​Max Financial
Services
Steady showing; partnership concerns overhang; ​Result Update
438 Hold
> 50bn Between 10bn and 50 bn < 10bn
Rating Interpretation
Buy Hold Reduce Total
Rating Expected to
Buy ​appreciate more than 15% over a 12-month period
Hold ​appreciate up to 15% over a 12-month period
Reduce ​depreciate more than 5% over a 12-month period
One year price chart ​120
110
100
90

80 ​ 8
70 ​
9
 9

9 ​8

99

1111​1​1​1​1​1​11​1​1---​-​-​-​--​-​--​-​-ltrcrg​v​yvn​bpn​cuapaeu​o​ao​eeu​
JJ​J​OA​FS​DA​N​NMM
INR)
(​
Aditya Birla Capital
15 ​Edelweiss Securities Limited

Banking and Financial

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Aditya Birla
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