Congratulations on a very strong set of numbers. So, on the NBFC piece, firstly, on the Opex cost, I think there is a jump of more than 25% sequentially on the operating expense front. So, I just wanted to understand, is there any one-off here? Firstly, on that. And secondly, on the yields part. So, yields have been kind of declining for now almost 5, 6 quarters. Hence, now given that we are increasing focus on the unsecured business, personal and consumer loans, business and unsecured business loans as well, and it's in the second quarter of strong growth in these businesses. So, when do we see this reflecting in the yields part? Yes, and that's on the NBFC business.

So Chintan, on opex, it's one -off. And if you look at the H1 number , it is 1.9% opex to AUM. Going forward, we will be in this range. So, since the last quarter, 1.74% was slightly muted. If you see last year, it was above 2%. And if you look at it in H1, it is 1.9%. So going forward, it should be at 1.9% in that range. So, this one-off should get normalized going forward. ABCL – Q2 FY26 Earnings Call Page 12/19 Your second question was on the yields. If you look at our yield, in fact, when compared to quarter 1, I think it's in the same range, 12.71% and 12.68%. So that's the range. Our margin, if you look at it, has improved by 9 b ps from 5.97% to 6.06%. So clearly, as our personal and consumer and unsecured business grows the way it has grown in quarter 2, we will see improvement in yield going forward.

Okay, s ure. Sir, if you could just quantify the amount of opex mix and exactly in terms of some qualitative aspect on what was it exactly? That would be helpful.

So, these will be primarily on the business side, retail operations and investment in branches, technology and all, and that's slightly one -off, which we did. So, I think we can take you through that separately.

Sure. And so, sir, you said that the margins have improved, but I think they have improved largely because of the borrowing cost, while yields have compressed even 3 bps Q-o-Q in this quarter. So, if you could just give the breakup of the yields into the 4 segments, if that is possible?

Segment-wise yield, if you look at EIR, it's in the same range, like personal and consumer, if you look at, it's around the 16% to 17% range is what we had. Our corporate is in the same range. We have always mentioned 10.75% to 11%, so it's in that range. Secured was in the range of around 12%, and it is at around 11.96%. So, I think the NIMs are quite stable, Chintan. As I said, as we grow our personal and consumer, we will start seeing the benefit in quarter 3, quarter 4 with the growth which we have seen in quarter 2. So yes, so I think the yields will start improving in the coming quarter.

Moderator

Ladies and gentlemen, we will move on to the next question, which is from the line of Avinash Singh from Emkay Global Financial Services Limited.

Thank you for the opportunity. The first one is regarding your NPA sale, some Rs. 700-odd crores out of that, you highlighted Rs. 500-odd crores from unsecured business. So can you help us understand the rationale and strategy behind doing this kind of ARC sale particularly when the portfolio had the CGTSME guarantee backing. So , why this change of strategy rather than getting recovery from guarantees or sending it to ARCs? So that's one. Second question is on Housing Finance. Can you provide some color on the competitive intensity there? And does that mean that in this falling rate environment, there will be kind of pressure on your NIMs. So, I mean, of course, so far in the last 4 quarters, the profitability improvement has been very, very impressive. But going forward, do you see this competitive intensity kind of bringing some sort of a pressure on margins? ABCL – Q2 FY26 Earnings Call Page 13/19

So, Avinash, the rationale was we wanted to align the ECL policy and the write -off policy, and that's the reason why we did it because there used to be a cash flow mismatch in terms of when the claim comes back and all of that, and it used to look elevated. That's the reason one, we have taken a one- time decision to align it with all our other businesses.

Yes. Avinash, Pankaj here on the housing question that you asked on whether there's a compression in yields that is expected. So, I think what we have done here is while logically, there has been a lot of competitive intensity. If you look at our EIR also, it has come down from 10.77 bps to 10.62. So, there's a 15 bps decrease that has happened there because we also made a change in EIR of 15 basis points that has showed up here. But as the competitive intensity moves up, I will maintain that the opportunity in the HFC segment is continuing to be very, very large. As of June, the industry was still at about Rs. 10.5 lakh crores, our AUM is Rs. 38,000 crores. So, the market share is still at about 3.8%, 3.9%. So, opportunity is quite significant. I think we need to find our own space there, which we have been doing quite well, backed by our entire product range as being a full stack player, we're having best-in-class digital platforms. And also, most importantly, I think the distribution structure, which is giving and providing us this growth. Having said that, I think, Avinash, in the last call also, I had mentioned that in the way we are looking at the business, while currently, the NIIs are looking at 5.07% and the ROA is looking at 1.82% with operating leverage coming in quite sharply in the last 2 quarters. I think the idea is that there will be naturally some reduction in the NII. So, 5.07% that we're talking, realistically, we should be seeing it somewhere in the range of between 4.75% to 4.80% at the end of the year. So that's the broad range. But that will get compensated by the operating leverage that we will get. So right now, 1.82, which is the ROA. We've guided that in the next 6 quarters; this number will be close to anywhere between 2% to 2.2%. So that is where we are on the HFC business.

Yes. Rakesh, just I mean, this sale to ARC of this government guarantee backed portfolio, is kind of a onetime nature, but your kind of your reliance or your willingness to get this CGTMSE backing, that does not change. I mean, in future growth also, you will continue to take this guaranteed scheme or is there a rethink on that strategy?

Yes, Avinash, we will continue to leverage that. And the only change is that we have aligned the provisioning policy in terms of the writing off at a guaranteed portfolio also at 180 days.

Moderator

The next question is from the line of Nidhesh Jain from Investec. ABCL – Q2 FY26 Earnings Call Page 14/19

My first question is on NBFC. So out of Rs. 735 crores, you mentioned Rs. 500 crores is unsecured business loans. What was the rest of the book? And what is the sort of haircut that we have seen in unsecured business loan book, which was by CGTSME?

Nidhesh, I think the remaining is SME , secured SME, which was the old portfolio. So that's the remaining.

Sure. And the book that was backed by CGTSME, what is the haircut that ARC has taken?

No, there is no haircut. As I mentioned, the reason why we have done it is because there's always a claim mismatch in terms of the timing mismatch, that's the reason one time we have taken this call to align with all our other portfolio. And going forward, we will stick to that. And we will leverage that credit guarantee, as I mentioned . But from a provisioning point of view, from a write-off point of view, we will treat it exactly the same as what we do with all other unsecured portfolios.

Sure. The second question on NBFC is how are you seeing cost of funds moving? Because you mentioned the yield should start to improve and the cost of funds, if they further reduce going forward, there could be a sharp expansion in margins. So, what is the trajectory of cost of funds that you see over the next 2, 3 quarters?

So, cost of fund, we operate in a competitive environment. And if the cost of funds comes down, if the floating rate interest is there, we need to pass it on to our customers. So, it's a fine balance, Nidhesh, and we will continue to do that. But as I mentioned, with the change in the product mix, our yield should improve, and that should help our margins to improve.

So, margin trajectory should be upwards going forward, right, in next few quarters?

Yes. I think in quarter 4, we will start seeing some bit of improvement in margins because I think the way we have grown in quarter 2 and we will continue, we'll see some improvement, sure.

Sure. The next question is on Housing Finance business. Since we have witnessed pretty significant ABCL – Q2 FY26 Earnings Call Page 15/19 operating leverage this quarter, ROEs have already reached pretty decent numbers. So why are we guiding that we will still take 6 quarters? I think if we see a similar amount of operating leverage, we should be able to reach 2% ROA in the next 3 quarters.

So, I think we will not stop there on the lighter side. But what we are seeing is in any business that you run, actually the first impact that we saw was quite significant because the gains in operating leverage typically come in 2 ways. One it comes with increase in productivity. So, that has improved significantly for us in the last 12 to 18 months. The other advantage that also comes in is that as the disbursement to opening book for that particular year keeps going down, while the overall absolute disbursement is high. But last year , you would have noticed that number was 57% of the overall books that is disbursed. So, our disbursements to overall book is Rs. 18,000 crores and Rs. 31,000 crores was the overall book. That number was 57%. As the disbursement to the opening book keeps reducing, you also get operating leverage. So, these are the 2 levels from where the operating leverage will actually come in. So naturally, the impact has been sharper in the first quarter and the second quarter. The impact may not be 20 basis points in the third and the fourth quarter. It will be there, but we feel strongly that when I said ROA, I said 2% and 2.2%. So, for 2.2%, it will take that much of time to reach between 5 to 6 quarters. So, that is the way in which we are looking at the numbers right now.

Sure, sure. And the last question is on Life Insurance. What is the impact of GST on our margins that you anticipate? Because of the GST impact, what is the VNB margin guidance for the full year now?

So, the VNB margins for the next 6 months will also be a function of how we'll moderate the product mix. And like I said, we are in negotiations on distribution costs and all of them have not fully fallen in place at this point in time. Typically, impact on VNB margins could range between 200 to 250 basis points. But like I said, depending on what we are negotiating right now and what discussions that we are doing, we continue to maintain our guidance. We have guided above 18% margins of net VNB, we still are giving the same guidance to say we'll get there by the end of the year.

Moderator

The next question is from the line of Sameer Bhise from Dymon Asia.

Congrats on a strong set of numbers. Just wanted to pick your brains on slightly medium-term picture now that credit costs are fairly under control, we are entering a period of margin expansion. How should one think on the 6- to 8-quarter margin trajectory for the NBFC piece? I think that is one. ABCL – Q2 FY26 Earnings Call Page 16/19

Yes. So, as we improve our personal and consumer and unsecured business loan, that will help us improve our yields and margins. Also, the opex, which we mentioned, which is 2.03%, if that comes down to 1.9%, we will see some expansion in our ROAs.

Okay. I think that would be a fairly linear outcome. Secondly, in terms of this policy change on the CGTSME, the guaranteed part, any incremental impact that you expect from a P&L perspective? Good to see that it hasn't impacted credit cost this quarter, but even going forward?

We don't see any incremental impact.

Okay. And the recoveries will accrue as they accrue when the payouts happen from the government side?

We'll continue to focus on the collections and claims from the guarantees.

Okay. This is helpful.

We have given a guidance at a company level as we grow our retail portfolio, the credit cost at a company level will be at 1.2% to 1.3% range.

Moderator

The next question is from the line of Suresh Ganapathy from Macquarie.

Just a continuation of the previous question on ROA. Some of the math doesn't add because for last 4 quarters, you have stuck in this 2.2% ROA range. And if I look at it this quarter, your margins went up, credit costs came down. But still, you are at 2.2%, in fact, lower than the previous quarter ROA marginally. Now, you have given a medium -term aspiration of 3%. How do you take it up by 80 b ps because interest rate cyclicality will also be there. Can you really structurally for this business aspire a 3% ROA because you are saying your credit cost is also not going to come down. It is going to go up from the current levels of 1.16% to 1.2% to 1.3%. So, 2.2% to 3%, that 80 bps gap, how are you going to bridge over the next 3, 4 years? ABCL – Q2 FY26 Earnings Call Page 17/19

Suresh, we had given a guidance of 2.5%. By the end of this quarter 4, we should be closer to around 2.4%. And from there on, we will look at how do we expand the margins. But in the given environment, we had mentioned about 2.5% in the medium term. In slightly longer term, we will have to recalibrate and see how we expand the ROAs from there.

Okay. So, 2.4% to 2.5% is what you're saying over the medium term. Okay, cool. The other thing is that on the SEBI regulations on mutual funds, can Bala say what could be the impact? Have you guys done any preliminary assessment? How are you going to tackle it? I know it's draft, but any deliberations here on that?

Yes. What we have done, Suresh, is one of course , welcome what they have proposed in terms of various changes that they have made with respect to improving the compliance standards, governance, reporting, and other stuff. With respect to the change of TER calculation, making the statutory obligations out of the TER, also will make it relatively easy for the MF industry from a monitoring point of view. At the same time, given the fact that they have proposed some changes in the TER structure, we have, of course, taken it up with SEBI through the committee which is formed under the AMFI to make a holistic representation. And we are, at this point in time, a little confident that they will be quite amenable to the changes that will be proposed. I think their intention is not to hurt the mode of the industry, which is, of course, one of the largest supporters of the Indian capital market. But having said that, we will take it up with SEBI for proper discussion. That's the plan.

Moderator

The next question is from the line of Punit Bahlani from Macquarie.

Yes. Just one question on the margins bit. Over the past 2 quarters, your personal loan disbursements have been pretty good, but yields, if I might be more specific, have declined. So, I know part of it has got to do with the repricing bit. But is it fair to assume that like this half, we are done with the repricing and now we'll directly see the impact of these increased disbursements flow into the yields from next quarter onwards? Like the increase in yields will be like in a significant proportion? That's the only question I have.

Yes. We have to look at the overall mix of the portfolio. So, I think with that going up, personal and consumer growing, unsecured business growing, we will start seeing improvement in yields and margins as we go along in quarter 3 and quarter 4. ABCL – Q2 FY26 Earnings Call Page 18/19

Moderator

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Vishakha Mulye for closing comments. Thank you, and over to you, ma'am.

Thank you so much for joining us today evening. And if there are any more questions, all of us are here, and please feel free to reach out to us. So, thanks a lot again.

Moderator

Thank you members of the management. Ladies and gentlemen, on behalf of Aditya Birla Capital Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you. ABCL – Q2 FY26 Earnings Call Page 19/19

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