Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the debt instruments of Aditya Birla Capital Limited (ABCL; holding company of the ABCL group) and has assigned its ‘Crisil AAA/Crisil AA+[1]/Stable/Crisil A1+’ ratings to the debt instruments and bank facilities that have been migrated from erstwhile Aditya Birla Finance Limited (ABFL; earlier a wholly owned subsidiary of ABCL) upon receipt of novation letters post amalgamation of erstwhile ABFL into ABCL. The ABCL group includes ABCL and its subsidiaries, joint ventures and associates.

 

[1] For Perpetual debt

 

Rating action is driven by the completion of the scheme of amalgamation of ABFL with ABCL, with effect from April 01, 2025, post requisite approvals from shareholders, statutory / regulatory authorities and as sanctioned by National Company Law Tribunal (NCLT). Before this amalgamation, ABCL was the non-operating holding company for the financial services business of the Aditya Birla Group (ABG). Post the amalgamation with erstwhile ABFL, ABCL has applied for NBFC-ICC (Investment and Credit Company) registration and would comply with the guidelines as applicable to NBFC-ICCs from the effective date of merger. ABCL will continue to hold investments in various financial services entities of ABG.

 

As stated earlier, Crisil Ratings understands that the scheme of amalgamation aims to simplify the group structure by reducing the number of group entities, achieve optimal and efficient utilization of capital, and ensuring compliance with the listing criteria of the scale-based regulations applicable to NBFCs. Since Crisil Ratings continues to consider the combined business and financial risk profiles of ABCL and its subsidiaries, joint ventures and associates for arriving at the ratings, the ratings on the debt instruments of ABCL remain unaffected with the amalgamation.

 

The rating factors in the strategic importance of ABCL and financial services business for Grasim Industries Ltd (Grasim; ‘Crisil AAA/Stable/Crisil A1+’), ultimate parent of ABCL, which along with promoter group holds 68.86% stake in ABCL as on December 31, 2024. Grasim (along with promoter group entities) will continue to maintain majority ownership in ABCL and financial services is expected to be a key focus area from long-term perspective. Grasim (along with promoter group entities) has provided capital support to ABCL in the last two equity fund raise done in fiscal 2020 and 2024 and will endeavour to ensure that ABCL and its subsidiaries maintain liquidity and cushion in capital adequacy / solvency above regulatory requirements.

 

The rating also factors in the diversified presence of ABCL across the financial services space, comfortable capitalisation and diversified resource profile. These strengths are partially offset by average, albeit improving, profitability and ability to sustain healthy asset quality metrics as portfolio scales up and seasons.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of ABCL and its subsidiaries, joint ventures and associates, since they have significant operational and management linkages, and operate under a common brand. Crisil Ratings has also factored in the strong parentage of ABCL and benefits from the same, given the strategic importance of the financial services business.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Benefits from strong parentage and strategic importance of financial services: The rating factors in the strategic importance of ABCL and financial services business for Grasim, the ultimate parent of ABCL, and the promoter group. Grasim, along with promoter group entities, held 68.86% stake in ABCL as on December 31, 2024 (Grasim’s stake stood at 52.55%). Further, ABCL is the holding company for financial services offerings of the promoter group, and thus remains strategically important and a key focus area, given the growth opportunities in this sector. There is strategic oversight provided to ABCL group, including having key personnel from group’s senior management on ABCL’s board. ABCL also benefits from shared brand name of “Aditya Birla” as well as in terms of synergies derived from various businesses and cross-selling opportunities to the entire ecosystem.

 

Grasim, along with promoter group entities, has provided capital support to the ABCL in last two capital raise; of the Rs 3,000 crore capital raised by ABCL in fiscal 2024, Rs 1,250 crore was infused by Grasim and other promoter group entities. Crisil Ratings expects Grasim, along with promoter group entities to maintain majority shareholding and endeavour to ensure that ABCL and its subsidiaries maintain liquidity and cushion above regulatory capital adequacy / solvency requirements. Crisil Ratings also believes that the financial services business will remain a key focus area for Grasim and the promoter group over the medium term.

 

Diversified presence in the financial services space: ABCL is the holding company for the financial services business of ABG and holds majority stake in various subsidiaries, which operate mainly in the commercial and retail finance, housing finance, asset management, life and health insurance segments, asset and wealth management, and securities broking. ABCL also has presence in stressed assets space. The group has successfully scaled up and attained market leadership positions in business segments such as lending, asset management and life insurance.

 

ABCL has a strong market position in the lending business with total assets under management (AUM) of Rs 1,46,151 crore as on December 31, 2024 (Rs 1,24,059 crore as on March 31, 2024) between the two lending entities – erstwhile Aditya Birla Finance Ltd (ABFL) and Aditya Birla Housing Finance Ltd (ABHFL). It provides financing products across various asset classes in retail, micro small and medium enterprises (MSMEs) and wholesale segments. ABCL also has strong presence in the asset management business through Aditya Birla Sun Life AMC. It is one of the largest asset management company (AMC) in India with closing Mutual Fund AUM of Rs 3.66 lakh crore as on December 31, 2024 (Rs 3.12 lakh crore as on March 31, 2024). ABCL, through Aditya Birla Sun Life Insurance, also has a meaningful presence in the life insurance business and is a leading private sector life insurance company in India. Through its securities broking entity Aditya Birla Money Ltd, ABCL offers a wide range of solutions including broking, portfolio management services, and depository services. ABCL also provides health insurance business through Aditya Birla Heath Insurance and has a unique business model of providing health insurance with active customer engagement for driving healthy behaviour and managing customer experience. ABCL is also present in stressed assets space (and has AUM of Rs 1,193 crore as on December 31, 2024) via its asset reconstruction company.

 

Erstwhile ABFL has been among the larger diversified non-banking finance companies (NBFCs) with AUM of Rs 1,19,437 crore as on December 31, 2024 (Rs 1,05,639 crore as on March 31, 2024). It offered various products such as personal loans, consumer loans, business loans, loan against property (LAP), project loans, corporate loans, construction finance and working capital loans to customers ranging from retail, high networth individuals (HNIs), ultra HNI, micro small and medium enterprises (MSMEs), and mid and large corporates. The share of AUM among the four primary business verticals was corporate and mid-market at 32%, secured business at 46%, unsecured business at 9% and personal and consumer at 13%, as on December 31, 2024. The share of corporate and mid-market segment has come down from 35% couple of years ago and is expected to decrease  with the higher focus on SME and retail segments.

 

Comfortable capitalisation: ABCL has comfortable capitalisation, with an absolute networth (on a consolidated basis; including minority interest) of Rs 30,473 crore as on September 30, 2024 (Rs 28,638 crore as on March 31, 2024). ABCL's consolidated gearing was at 4.0 times as on September 30, 2024 (3.8 times as on March 31, 2024). This has increased from around 3.4 times as on March 31, 2022 on account of healthy growth seen in the lending business, and is likely to increase further but will remain under 4 times on a steady state basis. The gearing levels of erstwhile ABFL and ABHFL were at 5.9 times and 6.7 times, respectively, as on December 31, 2024 (6.1 times and 7.1 times as on March 31, 2024). The ability to raise capital has supported the capital position of the group; Rs 3000 crore capital was raised during fiscal 2024, wherein Rs 1,250 crore was infused by Grasim and other promoter group entities and remaining Rs 1,750 crore by external investors. Fund received from stake sale of AMC business in fiscal 2024 also shored up the capital position.

 

ABCL's capitalisation is likely to remain comfortable, considering its flexibility to raise capital, also supported by internal accruals. Further, Crisil Ratings expects Grasim, along with promoter group entities to maintain majority shareholding and endeavour to ensure that ABCL and its subsidiaries maintain liquidity and cushion above regulatory capital adequacy / solvency requirements.

 

Erstwhile ABFL was adequately capitalised with total capital adequacy ratio of 16.8% as on December 31, 2024 (16.2% as on March 31, 2024). The gearing of ABFL has increased to 5.9 times as on December 31, 2024 from 4.7 times as March 31, 2022 owing to healthy portfolio growth, however was supported by Rs 1,600 crore infusion by ABCL during fiscal 2024 and Rs 500 crore in fiscal 2025. Ability to absorb asset-side risks remained adequate, as indicated by networth coverage to net stage three assets of 12.2 times as on December 31, 2024 (11.5 times as on March 31, 2024).

 

Diversified resource profile: While on standalone basis ABCL had nil debt, on consolidated basis it had outstanding borrowings of Rs 1,20,910 crore as on September 30, 2024 (Rs 1,09,540 crore as on March 31, 2024) around 99% of which is attributable to the lending business. The group resource profile remains diversified with share of NCDs at 29% of outstanding borrowings as on December 31, 2024, CP 9%, term loan 49%, CC/WCDL 6%, ECB 3%, NHB 3% and others (sub-debt, perpetual, inter-corporate borrowings [ICB], etc) forming remaining 1%. The investor base is also diversified with banks, mutual funds, HNIs, corporates, provident funds, etc. Further, ABCL group companies also benefit from the parentage in raising funds at competitive rates.

 

Erstwhile ABFL had outstanding borrowings of Rs 1,01,687 crore as on December 31, 2024 (Rs 91,366 crore as on March 31, 2024), with NCDs forming 23% share, CP 9%, term loan 52%, CC/WCDL 7%, ECB 4%, subordinate debt 3% and ICB 1%.

 

Weaknesses:

Improving, albeit moderate, profitability: While ABCL’s standalone revenue primarily comprises dividend income from its asset management business, at a consolidated level, earnings of the group remain well-diversified across lending, insurance, and AMC businesses, resulting in a good mix of fund-based and fee-based revenue. ABCL reported a PAT of Rs 714 crore on standalone level and Rs 3,335 crore on consolidated basis for fiscal 2024. The return on assets (RoA) and return on equity (RoE) for the group were at 1.7% and 13.6%, respectively, for fiscal 2024 (including one time gain from stake sale in AMC business, adjusting for which the returns will be 1.5% and 11.9%, respectively). While returns are moderate, the same have improved from 0.9% and 7.7%, respectively, in fiscal 2021. For nine months ended December 31, 2024 (9MFY25), the group reported a PAT of Rs 2,468 crore.

 

The improvement is primarily being driven by improved returns on the lending business, which is the majority contributor in the group’s earnings at over 70% share in PAT for fiscal 2024 (84% for 9MFY25). Erstwhile ABFL witnessed an improvement in RoA to 2.3% for fiscal 2024 from 1.5% fiscal 2021. ABHFL also reported higher RoA of 1.8% for fiscal 2024 as against 1.1% for fiscal 2021. However, the RoA for both ABFL and ABHFL have witnessed a dip in 9MFY25 at 2.1% and 1.4% respectively, on account of lower yields with shift towards secured asset classes. The trajectory of same will remain a monitorable.

 

Provisioning coverage ratio for the combined lending portfolio was comfortable at 45% as on December 31, 2024. The mutual fund business, run via Aditya Birla Sun Life AMC, continues to generate comfortable returns with RoE of 27.3% for fiscal 2024 (25.1% for fiscal 2023). The earnings profile of the life insurance business remains modest, with RoE below 10% and while the health insurance business has been reporting lower losses year on year, it is yet to breakeven. Nevertheless, with further diversification in lending book and expected improvement in returns generated by insurance businesses, ABCL’s overall profitability is expected to gradually improve over the medium term.

 

Erstwhile ABFL reported a PAT of Rs 2,221 crore for fiscal 2024, as compared to Rs 1,554 crore for fiscal 2023; RoA improved to 2.3% for fiscal 2024 from 1.5% fiscal 2021. For 9MFY25, ABFL reported a PAT of Rs 1,849 crore, with annualized RoA of 2.1%. While operating expenses have increased with investment in technology and branch expansion (2.0% for fiscal 2024 as against 1.5% for fiscal 2021; 1.8% for 9MFY25), improvement in profitability has been supported by higher net interest margins (NIMs; 5.7% for fiscal 2024 as against 4.4% for fiscal 2021) with shift in portfolio towards higher yielding retail and SME segments. However, the same decreased to 5.1% for 9MFY25 given incremental focus towards secured segments. Nevertheless, credit costs have also witnessed an inch up (1.4% for fiscal 2024 as against 1.3% for fiscal 2021; 1.2% for 9MFY25) on account of higher write-offs given the changing portfolio mix. Nevertheless, provisioning coverage ratio was comfortable at 46% as on December 31, 2024. The ability of the management to augment yield and contain credit costs as the newer portfolio seasons and maintain the improvement in profitability will be monitored.

 

Sustenance of asset quality metrics in lending business needs to be seen amidst high growth and changing portfolio mix: While the asset quality metrics for the lending business have seen an improvement over last couple of years, the sustenance of the same needs to be seen and remains a monitorable given recent and expected pace of growth and changing portfolio mix. The gross stage 3 for erstwhile ABFL stood at 2.3% as on December 31, 2024 (2.5% as on March 31, 2024) as against 3.1% as on March 31, 2023. Gross stage 2 assets have also come down from 2.7% to 2.0% during this period. However, this is supported by healthy AUM growth of 31% during fiscal 2024 and 21% during 9MFY25. The gross stage 3 on one year lagged basis stood at 3.3% as on March 31, 2024 (4.5% for a year before). Higher write-offs during fiscal 2024 and 9MFY25 has also supported the improvement in asset quality metrics. Gross stage 3, adding back write-off done in fiscal 2024 stood at 4.1%. Further, the growth in last couple of years has been driven by SME and unsecured retail asset segments and is yet to go through economic cycles.

 

ABHFL reported gross stage 3 assets of 0.99% as on December 31, 2024 (1.8% as on March 31, 2024), as against 3.2% as on March 31, 2023. Apart from prime, with recent focus also towards and growth in affordable mortgage loans segment, the performance thereon will need to be witnessed. With recent growth, the gross stage 3 assets on two year lagged basis would be higher. Further, gross stage 3 assets, adding back write-off done in fiscal 2024 stood at 2.1%.

 

Nevertheless, the share of wholesale portfolio of ABFL continues to decrease and was rangebound at around 32% as on December 31, 2024 (30% as on March 31, 2024 and 35% as on March 31, 2022). Further, the exposures are primarily towards better rated corporates. The outstanding exposure towards top 20 groups stood at 11% of ABFL’s AUM as on March 31, 2024. With focus towards retail and SME in ABFL and towards affordable mortgage loans in ABHFL, the share of wholesale portfolio is expected to come down and also increase the granularity of the portfolio.

 

The ability of the management to keep the asset quality metrics under check as the recently added portfolio seasons and goes through economic cycles, and with expectation of continued healthy pace of growth, will remain a key monitorable.

Liquidity: Superior

ABCL, on a standalone basis, had cash and equivalents worth Rs 711 crore as on February 28, 2025. Liquidity remains supported by dividend income from operating subsidiaries and high flexibility to raise funds from the market driven by the strong parentage. Nevertheless, borrowings were nil as on same date.

 

In the lending business, the group maintains adequate cash and equivalents and unutilised bank lines, totalling to Rs 13,540 crore as on February 28, 2025, to cover upcoming debt repayment of around Rs 12,860 crore till May 31, 2025. While the structural asset and liability management statement for ABFL and ABHFL had negative cumulative mismatches in few buckets up to 1 year as on December 31, 2024 and September 30, 2024, respectively, the same were well-managed by the presence of unutilised bank lines.

 

ESG Profile

Crisil Ratings believes that ABCL’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.

 

The ESG profile of financial institutions typically factors in governance as a key differentiator between them. The sector has reasonable social impact because of its substantial employee and customer base, and it can play a key role in promoting financial inclusion. While the sector does not have a direct adverse environmental impact, the lending decisions may have a bearing on environment and other sustainability related factors.

 

ABCL has demonstrated an ongoing focus on strengthening various aspects of its ESG profile.

ABCL’s key ESG highlights:

• Aditya Birla Group has committed to achieving net zero by 2050, eliminating landfill contributions, and ensuring zero harm in the workplace, and as a part of this group, ABCL is dedicated to these goals. The company is enhancing transparency and trust through a robust governance mechanism and is investing in carbon neutrality by increasing renewable resource consumption. ABCL is purchasing green energy for its two largest corporate offices and continuously expanding its solar panel capacity across its branches, which reached 140 kW by the end of FY24.
• ABCL has taken the initiative for the disposal and recycling of a total of 35,725 kg of waste from all its branches and offices, encompassing e-waste—disposed of in accordance with applicable laws—along with dry waste and biomedical waste.
• The share of women in the company’s workforce was 31% as of March 31, 2024, in line with the previous year. It has also launched various initiatives to improve the representation of women in leadership positions and create a level-playing field for women employees.
• The company’s governance structure is characterized by the majority of the independent directors (50%) on the Board, separate chairman and CEO positions. ABCL has a dedicated investor-grievance redressal mechanism and extensive financial disclosure.

There is growing importance of ESG among investors and lenders. ABCL’s commitment to ESG will play a key role in enhancing stakeholder confidence, given high share of foreign investors as well as access to both domestic and foreign capital markets.

Outlook: Stable

Crisil Ratings believes that ABCL and financial services businesses will remain strategically important for Grasim (and promoter group entities). Furthermore, ABCL is expected to maintain its diversified presence across the financial services space, comfortable capital position and diversified resource profile.

Rating sensitivity factors

Downward factors

• Weakening in Grasim’s credit risk profile by one notch could lead to a similar rating change
• Any material change in support stance, strategic importance of the financial services business and/or the shareholding of the promoter going below majority
• Deterioration in asset quality, thereby significantly impacting profitability and capital position.

About the Company

ABCL is the holding company for financial services businesses of ABG. The company has been registered with the RBI as a systematically important, non-deposit-taking, core-investment company. However, with scheme of amalgamation of ABFL with ABCL being effective from April 01, 2025, ABCL has applied for NBFC-ICC registration and would comply with the guidelines as applicable to NBFC-ICCs from the effective date of merger. ABCL continues to hold investments in various financial services entities of ABG.

 

ABCL provides end-to-end financial services to both retail and corporate customers and has a presence across life insurance, asset management, asset reconstruction, corporate lending, personal & consumer lending structured finance, project finance, wealth management, security broking, online personal finance management, housing finance, pension fund management and health insurance businesses. ABCL has about 59,000 employees and a nation-wide reach through 1,482 branches and more than 200,000 agents/channel partners as on December 31, 2024.

 

ABCL, on consolidated level, reported profit after tax (PAT) of Rs 3,335 crore on total income of Rs 34,561 crore in fiscal 2024 (including one time post-tax gain of Rs 433 crore from stake sale of AMC business), against Rs 4,796 crore and Rs 30,201 crore (including one time gain of Rs 2,739 crore from stake sale of health insurance business), respectively, for the previous fiscal. For 9MFY24, it reported a PAT of Rs 2,468 crore on total income of Rs 28,485 crore.

 

On standalone basis, ABCL reported PAT of Rs 714 crore on total income of Rs 861 crore for fiscal 2024 (including one time post tax gain of Rs 566 crore from stake sale of AMC business), against PAT of Rs 141 crore on total income of Rs 223 crore for the previous fiscal. For 9MFY24, it reported a PAT of Rs 454 crore on total income of Rs 618 crore.

About the ABFL

Aditya Birla Finance Ltd was a wholly-owned subsidiary of ABCL and was registered with RBI as a systemically important non-deposit accepting non-banking finance company.  It was incorporated in 1991 and was formerly known as Birla Global Finance Company. The NBFC had an AUM of Rs 1,19,437 crore as on December 31, 2024 (Rs 1,05,639 crore as on March 31, 2024), with personal and consumer loans, unsecured business, secured business, and mid-market and corporate financing segments forming 13%, 9%, 46% and 32% share of AUM, respectively. Apart from providing a bouquet of lending solution across a wide range of asset classes and customer segments, it also provides wealth management solutions. It reported a PAT of Rs 2,221 crore on total income of Rs 12,764 crore for fiscal 2024, as against Rs 1,554 crore and Rs 8,179 crore, respectively, for fiscal 2023. For Q1FY24, it reported a PAT of Rs 621 crore on total income of Rs 3,604 crore.

Key Financial Indicators (ABCL consolidated)

As on / for the year end		Dec-24	2024	2023
Total income	Rs crore	28,485	34,561	30,201
PAT	Rs crore	2,468	3,335	4,796*
Total assets	Rs crore	NA	2,32,102	1,80,754
Gross Stage 3 (ABFL)	%	2.3	2.5	3.1
Gross Stage 3 (ABHFL)	%	0.99	1.8	3.2
Return on assets	%	NA	1.7&	3.0*
Gearing	Times	NA	3.8	3.9

& including one time gain of Rs 433 crore from stake sale of AMC business

* including one time gain of Rs 2,739 crore from stake sale of health insurance business

The ratios mentioned in the rationale have been calculated using Crisil Rating’s standard methodology

Any other information: Not Applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Aditya Birla Capital Ltd	Full	Holding company
Aditya Birla Finance Ltd^	Full	Subsidiary
Aditya Birla Housing Finance Ltd	Full	Subsidiary
Aditya Birla Capital Digital Ltd	Full	Subsidiary
Aditya Birla Financial Shared Services Ltd	Full	Subsidiary
Aditya Birla Stressed Asset AMC Pvt Ltd	Full	Subsidiary
Aditya Birla Trustee Co Pvt Ltd	Full	Subsidiary
Aditya Birla PE Advisors Pvt Ltd	Full	Subsidiary
Aditya Birla ARC Ltd	Full	Subsidiary
Aditya Birla Money Ltd	Full	Subsidiary
Aditya Birla Health Insurance Co Ltd	Partial*	Joint Venture
Aditya Birla Sunlife Insurance Co Ltd	Full	Subsidiary
Aditya Birla Sunlife Pension Management Ltd	Full	Subsidiary
Aditya Birla Insurance Brokers Ltd#	Full	Subsidiary
ABARC-AST-008-Trust	Full	Subsidiary
ABARC-AST-010-Trust	Full	Subsidiary
Aditya Birla Special Situation Fund – 1	Full	Subsidiary
Aditya Birla Sunlife Trustee Pvt Ltd	Partial*	Joint venture
Aditya Birla Wellness Pvt Ltd	Partial*	Joint venture
Aditya Birla Sunlife AMC Ltd	Partial*	Associate
Aditya Birla Sun Life AMC (Mauritius) Ltd	Partial*	Associate
Aditya Birla Sunlife AMC Ltd, Dubai	Partial*	Associate
Aditya Birla Sunlife AMC Pte Ltd	Partial*	Associate

*Equity accounting

^Note: Aditya Birla Finance Limited has got amalgamated with its holding company, Aditya Birla Capital Limited pursuant to scheme of amalgamation effective from April 01, 2025.

#The entire stake in Aditya Birla Insurance Brokers Ltd was sold on August 30, 2024