Aditya Birla group to invest Rs 1,000 cr in lending, health insurance biz

Company has provided Rs 60 cr for IL&FS group exposure at Rs 220 cr; gets board nod to raise Rs 3,500 crore of equity

Aditya Birla group plans to invest between Rs 800-1,000 crore a year in its lending and health insurance businesses to support growth plans.

Aditya Birla Capital Ltd (ABCL), financial services arm of the group, has obtained approval from its board to raise up to Rs 3,500 crore of equity capital.

Ajay Srinivasan, the Chief Executive Officer at ABCL, said the board nod for the capital raising plan is an enabling resolution. Various businesses under ABCL need capital to grow. The company also has the ability to leverage and provide capital to subsidiaries.

ABCL, a holding company for insurance, asset management, asset reconstruction and lending activities, posted a net profit of Rs 258 crore in the fourth quarter ended March 2019 (Q4FY19), up from Rs 169 crore in Q4Fy18. The total income for Q4 rose to Rs 5,050 crore from Rs 3,944 crore. The net profit for FY19 grew by 26 per cent to Rs 871 crore and the revenues were up 29 per cent to Rs 16,570 crore.

The non-banking finance company, which lends to companies, SMEs and retail segments, saw its loan book expand by 20 per cent year on year to Rs 51,714 crore by March 2019 end.  

Its loan book is expected to expand by 20-25 per cent in FY20. The NBFC is generating adequate profits which can be ploughed back into business, Srinivasan said. Its net interest margin (NIM) expanded by 37 basis points to 4.91 per cent by March 2019.

NBFC has exposure of about Rs 220 crore to IL&FS group entities and has made provision of Rs 60 crore for such exposures. 

The housing finance unit’s loan book grew by 40 per cent year on year to Rs 11,405 crore while maintaining healthy NIM at 3.1 per cent in Fy19. The affordable lending book grew four-fold in a year to Rs 1,500 crore.

Srinivasan said pace of growth in housing finance business will be higher than that of NBFC unit since the base of HFC unit is small.

In the health Insurance business, gross written premium doubled to Rs 497 crore in FY19, with retail business contributing 65 per cent. It is covering more than 2.3 million lives in its second year of full operation.