Target: ₹215

CMP: ₹176.05

We believe AB Capital is poised to double profits in the next 3 years, capitalising on wider network and higher cross-sells. NBFC can gain from MSME lending opportunity as it expands branches, leverages low CoF and shifts to lower ticket loans.

Over FY23-26, this should drive 29 per cent EPS CAGR & lift ROE to 16 per cent at NBFC; in Life insurance, strong APE growth, better VNB margins due to scale gains can drive 26 per cent VNB CAGR..

Aditya Birla Finance Ltd (ABFL) (AUM ₹85,900 crore) has re-oriented its portfolio from wholesale to MSME/retail loans (69 per cent of AUM). We expect profit to grow at 29 per cent CAGR and ROE to rise 140bps to 16 per cent over FY23-26. Aditya Birla Housing Finance Ltd (AUM ₹14,500 crore) offers prime, affordable home loans with ATS of ₹26 lakh like other large HFCs. lag. AB Group, a mid-sized player in life (LI) & health insurance (HI), is seeing good growth.

Our SOTP-based PT values NBFC/ HFC at 1.8/1.6x BV (Sept 25E), LI at 1.7x EV & HI at 1.5x P/GWP. Aditya Birla Finance Ltd, being an upper layer NBFC, has to list by Sept 2025 per current norms. We ascribe 20 per cent holdco discount to ABFL & other listed subs.

Risks: slower growth, asset quality issues in NBFC, changes in holdco structure.