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Aditya Birla Capital expects 5–10 bps rise in Q3 funding cost, creates overlay for macro risks

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Aditya Birla Capital expects 5–10 bps rise in Q3 funding cost, creates overlay for macro risks

Aditya Birla Capital expects 5-10 bps rise in Q3 funding cost, creates overlay for macro risks

Aditya Birla Capital expects its NBFC’s incremental cost of borrowing to rise another 5–10 basis points in the December quarter, after an 11-bps increase in Q2, while the lender has created a management overlay to account for emerging macroeconomic risks.

NBFC incremental borrowing cost rose 11 bps between Q1 and Q2; another 5–10 bps rise expected in Q3

NBFC NIM declined to 6% in Q2 from 6.07% in Q1 despite a higher-yielding product mix

Management said it is not looking to onboard high-risk customers merely to improve margins

Management overlay created for segments coming under stress from the changing macro environment

Aditya Birla Capital expects funding costs in its non-banking finance business to rise another 5–10 basis points in the December quarter if the current rate environment persists, putting further pressure on margins even as the company looks to improve profitability through a higher share of retail and unsecured loans . The NBFC ’s incremental cost of borrowing increased by 11 basis points between the first and second quarters, with management expecting another 5–10 basis points increase in Q3. The company’s investor presentation shows interest cost at 6.55% of average lending book in Q2, compared with 6.52% in Q1, while net interest margin , including fee income, declined to 6% from 6.07%. Advt

Rakesh Singh, MD & CEO, Aditya Birla Finance, said the benefit from a change in product mix towards higher-yielding unsecured loans was offset by the increase in cost of funds, which meant there was no margin expansion in Q2.


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