 "Our competitive edge is platform, technology and great customer service: Pramod Bhasin")
With the backing of Aion, an India-focussed fund of Apollo Global Management and ICICI Venture Funds Management, Pramod Bhasin has taken over GE Capital's commercial lending and leasing business in India. The former president and CEO of GE Capital India and Asia, and founder of Genpact, has with him Anil Chawla, former head of GE Capital's commercial business and DE Shaw India. In an interview with Jyoti Mukul, Bhasin says one has to find a niche in the increasingly competitive financial sector. Edited Excerpts:
How is the deal structured between the three partners and what do they bring to the new venture?
We are not revealing the equity details. I have been in financial services for 30 years. I have built Genpact and SBI credit card business. Anil has been running the commercial finance business. His knowledge of capital markets with DE Shaw and merger and acquisitions is profound. Parth (senior partner, Aion India) and Aion are in the financial markets. Aion also brings with it deep pockets. They will provide key strategic inputs. Our experience of building businesses and scaling them up is important. We had one of the largest data analytics businesses in Genpact. I hope I will bring that capability here also. We built it right from scratch. Today, there are 5,000 people. I hope we will combine all that capability here. It is a strong composition.
What is the name of new company? Will there be a new brand?
Because we closed the acquisition just yesterday (Wednesday), we have applied for the new name today. We can't talk about it yet.
What is the asset size and the loan portfolio you are taking over? Is there a premium at which it is being sold?
The loan portfolio and asset size will together be $360 million. We are not divulging the deal details.
How many GE Capital employees are you taking in?
They are less than 100 but a sizeable number. We are delighted to take in GE employees. They have been around for long time. GE has an organisational legacy.
Where do you see growth coming in?
If you see banks and strong NBFCs, there is a growth of 20 per cent plus over a period of five-seven years but the level of penetration of financial products in India is among the lowest in world. The ability to increase penetration of financial products, regardless of economic growth rate, is enormous. Today, the game has changed because India is going through a chain of events like Aadhaar, Jan Dhan Yojana, broadband access, mobile phones. These will allow India to leapfrog into the 21st century in ways which are unprecedented. Think of small-scale businesses in remote parts of India which did not have access to market and good pricing, but now, suddenly, get access to data, pricing, knowledge, transportation and distribution services. They can now double, treble and quadruple their business just like that.
But financial inclusion schemes like Jan Dhan Yojana are targeted at low-value customers. Will they be your clientele?
Well, Aadhaar will certainly be. It applies to a billion people. If you look at the number of people who are outside the formal income group, there are millions of them. Not all of them are low value. There are several who have great assets and run businesses. Many of them may not be fully in the formal sector but run decent businesses like a dealership, repair shop, beauty salon - all of them make money. There are professionals like doctors and lawyers - everybody needs financial prowess. So our ability to reach out to them will substantially increase their financial inclusion and that is where the growth will come from. It is not only about what India's growth rate is but also about the fact that public sector banking, at least for the time being, is not really lending much. Public sector banks are sorting out their own problems. Seventy per cent of banking is done by the PSUs and if they are not doing so much banking, you can imagine how much others can do.
How competitive is lending by NBFCs? Wouldn't cost of finance determine consumer choice, especially when there are too many players?
Cost of finance does not really determine the choice. Things like customer service, flexibility of product and speed of response matter. Many customers will be willing to pay more to get loan in time. If you go to a bank and it takes two months to find if you can get a loan or not, then what is the use? I don't think it is just about price. I earnestly believe that people who compete only on price have not figured out what is there competitive advantage whereas our competitive edge is platform, technology and analytics driven by a desire to deliver great customer service. Credit cards wouldn't exist if people wanted only price. You can always get a cheaper loan than buying on credit card. The reason they exist is convenience. You have to be clever and find a competitive niche which is sustainable.
RBI has opened up the financial sector by offering licences under various models. Would you be interested in migrating to a larger entity like a bank?
RBI has done a great thing by opening up the sector and offering bank licences on tap. It has also given the option of becoming a payments bank, small bank or a large bank, allowing you varying ways to serve the financial sector market. There are also many people opening up NBFCs. It comes down to execution. Not everybody can execute. We have built businesses and have skills and we hope we can pull together a great organisation. That will be our cutting edge and competitive differentiator. In time, we will look at all aspects, should we become a bank or not? Is it viable or not? There are pluses and minuses. Payments banks don't bother us because they will help us. We will have to see how universal, personal interface and other things play out.
How do you plan to go forward?
There are three steps. We launch the commercial business that is already functional. Leasing business will continue. We will move much faster in healthcare equipment financing. In many of these things, it is just clicking the switch on. We will start doing business tomorrow onwards. In consumer segment, we are already starting to build platforms on analytics framework which we hope to use in future. In SMEs, we need to expand our product portfolio beyond healthcare equipment into other things like generators, boilers, printing machines, transportation equipment, lease holding improvements, small aircraft, etc. But the most important thing we want to do is hiring. We are looking for people in all segments - consumer finance heads, risk managers, underwriters and operations. There is a strong legacy of ex-Genpact people and strong financial sector people. We want people not just from financial services but FMCG companies, people who have worked in small town India. Our goal is to move quickly but not recklessly.
