Sanjiv Bajaj on taking business to the next level of digitisation

Surajeet Das Gupta in conversation with Sanjiv Bajaj, Chairman and Managing Director, Bajaj Finserv
 
Q1: From an auto-finance company to one of the largest NBFCs in the country, it has been a long journey. You have had an amazing run in the last few years, both in the stock market and financials. If you could briefly say, what’s next for the next 2-3 years for you?
Ans:

• Bajaj Finance journey started in 2007, before which it was ‘Bajaj Auto Finance’
• Focus has been to build a diversified, tech-first lending business aimed at the middle-class consumers
• Across the geographies and products, data and analytics are used to understand the risk of the customer as against the company’s risk appetite  
• The pandemic made Bajaj Finance reset its business, re-organise thoughts and develop a strategy for the digital world
• Its new (three-in-one) app offers customers frictionless access to products and services, as well as insurance products for partners
• Works with 1,00,000 retail stores and manufacturers of TVs, mobile devices, furniture, hospital chains and integrate them to provide a seamless experience over the app

 
 
Q2: What would be the size of this, in terms of the customer base, which you would readily have once you do this – some idea of what is the kind of transactions that you will be able to do?  
Ans:

• Have 50 million customers who are credit-tested and KYC-cleared and approved for loans on multiple products
• Built software for partners of Bajaj Finance’s debt management services or collection business
• Debt management services and employee engagement will go digital in the next 12 to 18 months
• Adds 5-7 million new customers every year
• Across all financial services, including insurance business, it has close to 150 million customers
• Projected to have 150-200 million customers on its platform in next five years
• Aims to implement own payment gateway in the next one year – an extension of service that offers transactional glue to customers

 
 
Q3: You have relationships with a lot of retailers from whom we buy consumer goods. Would you have to build a substantial e-commerce platform? If you are going to build an e-commerce platform, will it conflict with the fact that you have other e-commerce partners where you are financing the needs of their customers?
Ans:

• Bajaj Finance is an enabler of digital platforms where products and services get sold
• Collaborating to help sell end products and not compete with e-commerce players

 
 
Q4:Lot of the ecommerce players have also got into things like entertainment, music as a glue to retain customers. Would you, as a large player in this space, look at other cues beyond just the financial services?
Ans:

• Gaming is becoming a significant business opportunity
• Monitoring the metaverse and trying to understand the evolving space
• Will monitor and decide which space to join as an enabler (of services)
• To launch an online store for two-wheelers across multiple brands later this year financing own customers
• Joined the used four-wheeler space. Evaluating opportunities of expanding to new four-wheeler space with strategic collaborations
• A player in the SME lending and housing space for the past 7-8 years

 
 
Q5: As you have experience in the auto sector, electric vehicle sector is opening up. And it has new challenges of financing. How do you see this space panning out?
Ans:

• EVs are here to stay, but it may not be the only way to clean energy
• Electric vehicles will require commitments from developed nations, significant upgradation in infrastructure, development in battery technology and manufacturing facilities  
• Doing a significant amount of work so that, once the space evolves, the company is ready

 
 
Q6: You have got into the mutual fund business and done a lot of innovation in the health space. These seem two new areas. Why did you get into this space which looks very crowded? Also, you are approaching the health space very differently from others. If you could elaborate on how you are looking at these two businesses?
Ans:

• Didn’t want to come out with a ‘me too’ product among mutual funds
•  Now, with the large numbers of customers, aims to create a unique offering in the mutual funds space by looking at different customer segments and at a lower cost than traditional industry
• Looking at the healthcare space not from the point-of-view of lender or an insurance company, but from the point-of-view of customer or patient  
• Creating health solutions platform for customers with loans and insurance built-in
• Created patient management software for doctors, where patients’ health records will be stored with their approvals, allow doctor appointments from the platform and more
• The platform is designed to offer customisable, personalised, preventive and prepaid outcomes for individuals over a period of time  

 
 
Q7: You are considered to be a non-bank, but a bank in many ways. If the rules are such that you can actually get a banking licence, does it really matter to you raise funds? In a bank, you have an advantage or more regulatory hassle?
Ans:

• Do most of what a bank can do and most of what and NBFC can do
• Implemented most regulations that apply for banks for ourselves (Bajaj Finance)
• Don’t have Cash Reserve Ratio (CRR) requirement, but the company keeps one voluntarily
• Internal processes, operational and compliance processes are more like a bank, than a non-bank
• More decentralised financing gets, the less monolithic structure (like a bank) will be relevant for the future
• There is also certain solidity to being a bank because of the RBI regulation
• Banks are not allowed to fail and customers have greater confidence in a bank than a non-bank

 
 
Q8: Covid made everybody relook at their businesses, especially the consumer business. Buying got a hit and one would assume that it hit your consumer business also. Now that is over, what is the trend that you are seeing in terms of growth?
Ans:

• Reported higher losses during the first wave of the pandemic compared to earlier years
• Over the last three quarters, there were some good months and there were slower months
• Learning from the pandemic in terms of running business and life, making personal choices is going to be important for businesses to choose  
• Going forward, a hybrid operational model will evolve, focused on building greater flexibility in the business model

 
 
Q9: What kind of business comes from rural India for you?
Ans:

• Businesses like consumer loans, loans to SMEs etc comes from rural India
• Have over 10 different products in rural India  

 
 
Q10: Out of these 50 million KYC customers, how much would you have in rural today?
Ans:

• Around 8-10% of customers are from rural India and growing
• Credit performance of rural and semi-urban customers have been better than urban customers during the lockdown
• Important to choose the right customers, right level of engagement is important

 
 
Q11: Your father (Rahul Bajaj) was always considered to be the auto man of India. One has always talked to him about the automobile industry, two-wheelers.  But did he advise you on the running of the financial services business?
Ans:

• Rahul Bajaj had the ability to focus on the big picture and also deep dive into the smallest of details
• He had the ability to ask the most relevant questions during all discussions
• In 2006-7, Sanjiv Bajaj volunteered to build up the financial services business, while Rajiv focused on Bajaj Auto
• In financial services, success and failure will both be on your watch

 
 
Q12: What are the things you learned from him in business, which you replicated in what you do in Bajaj Finance?
Ans:

• Rahul Bajaj walked the talk on working hard, honesty, never compromising on integrity  
• He was known for speaking his mind – something many leaders find difficult
• Rahul Bajaj loved talking, but he would also hear everyone’s point of view  
• Don’t wait for consensus – take the chance, go ahead and act without worrying about failures  

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