I am addicted to success. But I believe my main strength lies in my mind. Numbers don’t lie. If you look at the last 15 years, my level has consistently remained high. If you don’t commit 100%, you won’t achieve the level you aspire to. I’ve dedicated myself so much that success has become a part of me. Records are part of me. I don’t follow the records. The records follow me.”
If you are conversant with the financial services world, chances are you would attribute that quote to Rajeev Jain, the 53-year-old Managing Director of Bajaj Finance.
That’s because the non-banking finance company (NBFC) from auto giant Bajaj Group’s stable wasn’t even in the game 16 years ago. The turnaround began after Jain joined the company in 2007. The company shattered all records in terms of growth and shareholders’ returns under Jain’s leadership.
With the support of the late Rahul Bajaj, former chairperson of Bajaj Group, and Nanoo Pamnani, former chairman of Bajaj Finserv, Jain marched forward, scoring goals one after another. In the last 16 years, the company’s total income has compounded annually at 34%, while net profits have compounded at 52%. Assets under management (AUM) have increased 100 times. In terms of return ratios, the ROA has jumped from 0.7% to 5.3%, while ROE increased from 2% to 23.5%. Its continued good performance ensured that it topped the list of large NBFCs in the BT-KPMG Best Banks and NBFCs Survey 2022-23.
Now, returning to that quote above, it’s not from Jain, it’s taken from a video clip of Portuguese football legend Cristiano Ronaldo, one of the greatest of all time. And though Jain isn’t a football enthusiast, he shows this video to employees as an example of how great people think and how hard work is the key to their success. It is what he takes as inspiration as he readies to deliver on the FY27 strategy to become a leading payments and financial services company in India. The firm is aiming for more than 100-120 million customers by 2027, a market share of 1-1.25% of payments GMV, 2-2.75% of credit, and 3.5-3.75% of retail credit.
The company—focussed on consumer, SME, commercial, rural lending, personal loans, and loans against securities—has generated sustainable growth in profitability over a long period. Jain says there’s reason to expect that performance to continue simply because of India’s growth prospects. “As per capita income grows, more people come into the broader pyramid of middle-income and mass-affluent consumers. It is estimated that this segment will grow to a billion people by the time India turns 100 in 2047,” believes Jain.
Bajaj Finance is aiming to become an ‘omnipresent’ financial services provider, covering all consumer touch points, including physical branches, mobile apps, and the internet. The goal is to reduce friction and enable customers to seamlessly switch between online and offline shopping. In terms of physical presence, the company operates across 4,092 locations and had more than 190,000 active distribution points as of December 31, 2023. In the digital space, it has the Bajaj Finserv app, the web platform, and three proprietary marketplaces: the insurance marketplace, investment marketplace, and EMI store.
The strategy is targeted at reaching more customers, improving customer loyalty, increasing cross-selling opportunities, and bettering margins. “We are building social commerce. This consumer platform will go live in June. Rewards will go live in April,” says Jain.
The company has reached over 80 million customers in the past 16 years and aims to touch the 100-million mark in the next three years. “We have started providing a long-range strategy document from FY22 onwards. As per the FY23 document, we believe that the company should have served between 130-140 million customers by FY28. This year (FY24), we expect to close the year with 83 million customers,” adds Jain.
In this it will be aided by the overall development in the country. Its newer customers will likely come from newer geographies, particularly between Uttar Pradesh and Bihar. That’s because per capita incomes are expected to rise in the northern and eastern regions, which have over the past 25 years lagged behind the western and southern regions. “While the West and South have a per capita income of $3,000 to $4,000, the North and East are expected to have per capita incomes below $1,800. As the North and East catch up in terms of per capita income, the total addressable market will expand,” explains Jain.
Another avenue that it is targeting is payments, where platforms like Google Pay, PhonePe, and other third-party apps have established successful business models. The company’s payment stack includes wallets, Unified Payments Interface, bill payment services, and more. The payment solutions are at the core of Bajaj Finance’s omni-channel strategy because they are expected to enhance customer engagement and retention on the company’s new digital platforms.
Towards this end, the company has developed Bajaj Pay into a substantial payments infrastructure over the past three years. The company has deployed merchant QR codes and point-of-sale (POS) terminals. QRs at merchant POS were at 2.71 million by the end of the third quarter of FY24. “The payments strategy is a means to engage customers and not to originate new customers. It helps improve engagement and products per customer metric significantly. Over time it may bring new customers to the fold as well,” says Jain.
Credit, which has always been a major focus area, is now undergoing expansion. The company’s current market share in credit stands at 1.70% in the BFSI industry, which it is looking to increase to 3-4% by FY27. In terms of consolidated business, mortgage accounts for 31%, SME for 13.3%, two- and three-wheeler financing for 6.2%, commercial lending at 6.7%, and consumer durables financing at 7.9%. The company is also venturing into new areas such as car financing, emerging corporate lending, microfinance, and tractor financing.
But there are challenges it faces. The significant one, considering its digital focus, is regulatory scrutiny of digital products for compliance gaps. In November, the Reserve Bank of India directed Bajaj Finance to immediately cease sanctioning and disbursing loans under its ‘eCOM’ and ‘Insta EMI Card’ products. The Insta EMI Card offers consumers pre-approved credit up to Rs 2 lakh for small purchases, while eCOM provides lending on popular e-commerce platforms. The RBI’s decision stemmed from the company’s non-compliance with digital lending guidelines, particularly the absence of Key Fact Statements for borrowers and deficiencies in those issued for other digital loans. “The adverse impact of RBI’s embargo on new customer acquisition through digital channels could be a temporary phenomenon and loan growth could accelerate once it is lifted. Additionally, sectoral headwinds in terms of pressure on NIMs due to rise in cost of funds could fade away in a couple of quarters with improvement in crunched liquidity situation,” investment consultancy firm Way2Wealth has said in a report.
It also confronts an NBFC landscape that is changing, and changing fast. For the first time, Bajaj Finance faces competition from major corporate players targeting this market. Big conglomerates like Reliance Industries, Poonawalla, Piramal, and Godrej groups have entered the fray. This could affect margins. But Jain seems unperturbed. “As long as we continue to use technology and data-first as a business construct, we will become more efficient... we will continue to deliver 21-23% ROE,” he says.
There is another challenge it faces: Raising funds or deposits at the lowest cost. “We used to primarily borrow wholesale and lend retail in the first seven years of our journey. Since 2014, we have also begun borrowing retail and lending wholesale. We’ve started attracting retail deposits and engaging in commercial lending,” says Jain. Currently, 22% of the company’s total borrowing is retail. In fact, Bajaj Finance has the largest deposits among non-bank institutions. Currently, Bajaj Finance holds a 33% share of bank lending in its liabilities mix, while the share of non-convertible debentures (NCDs) stands at 33%. “Our aim is to have 25% of our liabilities sourced from retail and corporate sectors in the medium term,” says Jain.
Beyond these challenges, he is also preparing the company for a gradual and seamless management transition. Anup Saha, who came from ICICI Bank in 2017, will become Deputy Managing Director from Executive Director in April. He will be supported by three new COOs—Deepak Bagati, Sandeep Jain and Anurag Chottani. Saha will continue to report to the MD.
For now, Jain is not going anywhere. He is busy leading the NBFC into the next phase.
@anandadhikari
