Next wave of consumption will come through credit only, says Sanjiv Bajaj

Bajaj Finserv has created a financial stronghold with multiple business lines. Bajaj Finserv, a lending, insurance and wealth advisory firm has three arms —the non-banking finance firm Bajaj Finance, Bajaj Allianz General Insurance and Bajaj Allianz Life Insurance.

Sanjiv Bajaj took charge of Bajaj Finance in 2008. Starting from a low base in 2007-08, when Bajaj first entered the financial services business, the company's revenue has grown to Rs 22,364 crore and profits have grown to Rs 1,863 crore in 2015-16. The company is currently valued at over Rs 28,000 crore and has earned a solid reputation among both peers and consumers. With a focus on sustainable profitability and innovation, Bajaj Finance has given handsome returns to investors.

Currently, Bajaj Finance is present in 20,000 stores across the country and has now tied up with Future Group to provide easy EMIs to customers on groceries and household essentials in all Future Group stores. Vice-chairman of Bajaj Finance Sanjiv Bajaj spoke with Anurag Shah about the company's prospects and industry scenario.


What kind of scope does consumer finance offer today and what are your plans in this segment?

Consumer finance has a very small portion if you see the total debt in India today. But in western countries it's a much larger proportion of the GDP. Even though we don't have to go that far, the opportunity we have today is large considering. As our income levels are growing, so are people's aspirations. With our consumer financing and EMI products, we are able to enable the aspirations, and that is what we are focused on.

Consumer finance industry around the world plays a critical linkage role in developing consumer culture and therefore gives a kick-start to the economy. How do you see it panning in India?

Now our society is a mix of old India and new India, old India didn't spend, they didn't have anywhere to go and spend, there were no malls, they didn't have the opportunity to spend, no discretionary spend was available beyond basic necessities. In the last 10 years the entire consumer space has changed and that has given rise to companies like us, and we are able to enable those consumers, we can stretch a person's money using EMI, using schemes to help him buy products affordable and available to him.

The most important point is generational, we all grew up in an environment of deficit not surplus, therefore, apart from the younger generation, most Indians do not like taking debt, which is not such a bad thing. In the country of 130 crore people, you can always get enough volumes who can come and buy, it's an issue of availability and accessibility. Today we need 20 more Bajaj Finance all over the country to reach out to the customers to provide them financial products. So I think it's an issue of accessibility today more than affordability.

So you mean to say people are willing to pay more when they have more access to finance?

We have been doing consumer financing from last many years, we find that availability of EMI finance plays a major role; of the customers who comes to buy a 40 inch TV, one in three trades up for higher value product, that's how we end up meeting people's aspirations and enabling them. In our experience we see section of consumer happy to trade up.

Are non-performing loans and repayment creating a problem in this and becoming a challenge?

What we have seen in India is that consumers want to pay. There are very few consumers in India who consciously do not want to pay. But some consumers have accumulated too much debt, or have a debt but have lost their jobs, which is why they are unable to pay. Other than those situations, we have seen that getting payments back is not a problem. On our part, it is our responsibility to see that we use good quality analytics to try and understand which customers should be given how much leverage and that has helped us so far in having a very low net non-performing assets.

Bajaj Finance has tied up with Future Group, so what is the plan and potential of the two companies coming together.

Time will tell us the potential but the next wave of growth will be enabled by finance. For us, it is as important to find new customers as it is to build the right type of partnerships so that we can take care of customers' multiple needs. The next wave of consumption will happen through credit only. I am excited because two Indians groups getting together to do something which is world class. It's a win- win tie-up for Bajaj Finance, Future Group and customers.

Going forward, what strategies do you have for expansion and growth?

Our major focus will be on the consumer segment. But we are increasing focus on the rural and other segments. In these, it shouldn't be problematic to enhance growth from 20-25 % in the next few years. Having said that, there exist growth cycles, so if we deem that growth needs to be slowed in the coming years to maintain the quality of the growth, then we will slow it down. This is because we are long-term players who wish to be around for the next 100 years. But overall, the kind of potential we have witnessed in India in the past decade encourages me to think that there won't be a problem in seeing over 20% of good quality growth.

What you think of India's current macroeconomic situation. Do you think we are going on the proper growth trajectory with self-dependency or still we are very much dependent on the external world?

We do not live in an isolated world. Around 25 years after liberalisation, we are open to what is happening in the world, so obviously we have some impact of external factors. Nevertheless, our strengths are a very large consuming population, great skills and ability to manufacture locally, whether it is products or services. If we continue to focus on these, it will help us buffer external shocks and leverage external benefits. Our capability can maneuver through slow to quality growth cycles. What we witnessed with China in the past 30 years, I believe the next 30 years belong to India.

Do you expect further consolidation in the insurance sector? Also, there is a talk of Allianz quitting the joint venture with Bajaj...

Rumours come and go, although they can be interesting to read in the newspapers. Our discussions are ongoing and Alliance is a very well-respected company having been our partner for the past 15 years. Beyond that, I cannot say anything because our discussions are ongoing at the moment. With regards to consolidation, I believe there are new opportunities for consolidation. But there will be new companies coming in because India has a huge opportunity for insurance. Be it banking or insurance, we need a lot more competition to really penetrate financial products right across India. Today India is not only 50-100 cities. We have to go much beyond that, and we need more competition not less.