BAJAJ FINSERV LIMITED (BFSL)

A Detailed Analysis of the Conglomerate

Submitted to: Prof. Ram Adhar Chopra

Presented by:
Group 4
Ankit Goel 20/2009
Lokesh Yadav 38/2009
Mounis Parwaiz 47/2009
Ina Arora 76/2009
Saurabh Agarwal 78/2009

Date: 3rd October 2010

Flow of Presentation

• Objectives of the Study

• Overview of Bajaj Group
• Bajaj Auto Limited
• Bajaj Allianz Life Insurance Limited
• Bajaj Allianz General Insurance Limited
• Bajaj Finserv Lending
• Wind Energy Business
• Diversification Plans and their Prospects
• Conclusion
• References
Objectives of the Study

Primary Objective:

 To analyze the strategy and performance of Bajaj Finserv (BFSL) over

the past few years and identify the prospects of its diversification plans

Secondary Objectives:

 To analyze growth of the Life Insurance and General Insurance businesses of

BFSL
 To analyze the prospects of wind energy business of the company
 To gauge the financial strength and adequacy of Bajaj Finserv Lending, a
subsidiary of BFSL, as per RBI norms
 Founder: Jamnalal Bajaj Founded in: 1926
Employee Strength: 36,000 Market Cap.: ` 276 bn*

Overview of the Group

*At exchange rate: 1US$= ` 46.00

The Bajaj Group
 Businesses: (34 companies)
 Auto (two & three wheelers) Manufacturing
 Home Appliances
 Insurance and Finance
 Steel and allied products

 Holding Company: Bajaj Holdings and Investments Ltd. (BHIL)

 Flagship Company: Bajaj Auto Limited (Turnover of `120 bn)

 Bajaj Auto Ltd. (BAL): Manufacturing services of the group

Bajaj Finserv Ltd. (BFSL): Strategic businesses consisting of wind farm and
financial services
The Bajaj Group
 Joint Ventures:
Bajaj Auto Limited (BAL)
 Flagship company of the group
 Date of Incorporation: Corporate Office: Pune
Employee Strength: 2,265 Listings: BSE, NSE

THRUST AREAS
• Industry
• Introduction to Non Banking Financial Companies (NBFCs) in India
• Company History
• Company Profile and Business
• Performance on the Street
• Company Performance (last 5 years)
• Competition
• Risk Management
Industry
•
 NBFCS in India
• Company registered under Companies Act 1956
• Not allowed demand (CASA) deposits, cash credits , overdrafts, etc.
• Modes to access public funds: public deposits (only for NBFCs- D), CPs,
debentures, inter-corporate deposits and bank finance
• No prudential norms for cap on exposure to parent group or co. i.e. intra group
transactions (ITEs), but have exposure limits to single/ group borrowers
ASSET BASED CLASSIFICATION CLASSIFICATION BASED ON BUSINESS
Asset Finance Companies NBFC- D
Investment Companies NBFC- ND
Loan Companies NBFC- ND- SI
Infrastructure Finance Companies Residuary NBFC (RNBFC)

• Similar norms applied except CRR, cap on exposure capital market, financing
M&As, etc.
• Unlike customers of banks, NBFC customers not allowed deposit insurance
Source: www.rbi.org.in (CC.No. 86/ 03.02.089 /2006-07)
 Company History

Source: Company Web Site

 Company Profile & Business

 Erstwhile called Bajaj Auto Finance Ltd. (BAFL), changed name because
portfolio widened

 Credit Portfolio:
 Two Wheeler Loan (under the name of BAFL)
 Consumer Durable Loan
 Small Business Loan
 Personal Loan
 Loan Against Property
 Loan Against Securities Construction Equipment Finance

Source: Company Web Site

 Company Performance
2009-10 2008-09 2007-08 2006-07 2005-06
Deployment 45,851 24,509 30,363 26,313 19,545
Operating Income 9,100 5,947
Total Income 9,161 5,993
Interest and Finance 2,017 1,643
Charges
PAT 893 339
ROE (%) 7.75 3.11
RoA (%) 2.05 1.31
EPS (`) 24.43 9.27
DPR (%) 24.64 21.54
Growth Rate (%) 5.84 2.44
CAR (%) 26

Figures in ` mn unless specified otherwise

 Company Performance
Loan Book Analysis:
• High credit growth: 87% increase yoy
• Robust auto demand (75%)
• Rising demand for home loans (266%)
• SMEs, MSMEs (71%)
• Cautious Retail lending (-54%)

16000
Two and Three % Securitized Retail Asset
14000 Wheelers Pools
100
12000 Consumer Durables Mortgage and Other
80 Secured Assets
10000

8000
Small Business Loans 60 Small Business Loans
and Personal Loan and Personal Loan
6000 Cross- Sell Cross- Sell
40
Mortgage and Other Consumer Durables
4000 Secured Assets
20
2000
Securitized Retail Asset Two and Three
`mn Pools 0 Wheelers
0
2009-10 2008-09
2009-10 2008-09
Source: Company Web Site
 Company Performance
 Deposits’ Details:

2009-10 2008-09 2007-08 2006-07 2005-06 2004-05

Tenor (months) 36
No. of Depositors 794 128
Amount of FDs (` mn) 24.48 2.2
NIM (%) 4.35 0.62

Source: Company Web Site

 Performance on the Street
% Shareholding
 Good performance due to robust
industrial activity causing high Promoter & Promoter
Group
5% 1%
credit demand Resident Individuals
18%
Domestic Cos.
8% 50%

 Scrip has outperformed BSE 6% FIs/Banks/ MFs

12%
Sensex over past 1 year FIIs

Foreign Corp. Bodies

 Share has gained 26% since NRIs

January 2010

Source: Company Web Site and www.bseindia.com

Competition

 Competition:

Company Market Cap. Income PAT Net NPAs

(`bn) (`bn) (`mn)
Manappuram 50.25 4.76 1,120
Bajaj Finserv Lending 28.34 9.11 893
Cholamandalam 18.81 9.26 154
M&M Financial Services (Tractors) 60.75 15.30 3,427
Shriram Transport Finance (Comm. 173.64 44.39 8,731
Vehicles)
Risk Management

 Associated Risks:
 Credit Risk
 Market Risk
 Operational Risk

 Increased investments in Credit Analytics, Credit Bureau and technology for

upgradation

 ALCO set up in line with RBI’s recommendations to tackle liquidity issues

 Multi Layered Audit Structure:

 Internal Audit Deptt. (IAD): Checks compliance with all laid down norms
 Audit Committee of BoD: Supervises and reviews working of IAD
 WIND ENERGY BUSINESS

 Installed Capacity: 65 MW Plants

Wind Energy
138 windmills in Maharashtra with installed capacity of 65.2 MW
Started to reduce dependence on conventional sources
Investments in non conventional energy is totally tax free
Market leader: Suzlon
At 3,100 MW, the industry is growing at 30% annually