The Risk Manager

Rajeev Jain has the unique ability to think like a customer and come up with marketable products.

Rajeev Jain, MD, Bajaj Finance (Photograph by Rachit Goswami) Rajeev Jain, MD, Bajaj Finance (Photograph by Rachit Goswami)

Clarity about clients, customers and the company differentiates Rajeev Jain, Managing Director of Bajaj Finance (BFL), India's most valuable non-banking finance company (NBFC), from others.

In his words, the company is in the business of giving money to people who don't want money. Jain's team finds customers with the help of business intelligence and data analytics; offers tailor-made loans; and cross-sells products while reaching out to new geographies.

The 48-year-old Jain, who joined BFL as the CEO during its inception in 2008, has built the Bajaj group's financial services empire along with Sanjiv Bajaj, the younger son of Bajaj group Chairman Rahul Bajaj, and former CEO of Citibank India, Nanoo Pamnani. "We are highly entrepreneurial on one side and institutional on the other. The entrepreneurial spirit enables us to think quickly, while the institutional culture ensures that we research, assess and create a business plan," says Jain.

Rahul Bajaj rates him as an "outstanding professional". The praise stems from Jain being vocal and expressive about ideas and his ability to think like a customer and thus come up with marketable products.

Pamnani remembers that it was in the Sea Lounge of the Taj Mahal Palace in Mumbai that he first met Jain and spent about two hours talking with him before giving the job offer. "He is a smart business person with great execution skills. His ability to think broadly is outstanding," Pamnani says.

Jain's core strength is to be able to sense the ground reality and build a business from scratch. Jain calls BFL a collective entrepreneurship. "Between the three of us, we always ended up making the right decisions," says Jain, but adds that they are only at the opening page of the success story. "The bigger opportunity is going to come in the next 8-10 years," he adds.

In the 10-11 years of its journey, BFL has grown from two lines of business to about 27 lines. The recently started home finance business registered a profit of Rs  22.31 crore on a revenue of Rs  147.74 crore in the last financial year.

BFL has financed 9.9 million purchases of consumer durables in the last financial year against 7.2 million the year before - a growth rate of 38 per cent. Its Existing Member Identification card (12.9 million in operation) enables customers to get instant finance after the first purchase.

BFL's revenue has risen 33 per cent to Rs  13,329 crore in the last financial year, while profit increased 44 per cent to Rs  2,647 crore. The assets under management (AUM) had risen 40 per cent in the last financial year and it stood at Rs  1,09,930 crore on consolidated basis as on December 2018. The NBFC's consolidated borrowings stood at Rs  92,889 crore with a mix of 35:53:12 between banks, money markets and deposits. The market valuation of BFL has increased by 150 per cent to Rs  1.5 lakh crore in the last two years.

Next Big Thing

"Lending is not an issue. But until the customer pays the last instalment, the lender will not make money. So we are in the business of managing risk," explains Jain. "We want to do business only with mass affluent customers who have a minimum of Rs  6 lakh annual income," he adds. In rural markets, BFL deals with customers with annual income above Rs  3.6 lakh.

"Retail loans should not have any papers. Last year, we launched the Bajaj Finserv Wallet app for EMI card customers. Customers can get a micro credit of Rs  5,000-15,000 with click of two buttons,," says Jain. His target is to reach out to the customer with preapproved loans, rather than the customer reaching out to the company.

Banks and financial services companies traditionally function in the B2C space. But Bajaj is in B2B2C - business to business to customer. "First, we reach out to manufacturing companies such as LG and Samsung and negotiate a deal. They offer us a margin for the additional sales that we bring in. Usually, they pay this margin from their marketing spend. This helps us offer consumer durables loans of zero per cent interest to customers," says Jain.

On a wider scale, the strategy at Bajaj Finance is to acquire customers through one product and then use technology and analytics to create propensity models to cross-sell multiple products to them. "We track closely so that no abuse takes place due to cross-marketing," says Jain.

Jain expects the next big opportunity to come in 2020/21, when the country's per capita GDP is projected to cross $2,000. Globally, this is an inflection point for retail lending and the cycle tends to continue for six-seven years.

Jain says their lower capital cost helps them register high return on equity. "Banks have social obligations which I don't have. I don't have to do 40 per cent priority sector lending. I don't have to reserve CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio). Our rural business is not because of social obligation unlike for the banks," he says.

Earlier, Bajaj's 80 per cent capital came from banks. This is down to 35 per cent. "We are committed to grow our balance sheet by 25 per cent and net income by 20 per cent. We want to double balance sheet and profit in three-and-a-half years," says Jain.

The product coverage is largely complete, but distribution needs more. BFL plans to expand to 2,500 cities. A challenge before Jain is that whatever BFL puts out in the market is copied by others. "You can't enjoy the fruit of your work for a long time. How do you reinvent every day? You need to disrupt the market while identifying the gaps in the product portfolio."

A trap that Jain wants to avoid is becoming slow. "When companies become large, they become slow, tolerate mediocrity, stop challenging themselves and become bureaucratic. The challenge is not to fall into that trap."