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Sanjiv's Bajaj

Anand Adhikari     June 25, 2008

To say that the past year has been one of definitive change for Sanjiv Bajaj would be an understatement. Consider: The 38-year-old younger son of Rahul Bajaj who had studied mechanical engineering and manufacturing, headed straight for the shop floor of the twowheeler major with the notion that he would be spending most of his life amidst scooters and motorcycles. And, till recently, that pretty much was how life was—as a Director at Bajaj Auto, Sanjiv headed the finance function and later took on the mandate of growing the international business. At the sprawling headquarters of Bajaj Auto in Akurdi in Pune, life was unhurried. Home was just a few metres away from office, the likes of Bruce Springsteen and Pink Floyd were constant companions, and time hummed along smoothly, pretty much like an engine on the best-selling motorcycle, Bajaj Pulsar.

 
Sanjiv Bajaj

 On his own now

It’s been quite a journey for the younger Bajaj.

Name: Sanjiv Bajaj

Age: 38 years

Job at hand: Managing Director, Bajaj FinServ

Qualifications: BE (Mechanical) from University of Pune, M.Sc. (Manufacturing Systems) from the University of Warwick, UK and MBA from Harvard Business School

Path at bajaj auto: Worked as GM (Corporate Finance) from August 1997 to March 2001. Was elevated to VP (Finance) and subsequently in April 2004, promoted as Executive Director; five months later joined the board of Bajaj Auto

Expertise: Was in charge of finance, investment, costing, audit, legal and IT-related functions at Bajaj Auto. Also looked after Bajaj Auto’s international business

Biggest challenge: To make Bajaj a financial services powerhouse with leadership in each business

After-office: Yoga & gym

Marital status: Married with two kids

Most likely to be heard saying: “India is extremely under-leveraged and under-penetrated when it comes to lending, investment and protection (insurance)”

Then, one fine day last year life took a turn. A chance meeting with yoga guru Baba Ramdev introduced Sanjiv to the world of his inner body. Result? Every morning he practices breathing exercises that help him control the bio-energy residing in his body. “I find much more energy in me at the end of the day than what I used to have before,” beams Sanjiv.

The lanky, one-time national-level basketball player has no time for the game now. Reason? You only end up hurting yourself. “It’s a rough game. You go out of action for days if you get hurt. As you get older you cannot keep going through that.” The effect of yoga—along with visits to the gym—is evident. Today, Sanjiv is lean and trim, having shed the extra kilos he had gained in the recent years.

The new phase isn’t restricted just to Sanjiv’s lifestyle. At a professional level too, there have been some big changes; the biggest of them is a move out of the backroom of Bajaj Auto onto the centre stage of a completely different portfolio of businesses. When Bajaj Auto was finally demerged into three separate companies three months ago, Sanjiv took control of the fastgrowing financial services pie (elder brother Rajiv runs the automobiles company). The transition from manufacturing to financial services has been remarkably seamless for Sanjiv (perhaps helped by the fact that he was in charge of the finance function at Bajaj Auto). So, these days he’s as comfortable and passionate talking about—in his familiar baritone voice—insurance under-penetration and the relative under-leverage of Indians as he was talking about taking Bajaj’s motorbikes into South East Asian markets and China a few years ago. “There is a huge opportunity at our doorstep,” says Sanjiv. As Managing Director of Bajaj FinServ Limited, the holding company for the financial services business, Sanjiv sits on a cash pile of Rs 700 crore. “We also have the option to draw money from Bajaj Holdings & Investment or to raise debt in Bajaj FinServ,” says Kevin D’sa, President at Bajaj FinServ.

Whilst Bajaj FinServ as a standalone company (with a wind power business, amongst others) is making profits, the consolidated operation, including insurance, is in the red; Sanjiv hopes to enter the black in the next 2-4 years. The losses on the books are hardly a concern for Sanjiv, as his focus today is squarely on growth. Sanjiv’s goal is simple. And ambitious. He wants to position Bajaj FinServ as a financial powerhouse, on the lines of an ICICI or an HDFC. The three pillars of this powerhouse are: Investment, Lending, and Protection.

Plugging the gap

The missing link today is clearly Investment. Bajaj has a presence in lending via Bajaj Finance, which finances consumer durables and personal computers. The protection part is taken care of via the life insurance and general insurance companies, both joint ventures with Allianz of Germany. Sanjiv now wants to plug the gap on the investment front. The success of the Bajaj-Allianz combo in mutual fund-styled ‘unit-linked insurance products’ has encouraged Sanjiv to look at asset management. He is talking to a few players (Allianz is one of them). “We are also looking at going it alone,” reveals the Managing Director. Sanjiv reckons he can make up for the late-mover disadvantage with the help of two intrinsic strengths of the Bajaj group: One, the widespread distributor network of the insurance subsidiaries; and two, the household brand that is Bajaj.

Ranjit Gupta, President (Insurance), Bajaj FinServ
Ranjit Gupta
Once asset management is flagged off, the next logical business line is wealth management, says Sanjiv. He’s also building a small team at Bajaj FinServ to kick-start a private equity operation. Sanjiv promises to start up many more businesses. “India has huge opportunities. We will look at the next set of opportunities that has not attracted the big boys.” If Sanjiv has spotted those new avenues, he obviously isn’t telling. What he is in a mood to talk about are his plans to scale up the existing operations. In consumer loans, for instance, the Managing Director is keen to broad-base the product basket. It’s no secret that the 20-year-old Bajaj Finance is too narrowly focussed on a few segments.

 
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Sanjiv wants Bajaj Finance to make it big in personal loans, loans against shares, lending to small & medium enterprises and loans against property. It’s this itch to scale up that explains the arrival of Rajiv Jain, who has had stints at GE Capital and AIG, at Bajaj Finance nine months ago. “So far we have dealt with the mass end of the market; now we are beginning to straddle higher income groups,” says Jain, CEO, Bajaj Finance. There are other professionals like Deepak Reddy from American Express, Vivek Likhite (Tata Motor Finance), Anil Dhankher (Citi) and Devang Mody (AIG) who recently joined Bajaj Finance. Of the four existing companies (two insurance, one consumer finance, and the holding company), Bajaj Finance and Bajaj FinServ are listed on the stock exchanges (the latter got listed last month). Sanjiv isn’t in favour of merging any of these companies into each other, and sees merit in the existing structure.

The current structure allows for flexibility for each of the companies. “We have options to raise capital or get a partner for all of them,” says Sanjiv. Today Bajaj Finance is well capitalised at Rs 1,086 crore to do more lending. On the protection side, the two seven-year-old insurance subsidiaries are well-placed amongst the top two players in their respective segments. The life subsidiary was the first private sector company to show a profit—in 2006-07—although it has once again entered the red.

 …and there are many more in the works.

New businesses and their status

AMC: Talks on with 2-3 players, including insurance partner Allianz. Partner expected to be finalised in 3-4 months

Private equity: Expertise in managing a huge treasury has given handsome returns. This business is a logical next step as financial services gets a focussed attention

Wealth management: Plans to get into wealth management either at Bajaj FinServ level or at the proposed AMC. This business will be launched once the AMC gets stabilised

Bank: A foray into banking figures in the overall plan, but that will happen only if regulations allow and if there is an opportunity and synergy

(Source: BT Research)

The general insurance subsidiary is operating in a new environment of de-tariffing, and this calls for a few strategic shifts. “We are going mostly retail in non-life business in the medium term as the corporate business is not profitable post de-tariffing,” explains Ranjit Gupta, President (Insurance), Bajaj FinServ.

Rajiv Jain, CEO, Bajaj Finance
Rajiv Jain
The corporate portfolio currently accounts for a quarter of the non-life business. The competition, for its part, is intensifying. In the current fiscal, for instance, Anil Ambani’s general insurance subsidiary is running neck and neck with Bajaj Allianz General Insurance. It didn’t help Bajaj’s cause when Sam Ghosh, who built the general and life insurance business of Bajaj Allianz for almost six years, jumped ship to join Reliance Capital as CEO. Life insurance, too, presents challenges, and they’re not just competitive. The biggest challenge for Sanjiv is to maintain a good run during a slowdown and stock market volatility.

A broader portfolio of financial services could be one way to hedge risks during a slowdown. Sanjiv sees a huge opportunity in distribution, especially selling third-party mutual funds, insurance and consumer loans. In fact, the Bajajs do have a 50:50 JV with Allianz for distribution but that is restricted to insurance-related products.

 
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Kevin Dísa, President, Bajaj FinServ
Kevin Dísa
Sanjiv is toying with the idea of floating a wholly-owned distribution company. “It will straddle a host of products. We will distribute loans, investment and insurance, equity, mutual funds, commodities etc.,” says Sanjiv, who might even opt for an acquisition (not just for distribution but also for consumer lending). If Sanjiv is in a hurry to build a bouquet of financial services, that may also have something to do with the direction in which the insurance subsidiaries could be headed. If regulation permits Allianz to go up to 74 per cent in life and 50 per cent in general, the German giant would want to slip into control.

Bajaj would then be relegated to playing second fiddle. By the time that happens, Sanjiv would like Bajaj FinServ to be a well-entrenched player with size and scale on the financial services landscape. With a presence in an assortment of sectors. And in that quest for operational breadth and depth, he doesn’t rule out an entry into banking. “It’s not a closed subject. At some stage, it makes sense for a large NBFC to convert into a bank,” says Sanjiv. Interestingly, an investment arm of the group holds a 3.41 per cent stake in ICICI Bank that’s valued at a little over Rs 3,000 crore.

Shekhar Bajaj, CMD, Bajaj Electricals
Shekhar Bajaj
For the time being, all eyes are on every move Sanjiv makes. Inevitably, comparisons are made with elder brother Rajiv, right from market cap (where Sanjiv is ahead) to style of management. “People will compare. I believe both businesses have huge opportunities over the next 5-10 years. Which one does better is immaterial as long as both do well,” quips Sanjiv. Uncle Shekhar Bajaj, CMD, Bajaj Electricals, who is also on the board of Bajaj Auto, has seen both boys from close quarters. “Rajiv is a risktaker, while Sanjiv is more conservative,” he feels. Clearly, in an uncertain environment (in which interest rates are rising and equities are under pressure) and in a highlycompetitive scenario, Sanjiv has got to find that right balance of risk and caution.


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