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.
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.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.
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.
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.
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.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.