Bajaj Finance Limited

(thecroc) #452

Market becomes fearful sometimes, and some perpetually fearful people make huge gains as they had been sitting on cash all along. People having cash , and people with fear don’t make the entire market.
I say 40 PE for 40% growth is fine with me.

(KunalKothari) #453

I wonder what the post-default recovery practices (and their effectiveness) are of Bajaj Finance, especially with respect to consumer durable loans & unsecured personal loans. Anybody have any idea?
Disc: Invested

(ranvir dehal) #454

Just a weird question…
RBI…sometime back had taken out a regulation banning zero percent EMI to credit card holders.
Posting a few links -

Are these in any way, a risk to the business model of Bajaj Finance.

It will be great if someone can throw some light on it.
Disc; invested in Bajaj Finance. Substantial part of my portfolio.

Ranvir Dehal

(ranvir dehal) #455

Although there are no regulations at present vis a vis the kind of lending that Bajaj Finance is doing, but just a thought crossed my mind as I was surfing through the net and saw these articles.

Maybe some industry insiders can throw some light on these.

Sorry, if I am behaving like a dumbo.

(Ankchandak) #456

@ranvir Let me try to explain how the no cost emi works now and how it use to work earlier.

Before RBI banned zero interest EMI
The bill amount use to be the rate at which product was sold. The bank / card issuers were not charging any interests

After RBI banned zero interest emis
The seller calculates the interest for the emis customer is opting. It gives upfront discount of the interest amount to customer. The bill amount will be selling price - interest as discount
Then the interest is charge on the bill amount.
Effectively user ends up paying almost the same amount whether he choose emi or opt to buy on cash

(Ankchandak) #457

This is the screenshot of the order which I made yesterday on flipkart with six month emi option.
Here you would see that amount mentioned also includes a discount of rs 697 on no cost emi.
That is the same amount I would eventually pay as interest for my six month emis.
If I would not have opted for emis I would not have got this discount. And I would have paid the full amount now.

(Ankchandak) #458

(Ankchandak) #459

The threat here to Bajaj finance here is now no cost emi is offered by most of the banks. And this space is becoming crowded
Earlier the case was that no cost emi was available on credit cards only and there are very few credit card holders compared to the targeted audiences. But now even on debit cards no cost emi is being offered.

Let see how Bajaj finance fares against competition. Although competition will increase but I believe the opportunity size is very huge and Bajaj finance has first mover advantage here. The volume game can compensate even they loose market share.

(HR) #460

I recently wanted to use the EMI card that I hold. I added the card. But, didn’t make the transaction since it involves sending a message to some number indicating card usage. Not sure if this happens instantly or if they reject after few days. Then, they will approve or reject as per the limit. So, it’s a hassle to use the EMI card.

(phreak) #461

It’s not just banks. Stumbled upon this business called zest money today.

Looks to have quite a following although am not sure how big they are. They seem to be offering EMIs on all major online shopping portals like Amazon, Flipkart or Jabong.

Looks to be pretty straight-forward in terms of usage.


Looks to have raised money from PayU and Xiaomi

These PE-backed businesses can be quite a pain in terms of fragmenting the market which is what has happened in the diagnostic businesses. Even if these may never end up big, they can causing tremendous pricing pressure and grab market share as they are ready to burn cash for extended periods of time.

(Ankchandak) #462

Thanks for pointing it out .
Yes , I have missed this part.
Now that even you get credit from the e-commerce players .
I have also got some credit on both amazon and flipkart.

Players with PE Money burn lot of cash by offering lucrative offers in the name of user acquisition.

(thecroc) #463

I would say this space is crowded, and why not - debt is a basic need; one needs money now while their comfort/capability to pay it may arrive later. Distribution , and technological disruption in distribution is not a big deal I feel - what matters is the collection, and that is to be seen over next ten years. As Rajeev Jain has said, until last EMI is collected on a loan you don’t make any profit, so the business is almost entirely about collection.

(divyansh ) #464

But also important is to understand that is this the main growth driver for bajaj finance over a 5 to 10 year horizon. Offline sales are equally robust and this trend of buying now and paying later is a thing of this millennial generation. This will only grow stronger with time. Also I assume that with new tighter lending norms for nbfc and rising interest rate cycle will put lot of small and medium nbfc out of considerable business. The bigger and the first mover will again get incremental business cause of the same.
Disc: bajaj finance is my core holding


As per the latest interview to CNBC by Head of Vijay Sales , there are 4 fintech lenders in consumer durable space this year compared to one i.e. Bajaj Fin last year.

(divyansh ) #466

Amazon and flipkart claiming they surpassed last five days sale in 36 hours this year. Record sales in smartphones and equally robust sales in large appliances.

(Jose) #467

Where does income come from for a company when it offers 0 interest EMIs?Is it MDR when u use credit cards or is their some commission arrangement b/w the seller and the bajaj finance, in this case.

(vinay ambekar) #468

this would give some idea…

(vinay ambekar) #469

is this one more competition for bajaj fin? flipkart/amazon offering loans (indirect) themselves. now banks. who can offer this in the non-online retail space. banks have direct history of the account performance of their own customers making it easy for them to analyse the credit. if every debit/credit card bank does this, what is left for bajaj fin? like nbfc who cannot compete with bbanks for salaried employees, does this mean that bajaj fin will be relegated to those customers with inadequate credit history or non-uniform income streams only?

(Abhishek Basumallick) #470

yes. In my opinion, Bajaj Fin does not have any competitive advantage over banks in the online world. In fact, I would argue, that it may be at a slight disadvantage. A customer with a banking relationship, if he gets the same deal, may well choose it over another entity like BFL, just for operational simplicity.

However, online is a very small percentage of revenue source for BFL. So, there will be no major impact immediately. Longer term, as online sales keep growing, BFL’s moat will likely decrease in consumer loans.

(Batterinram) #471

For offline sales presence at the point of sale is important other competitors don’t have BAF’s reach in that business. I see strong competition from HDB Financial in that space but others might not be able to catch up. BAF;s opex to AUM for CD loans is like 4% far lower than its competitors so they are able to make profits even if the loan size is just Rs 5000. While its true that they don’t have any competitive advantage in the online space they are aggressively expanding their credit card business in partnership with RBL They have already issued around a million cards which currently has an average monthly spend on Rs 12000. RBL has a target of issuing 4 million cards by FY21 most of this will be in partnership with Bajaj I assume. Credit Card penetration in India is very low (2.3% vs 70% for Brazi) and spends are very low too so there is significant scope for growth. So the EMI card busines that BAF loses by way of increasing online sales can be made up from the credit card business not sure to what extent. The thing is BAF is now a very diversified business and is not dependent on just CD loans for growth.