I need members input
Bajaj Finance Ltd deals largely with unsecured loan (do not require you to pledge any collateral or find a guarantor). They lend money based on data analytics and past history of the borrowers. For the year ended March 2018, Bajaj Finance funded 702,000 purchases in e-commerce platforms compared to 167,000 in the previous year, a growth of 320%
However, considering stress in income (poor monsoon, weak business environment, people loosing jobs, etc) could impact borrowers’ payment capacity and lead to default. How they deal with default on unsecured loan as they don’t have collateral/guarantor from the borrowers?
Looking at monsoon deficit and listening some of the consumption focused industries’ can call - coming days might not good for investors / return from the market. Stretched valuation of all consumption focused companies and consumption focused NBFC/banks (where most of investors/MF hiding at current scenario) might start correcting as hope vanishes and reality starred at everyone’s eye…
Most of these e-commerce loans are to middle class people who typically do not default in India. Even poor people in India do not default unless they are mislead that their loans will get waived etc. I think this is the basic nature and it is actually Corporate and Rich who can afford to default in our country because they have good access to legal system. Middle and poor people have lot of social pressure in India to not be known as ‘defaulter’. Poor monsoon is not for the first time and even poor business environment etc…these are pretty regular things in my opinion. Every few years these are repeated. A good management knows how to survive in these phases and that is why they get high premium.
There are no guarantees in investing. Yes there is a risk of slowdown, which management is pro-actively taking action. But if the marquee names are at risk-can’t imagine about not so good names. If this monsoon is bad, next year it may be good. Again there is a reason, these companies are market leaders. I am very positive about these leaders. In a slow down, they may fare better, as others would be under water.
Aditya Puri, talking to a dealer of consumer durables, trying to convince him to switch to HDFC for consumer durable financing. Here is the link to the video
And a screen grab from the video. You can see ‘Bajaj Finserv 100% finance’ in the background.
The conversation goes like this:
Adtiya Puri: You have opened an account with us but you are not using it. Dealer: I have started using it. I have surrendered all POS machines from Axis, ICICI etc and using only HDFC. Adtiya Puri:: Ok. Now we will also finance all your sales, at 0% interest rate. Will you switch? Dealer: I am a Bajaj Finance dealer. They finance all my sales. They just ask for 3 things - PAN, aadhaar and front page of pass book. I enter these details in my computer and within 5 seconds they either approve or reject a loan. Can you do it?
Aditya Puri points to his employees who are accompanying him, implying “this is what we have to do”.
Adtiya Puri: We will also start doing this next month. Same as Bajaj.
Last month we bought a washing machine. It was a LG showroom. There were 2 financing options at the showroom:
HDFC credit card 7% cashback and 0% interest rate financing
Bajaj 0% interest rate financing
I asked the salesperson about other NBFCs like Capital First, HDB Financial Services etc. He said that they work exclusively with Bajaj. That is because:
Bajaj approves/rejects a loan instantly, within 5 minutes. If approved, the money is in the account on the same day.
With NBFCs like Capital First, even if they approve the loan, their own due diligence takes upto 5 days. So money comes into the account after 5 days.
Some times even after 5 days they reject the loan. If this happens it is upto to dealer to recover the dues from the customer.
“Bajaj Finance ke saath koi magajhmaari nahi hota hain” (Mumbai people will understand this sentence )
I am not sure how Bajaj Finance does it, but they have absolutely nailed the consumer durable purchasing experience. The MD, Rajeev Jain, had talked about this happening 2 years back. At that time it seemed almost unbelievable.
I think they are stepping into the privacy issues very soon. I had bought one white goods 5-6 yrs back and decided not to take anything on instant loan since they keep bombarding with multiple calls every day and SMS, emails etc. What is shocking is that they got to know my home loan EMI from somewhere and now they send me a targeted SMS that they would reduce my EMI to xxx amount. I really hate these predatory messages when I have never asked any more financing ever. I don’t know if CIBIL is leaking these individual loan details to these NBFCs as well. They also send me my CIBIL score saying that there are some offers for folks having score above so and so… I don’t have anytime to make a formal complaint but will do so at some point of time. I think it is the CIBIL detail along with great backend analytics that makes them to accept or reject any application in less than 5 mins.
Very interesting video. Was it recorded by HDB or Bajaj finance?. Not sure whey they made it public. Also, the video is cut. Was Puri able to convince the dealer in the end?
That is fine as long as they call from authorised numbers. Despite being in no call registry they have started calling from unknown cell phones from individual bajaj finance agents. How would you deal with the same? The management would have been in jail if they have leaked these personal info to countless foot soldiers in a developed country. Ordinary folks hardly care and I also know some folks in my circle for not dealing with Bajaj fin for the precisely same reason. Sorry for off topic discussion here.
PSU banks have traditionally been the lenders to SMEs and MMEs. With the NPA crisis at PSUs, it is a good opportunity for the likes of HDFC Bank and Bajaj Finance to grab market share in this segment.
The MD had hinted at this in one of the conference calls.
Board of Directors, at its meeting held today 17-Sep-2019, inter alia, approved, subject to shareholders approval, raising of capital through a Qualified Institutions Placement (“QIP”) for an aggregate amount not exceeding ₹8,500 crore by issue of Equity Shares and/or Eligible Securities in accordance with the Securities and Exchange Board of India.
One of the promoters came out with a comment on weak performance in Q1 and the stock dropped 10%. The panicked promoters issued a statement that they were quoted out of context. The street was pleasantly surprised with the results which were better than ever before. Rajiv Jain in recent interviews has been talking of slow down but is surprised that it is not affecting their performance, except in the last 2 months. However they have issued caution notice to their agents, to avoid bottom 15% risky clients. A slowdown in Bajaj Finance is expected but if it shows up in the results before QIP, it will affect the QIP. Disclosure: Was earlier invested, but sold off before Q1 result.
Service tax dues of ₹1340 crores is under dispute out of which only 10 crore has been paid.
Auditor has noted that Impairment of financial
assets and provisions are management
estimates and could differ from actual.
ECL stage 3 loans can be renegotiated and
brought under ECL 1 or 2 provided
renegotiated principal and interest are being
repaid on time. 0.5% provision is made for
stage 1 loan, while provision is to the extent of
20% and 50% for stage 2 & 3 loans.
Major mutual fund shareholders regularly
purchase and sell shares.
Rajeev Jain sold the shares received by him
under ESOP immediately
Have some questions with Bajaj Finance (actually NBFCs in general). Couldn’t get it from the annual statement.
Noticed that for BFL, the Interest Income/AUM ratio is 17.6%. Given that auto loans, housing and zero cost EMIs are floated at substantially less than 12-13%, what type of loans are being given at more than 20%?
It’s kind of tough to believe people are taking loans at >20%
BFL declared that its customers equal to 3% of India’s population whereas only 6% of the population pays taxes. Do NBFCs in general give loans to people without tax history? Or has BFL captured 50% of the entire tax paying market
Is there any way a person with black income can show that to a company like BFL to show financial stability while getting a loan? What metrics does an NBFC track while giving loans?
It says 2 million credit cards have been issued. Is that a huge number or still small? Since I haven’t seen any person with it
I see a lot of people like Zomato delivery boys availing of consumer loans from Bajaj Finance. These people won’t be paying income tax. BFL has tied up with retailers like Vijay Sales in Mumbai who sell consumer durables on 0 per cent interest scheme which is very popular among people of all income groups.
)