#NDTVProfitExclusive | Sanjiv Bajaj says the response to Bajaj Housing Finance has been overwhelming.
Watch him talk about this and more, in conversation with Tamanna Inamdar. #NDTVProfitLive
Watch him talk about this and more, in conversation with Tamanna Inamdar. #NDTVProfitLive
Category
📺
TVTranscript
00:00Finance and Bajaj Finance. The anchor book, of course, for Bajaj Housing Finance opens today
00:06and it's expected a number of marquee investors will come in. But the story of Bajaj Housing
00:11Finance is a larger one and of the group as well. In the last 20 years, Bajaj Finance has rewarded
00:17investors with 900x returns. To call this company a multi-bagger would be an understatement.
00:23The vision behind the group's expansion is also key. Chairman Sanjeev Bajaj has recently talked
00:28about how the group will be the financial life cycle partner to every Indian. To understand more
00:34on this, I'm speaking now with Sanjeev Bajaj. Mr. Bajaj, thank you so much for speaking with us
00:39here at the NDTV network. Great to have you on. At a time when, you know, the anchor book opens
00:46for the Bajaj Housing Finance IPO, we'll wait for those details to come in. But it's expected that
00:52a lot of marquee investors will come in and there's a lot of interest. Were you expecting
00:56this kind of a response? Tamanna, I must say that while we were expecting and hoping for a good
01:05response, we've been overwhelmed by the response. End of the day, this is still a seven-year-old
01:11company. It's not a Bajaj Finance. It's not a Bajaj FinSev. I remember early days of Bajaj FinSev
01:17and Bajaj Finance, where for the first four or five years, we were so below the radar. I don't
01:22think most investors even knew about us. And partly it is the capability and the success that
01:28the team and those companies have driven over the last decade and a half, which brings about
01:34this confidence for Bajaj Housing Finance for its upcoming IPO. Also places, as you can understand,
01:41the responsibility that the business must do well. It has done well in the last seven,
01:46eight years since we started doing housing in this company. And keeping in mind the huge
01:51opportunity that India offers us in the housing space and the promotion that is happening even
01:58at the government level, we are very confident on our ability to continue doing that.
02:02Yeah. Also, it's the first IPO in 30 years for the group. That makes it special as well. Just a bit
02:11about the timing, Mr. Bajaj. I mean, you've spoken a bit about this. There was RBI regulations in the
02:16backdrop as well. But why now? Why does it make sense now? For two broad reasons. One, as Bajaj
02:25Housing Finance has grown in the last seven years from a book that started at zero to 97,000 crore
02:33AUM at the end of the first quarter, the funding has come from its parent. It is 100% owned by
02:39Bajaj Finance. And hence, it has looked to Bajaj Finance for funding. And yes, it has done very well.
02:44But given the size of the book now and the continued growth opportunities that we see
02:50in an Indian market where housing is expected to grow between 12 and 14 percent year on year for
02:55the next many years, we found it was necessary to diversify those sources. In addition, we qualified
03:02as an upper layer NBFC as per RBI's regulation a couple of years ago. And there's a three-year
03:10window within which we need to list the company, which is, of course, since September 25. So, we
03:15do have a whole year ahead of us. But a combination of both these factors, diversifying our sources of
03:22capital at the same time, meeting RBI regulations, and not waiting till the last minute to do that.
03:28This is what has been the driver in this upcoming IPO.
03:34Is it also good timing considering the integration of HDFC and HDFC Bank? I mean,
03:42a lot of analysts talking about how there is a bit of gap in that market. Does that help?
03:46Does that work for you at all? Well, that clearly has been a coincidence.
03:50And in many ways, it has been a positive driver for us. HDFC was the gold standard when it was
03:59standalone in the housing space. And yeah, they may have had a couple of years here or there,
04:05but over multiple decades, they built a high-quality business. What that also meant was
04:11that they were always first in line when it came to borrowing high quality from the market,
04:17or when the market looked at them as a bellwether for the future. That has opened up now. And I would
04:25be immodest in saying that that is us. But definitely, I believe that opportunity is there,
04:32whether on borrowing, just the access to a much wider borrowing revenue that we get,
04:38because HDFC is now merged with the bank. And the opportunity to try and build, if not the best,
04:45one of the top housing finance companies of this country in the coming decade.
04:51How much time to the number one position, Mr. Bajaj? And yes, definitely not immodest. I mean,
04:59the growth trajectory in terms of, if you just look at the metrics of AUM,
05:03PAT, have been astonishing. So, how much time to that number one position? And is that growth
05:10also sustainable right now with the kind of scenario in the housing market for Bajaj
05:15housing finance? So, as I mentioned, 12% to 14% growth for the housing finance industry
05:24looks very possible for the coming years. Our own intent is, given that the AUM is still small
05:31compared to some of our peers, and the huge opportunity. We are, after all, a national
05:36player. We are not a regional player. And we are building this business across all segments
05:42of home loans, of developer financing, of lease rental, discounting. There's one thing that we've
05:50learned from Bajaj finance is building a diversified book allows you to diversify risk.
05:56It allows you to leverage on segments that are growing at a healthy pace,
06:00slow down where it's not. And we are here for the long run. So, we believe that we have the chance
06:06to outpace industry growth like we have been doing in the coming years as well. And yeah,
06:11when it comes to number one, we want to be number one in customer mind. We want to be number one
06:16customer choice. We want to make sure that our processes of engagement with the customer pre-sale
06:21through sales and service thereafter is as frictionless as possible. So, we are right now
06:27going all guns and making sure we are number one in excellence. And size will follow.
06:32Yeah. And when we talk about size, just to take that one point about the HDFC,
06:39you know, comment further. And this is what a lot of people who are watching this space
06:44closely are saying that could the group between Bajaj finance, Bajaj housing finance also become
06:50the next HDFC. Now, this is coming at a time when the whole private BFSI space is facing a lot of
06:57macro challenges, deposit growth, et cetera. Do you see those conditions right for the kind
07:05of growth that is being expected out of you? Very much so. And I myself said that we look
07:11up to HDFC. The context to that was it's easy, well, I can't say it's easy, but it's easier to
07:18build a business for five years, seven years, 10 years. But to do it decade after decade,
07:23to build excellence at a particular pace, which is higher than the sector, requires a lot of
07:30capabilities to come together from your business strategy to your ability to raise money, which
07:36means how you're rewarding both your debt holders and your equity holders to the quality of
07:40management, the ability to keep management with you motivated, aligned, and rewarded in the long
07:46term. This is what, as you can see, we've been doing at Bajaj finance. And in that context,
07:52it is that same excellence over multiple decades that we hope to do with Bajaj housing finance as
07:58well. Clearly, the big push for Bajaj housing finance is the management pedigree. And that's
08:03why the excitement on the street about it as well. But just a couple of more points on Bajaj
08:07housing finance before I get to the bigger picture, Mr. Bajaj. One is the kind of rise we've seen in
08:13the loan book. I already asked you if that's sustainable. You say yes, the opportunity is there.
08:17But what has been the strategy? Because it has been relatively quite rapid in the last
08:22seven years. What has been sort of the differentiator compared to other pairs?
08:30Well, the main differentiators, I must say the single main differentiator is the ability to
08:36borrow. With the Bajaj brand name, we've been able to provide confidence to the market that
08:42we are a good quality borrower. And if you see most of our peers, many of them run good quality
08:49businesses, but their size is getting capped because they are running out of borrowing options.
08:54And that's where both the capital that was available from Bajaj finance, as well as the
09:00ability to raise a large debt book from a large set of lenders to us for Bajaj housing finance
09:08to have the highest credit ratings, domestic credit ratings has been a tailwind as well.
09:14And of course, the other side of it is the responsibility to build a good quality
09:19asset book. And here the diversification strategy that I talked about earlier,
09:24where while 60% of our business by regulation has to be on loans, but the rest of it,
09:30how are we balancing to ensure that we're supporting developers, we are supporting
09:35other constituents, we're supporting people who are buying large office spaces and then want to do
09:42lease rental discounting. How do we continue to build those relationships with each of those
09:46constituents? Then we go from one project to another as a fair partner with them.
09:52And finally, with our end customers offering an experience, which at least our attempt is to be
10:00significantly better, blending what we can in the digital space. And we understand that
10:06when you're taking a home loan, the digital capabilities that we need to offer are different
10:12than when you're taking a loan for a mobile phone or a television, which is a 30 second approval
10:18and probably a purchase in less than an hour. Keeping those differences in mind, we still
10:24believe that our entire process, which is a combination of physical and digital in the case of
10:30home loans, is industry leading today, a lot of effort, a lot of technology, a lot of data and
10:36analytics has gone into that. And we continue to invest in this space. So combination of this,
10:42we hope, will position this company well in the future also. So the only few headwinds that I can
10:52see, perhaps one is keeping up the asset quality or the level of asset quality. And the other maybe
10:59is regulatory challenges. I mean, that's one that no one knows clearly what will happen. But let me
11:03come to the first point, because the asset quality has been a big thumbs up. How do you sustain that?
11:11By doing the same thing that we do year after year, that our asset quality has been
11:16built up with assets built over seven years. It's not a small amount, as you know, just shy of
11:22100,000 crores as of June 2024. Larger than almost every other player, other than one or two out in
11:30the market. So it is with a lot of granular focus on what's happening in micro markets,
11:39very active choice in which developers we work with, what is their quality,
11:43what are their leverage levels, at the same time with borrowers that come into the LRP space,
11:50and even our granular understanding of individual consumer risk, which comes from the pedigree of
11:56having worked for most of the team members, having worked over 10, 15 years in Bajaj Finance.
12:02So it's a combination of these things. But I must be also careful to say that this is not static.
12:07The situation changes every day on the ground, it can change depending on how the economy is doing,
12:12it can change with respect to regulations. So we see that as we are building our business,
12:19if there is any regulatory arbitrage, we avoid building a business on that, because we know those
12:24regulations can change. So voluntarily, we build a solid book, we keep a liquidity buffer ourselves
12:31for unforeseen short term events, so that we build a steady, stable, good quality book,
12:38and thereby then a good quality business. But as careful as you have been, and most large
12:45companies have been, regulatory risks still remain. And you know, we've seen them in the
12:51past as well, in various arenas, and some with Bajaj Finance as well. And then you've gone back
12:57to the drawing board and fix things which needed to be fixed. Just in the space right now, how
13:02big a concern is regulatory risk? You know, I would not call it regulatory risk.
13:08Regulatory risk is when overall regulations change, you get blindsided and don't have enough
13:14time to comply with it. So for example, in the last 10 years, regulations for NBFCs have got
13:20tighter and closer to banks, at least the large NBFCs, you could call that regulatory risk.
13:26In our case, as I said, we never looked at arbitraging on that, so it did not impact us,
13:30it may have impacted others. But yes, what we are seeing is that the regulator,
13:36their scrutiny on the large NBFCs, including HFCs has increased. We think this only strengthens
13:44the entire ecosystem. And we look at it proactively and positively. As we are growing,
13:50we're getting larger, we're getting more important to the entire lending ecosystem.
13:56There is a greater responsibility to ensure that we minimize any fallout of unintended
14:04lack of controls, missing controls as we are growing. That by itself should not be a reason
14:10for fault lines to appear. And while we don't live in a perfect world, we understand that,
14:16but we are very conscious to proactively ensure that our foundations get stronger and stronger
14:23as we are building out our business. Once in a while gaps do happen, the regulators
14:27through the inspection identifies that, asks us to correct it, and we go ahead and do that.
14:33But our intent is how can we keep proactively evaluating and improving ourselves so that
14:38theoretically we don't need the regulator to come and tell us that there are gaps.
14:43I think it has just made us much stronger as a set of businesses. And some of that pain
14:50that you have to endure as you're getting bigger and better, because none of us are perfect,
14:55so there will be gaps. But how quickly you address those gaps and how positively you
15:00take that is what differentiates the better companies from the rest.
15:03Yeah. Is one of those lessons also perhaps on credit screening and the quality of credit
15:09screening? And this is not just in context of Bajaj Housing Finance, of course,
15:13but even for smaller ticket size loans. That's been something that the industry has had to go
15:19back to. Even as more and more Indians want to buy the latest gadget in a few minutes without
15:26perhaps having the money to afford it right now. So there will be different types of lenders who
15:33will use different strategies to build their business. And some of those strategies are
15:38higher risk, higher return strategies. Some of those strategies will use different surrogates
15:43for income. And each one has to see that as long as it's working for them, you're building a good
15:49quality business and that's fine. Otherwise, you have to fine tune your strategy. For us,
15:54the large number of customers we deal with, the access that we have to their information with
16:00their own consent, this allows us at a very granular level for an individual customer to
16:06assess their individual risk. On that basis, we take our credit calls, we decide what ticket size
16:14for a particular loan, what's an overall level of exposure because a large number of our customers
16:19have multiple loans from us. We also monitor what are their loans in the market to the credit
16:24bureaus, whatever information is by regulation allowed to be shared. And by doing this at a
16:31granular level, it has helped us so far look out when we saw, for example, five quarters ago in
16:38Bajaj Finance, we saw that small ticket unsecured lending that business in the market was showing
16:45little higher delinquencies and we slowed down our exposure to that segment. So the ability to
16:51be able to do that, and because we run a large diversified book, the flexibility that we have to
16:57do that, at least in our case, helps us with keeping our quality of business as good as the
17:04growth and top line. Just absolutely last question, Mr. Bajaj, and the reason I wanted
17:09to hear your view on this is because right now we have the conversation about a rural recovery
17:14and we're seeing this in different segments that we talk to every day and in different
17:19consumption segments. From the credit point of view, are you seeing those signs of rural recovery?
17:26We are clearly seeing in the last two quarters, better rural demand and rural quality again,
17:33other than on the small ticket personal loans, had been reasonably steady even in the last
17:39two years. Demand had slowed down a little bit and we're seeing a recovery on that. A small
17:45recovery at this stage. Even when I talk to people in the FMCG space, I'm hearing the same thing
17:51from them. We're very hopeful that with the current range, which by and large overall has
17:57been quite positive, that this should cut. Okay. Thank you so much for speaking with us,
18:02Sanjeev Bajaj there talking about Bajaj Housing Finance. We'll wait and see. This is definitely
18:09one of the anticipated IPOs this season in a year where you have pretty big IPOs hitting the market.
18:15Thank you so much once again for speaking with us.