Bajaj Finance has developed a new business framework and is working on upgrading its digital platform in a bid to more than double its customer base to 105 million over the next few years from a little over 44 million at present. The company will launch the new business and digital strategy by mid-2021 and hopes the initiative will increase the cross-selling of various financial products such as loans, insurance, mutual funds and cards.

At present around 54% of its customer base, or over 23 million customers contribute to the company’s cross-selling business, the company said in its investor presentation for the quarter-ended September 30, 2020.

The Company is in the middle of significantly strengthening its technology, data science, app design and content design teams. The Company is working towards delivering a transformed customer experience model for it 105 MM customers and prospects by June-July 21.

Bajaj Finance Ltd Investor Presentation 21, October 2020

According to the company’s earnings transcript, Rajeev Jain, managing director, Bajaj Finance said that the company has created a new framework for growth over the next 3 to 4 years, termed as “3-in-1″, through which customers can purchase a host of financial products in seamless and friction-less manner.”As we deliver 3-in-1 financial services, the share of fee [income] as a result of product and customers should grow. It will be lot more bought or pull rather than push. So I would be really, really excited about cross-sell frame and products per customer as 3-in-1 financial service will get delivered…as a result of the upgraded platform the cost of doing business will go down in the next few years,” he said.

Queries sent to Bajaj Finserv did not elicit a response. Bajaj Finserv Ltd is the holding company of Bajaj Finance Ltd, a non-bank financial company, Bajaj Housing Finance Ltd, a mortgage lender, Bajaj Allianz General Insuance Company Ltd and Bajaj Allianz Life Insuance Company Ltd.

Cross-sell risks and potential

The cross-selling potential differs from product-to-product in terms of risk, but due to the Covid-19 pandemic the capacity for the company to cross-sell products has waned. Jain says that they are willing to provide personal loans to 5 million customers out of the total 23 million cross-sell franchise, whereas before it was willing to finance personal loans to 11.2 million of these customers.

This is due to inconsistent credit bureau scores on customers as a result of many borrowers opting for the six-month loan moratorium which began in March this year, he said. Adding that as bureau data becomes available the company will run a “scrub” on these clients, to better gauge their customers’ credit quality and cross-sell potential.

According to an analyst with a brokerage, Bajaj Finance has a far superior digital platform compared to its competitors, and its digital strengths is comparable to that of HDFC Bank Ltd’s which is a leader in the banking industry.

“The company has been losing market share in the consumer durable lending segment due to aggressive moves by banks and credit card companies in the space, so it is obvious that the company is upgrading their platform. They have strong partnerships with retailers which would help in regaining this market share through special loan offers. But the cross-sell advantage and credit growth for the company would depend entirely on when economic bounces back,” the analyst said.

Financials snapshot

  • Total loan disbursements in September were at 62% of the previous year’s volumes
  • Total Income stood at Rs 6,423 crore (3% YoY growth)
  • Net Interest Income stood at Rs 4,165 crore (4% YoY growth)
  • Operating expenses stood at Rs 1,160 crore(down by 16% YoY)
  • Net Profit stood at Rs 965 crore (down by 36% YoY)
  • Booked 3.62 million new loans in June to September 2020 (down from 6.47 million in July to September 2019)
  • Loan losses and provisions rose to Rs 1,700 crore (up by 186% YoY)
  • Provisions on Stage 1 and 2 assets increased by to Rs 5,099 crore (up from Rs 3,729 crore in June 2020 and Rs 1,239 crore in September 2019)
  • Gross non-performing asset ratio stood at 1.03% (down from 1.40% in June 2020 and 1.61% in September 2019)

Downloads: Investor Presentation | Earnings Transcript | Financial Results