Bajaj Finance Limited: history, ownership, mission, how it works & makes money

A Brief History of Bajaj Finance Limited

Bajaj Finance Limited was established in 1987 as the financial services arm of the Bajaj Group, one of India's most diversified industrial conglomerates. The company initially focused on providing consumer finance to customers purchasing two-wheelers and later expanded its portfolio to encompass a broader range of financial products.

Over the years, Bajaj Finance has evolved into one of the leading non-banking financial companies (NBFCs) in India. As of March 2023, it recorded a robust total assets value of approximately ₹2.07 trillion. The company has developed various segments, including consumer finance, SME financing, and commercial lending.

In 2016, Bajaj Finance launched its digital platform, enhancing its reach and accessibility. Through this platform, the company provided quick loans and other financial services, contributing to a significant increase in its customer base. As of September 2023, Bajaj Finance registered over 60 million customers.

The firm has consistently reported strong financial performance. In the fiscal year ending March 2023, Bajaj Finance posted a net profit of approximately ₹8,417 crore, representing a year-on-year growth of 30%. This growth was driven largely by strong loan demand and efficient cost management.

In 2021, Bajaj Finance received the prestigious “Best NBFC” award from Business Today, highlighting its effective business model and customer-centric approach. Furthermore, the company has been listed among the Fortune India 500 companies, showcasing its significance in the Indian financial sector.

As of October 2023, Bajaj Finance continues to innovate within the fintech space. The company has actively invested in technology to enhance customer experience and streamline operations. For instance, it has employed artificial intelligence (AI) and machine learning (ML) to improve credit scoring and risk assessment processes.

Moreover, Bajaj Finance has embarked on sustainability initiatives aimed at promoting financial literacy and responsible lending. The firm aims to reduce its carbon footprint and implement practices that support environmental sustainability, aligning its operations with global standards.

With a focus on continuing growth, Bajaj Finance plans to expand its product offerings further. This includes diversification into new financial products while leveraging technology to reach underserved markets. The company positions itself to capitalize on the rapid digital transformation occurring within India's financial services landscape.

A Who Owns Bajaj Finance Limited

Bajaj Finance Limited, one of India’s leading non-banking financial companies, is partly owned by prominent entities and individuals. The company is part of the Bajaj Group and has evolved into a significant player in the lending and financial services sector.

As of the latest data available from September 2023, the ownership structure of Bajaj Finance Limited is as follows:

The major shareholder, Bajaj Finserv Limited, holds a commanding stake in Bajaj Finance, which reflects the company's strong alignment under the Bajaj Group umbrella.

In terms of institutional ownership, as of the same date, mutual funds have a substantial presence, owning approximately 14.2% of the shares in Bajaj Finance. Additionally, foreign institutional investors have also shown confidence in Bajaj Finance, with ownership nearing 25.1%.

Furthermore, the company's performance has been robust, with a market capitalization exceeding ₹4.5 trillion (approximately $54 billion) as of September 2023. The company's earnings for the quarter ended June 30, 2023, showcased a net profit of ₹2,550 crore, marking a significant growth of 32% year-over-year. This growth indicates strong underlying demand for its financial products and services.

With a diversified portfolio spanning personal loans, consumer durable loans, and commercial loans, Bajaj Finance Limited continues to expand its market share in India’s rapidly growing financial services sector.

Bajaj Finance Limited Mission Statement

Bajaj Finance Limited aims to be the most customer-centric financial services company in India. Its mission is founded on the principles of providing accessible financial solutions through innovation, technology, and customer satisfaction. The company focuses on expanding its product offerings, enhancing customer experiences, and leveraging technology to deliver tailored financial services.

As of FY 2022-2023, Bajaj Finance reported a consolidated total income of ₹43,203 crore, an increase from ₹36,284 crore in FY 2021-2022. This growth reflects their commitment to customer-centric offerings and expansion of financial services.

The company operates across various segments, including consumer finance, SME (Small and Medium Enterprises) finance, commercial lending, and wealth management. Bajaj Finance’s mission emphasizes the importance of innovation in these segments, aiming for higher penetration in underbanked and underserved markets. For instance, as of Q2 FY 2023, Bajaj Finance's customer base has surpassed 60 million, indicating substantial growth in market outreach.

Bajaj Finance continues its focus on enhancing financial inclusivity. The company’s digital strategy is pivotal, with over 82% of loan applications processed online, which underscores its commitment to leveraging technology to streamline services. This focus has led to a significant enhancement in service delivery and customer engagement, aligning with its mission statement.

Furthermore, Bajaj Finance's approach to sustainable finance is evident in its goal to achieve carbon neutrality by 2030. The mission embraces social responsibility by catering to the needs of diverse customer segments while supporting the environment, indicative of a broader commitment beyond financial performance.

In summary, the mission statement of Bajaj Finance Limited revolves around customer-centric financial solutions, innovation, technology, and sustainability, driving its strategic goals and operational excellence. The company's impressive growth metrics and strategic initiatives demonstrate its alignment with these core values.

How Bajaj Finance Limited Works

Bajaj Finance Limited operates as a non-banking financial company (NBFC) in India, primarily involved in consumer finance, SME finance, and commercial lending. Founded in 1987, it has established a robust presence in the financial services sector.

The company offers a diverse range of products, including personal loans, home loans, credit cards, and business loans. In the fiscal year 2022-2023, Bajaj Finance reported a net profit of ₹8,738 crore, reflecting a growth of 30% year-on-year.

• Consumer Financing: Bajaj Finance provides personal loans, which can be used for various purposes. The average loan amount in this segment is around ₹1.5 lakh.
• SME Financing: The company offers tailored financial solutions for small and medium enterprises. The SME loan book stood at ₹27,000 crore as of March 2023.
• Commercial Lending: Bajaj Finance also engages in financing commercial activities, contributing significantly to its revenue stream.

Bajaj Finance's revenue model is primarily driven by interest income from loans and fees from various financial products. The overall assets under management (AUM) reached approximately ₹2.5 lakh crore as of the end of Q1 2023.

The company employs a diversified distribution network, utilizing both offline and digital channels. As of March 2023, Bajaj Finance has over 2,50,000 active distributors and countless partnerships with merchants and e-commerce platforms.

Risk management is a critical aspect of Bajaj Finance's operations. The company has implemented stringent credit assessment measures which resulted in a gross non-performing assets (NPA) ratio of 1.7% as of Q1 2023, an improvement from 3.6% in March 2021.

• Digital Transformation: The company's investment in technology has enhanced customer experience and operational efficiency.
• Customer Base: As of the end of March 2023, Bajaj Finance has a customer base exceeding 6 crore.
• Credit Cards: In the financial year 2022-2023, Bajaj Finance issued over 2 million credit cards.

Bajaj Finance's strategic partnerships with various e-commerce platforms have boosted its consumer financing segment. The company reported a significant increase in disbursements due to these collaborations, with total loans disbursed amounting to ₹1.2 lakh crore in FY 2022-23.

The outlook for Bajaj Finance continues to remain optimistic, with analysts forecasting a gradual increase in loan demand, coupled with a focus on expanding its product offerings in the coming financial years. The stock price saw an increase from approximately ₹5,700 in October 2022 to around ₹7,200 by July 2023, reflecting market confidence in its business model and growth trajectory.

How Bajaj Finance Limited Makes Money

Bajaj Finance Limited operates primarily in the financial services sector, generating revenue through various segments including consumer finance, commercial finance, and insurance. As of the fiscal year ended March 31, 2023, the company reported a total income of ₹15,620 crore, reflecting a growth of approximately 34% year-on-year.

The company's consumer finance segment, which constitutes a significant portion of its revenue, includes personal loans, business loans, and credit cards. As of Q1 FY24, Bajaj Finance had over 55 million customers and reported an impressive increase in its loan book, which stood at around ₹2.5 lakh crore, up from ₹1.87 lakh crore in the previous year.

The company also collaborates with various retail partners, offering point-of-sale financing options. The partnership ecosystem has expanded to include over 1.2 lakh merchants, enhancing its distribution footprint. As of March 2023, the disbursements via this channel reached approximately ₹25,000 crore.

Another key revenue stream for Bajaj Finance is its financing of durable goods and electronics through the 'Bajaj Finserv EMI Card'. In FY23 alone, loans for consumer electronics accounted for more than 43% of its overall disbursements.

Bajaj Finance has also ventured into the insurance and asset management sectors, contributing to its diversified revenue base. The insurance segment had a premium income of around ₹3,200 crore in FY23, showing significant potential for growth. The Assets Under Management (AUM) for its mutual funds reached ₹1 lakh crore by the end of FY23, reflecting a substantial year-on-year growth of approximately 25%.

Bajaj Finance's operating metrics are also noteworthy. The company maintained a net interest margin (NIM) of approximately 10% for FY23. Furthermore, the asset quality remained robust, with a gross non-performing asset (GNPA) ratio of 1.27% compared to 1.99% in FY22, evidencing strong credit risk management.

In terms of digital innovations, Bajaj Finance has focused on enhancing its technology infrastructure to streamline lending processes. The company has invested approximately ₹900 crore in technology upgrades in FY23, which has contributed to a 60% increase in digital disbursements, now accounting for about 75% of total loans disbursed.

As of June 2023, Bajaj Finance's stock was trading at approximately ₹7,200 per share, reflecting an increase of around 25% over the past year. The company's strong performance and market confidence can be attributed to its strategic initiatives and diversified revenue model, positioning it favorably within the competitive landscape of Indian financial services.