Jul 22, 2013, 05.13 PM | Source: Moneycontrol.com

Open to setting up a bank, says Bajaj Finance

Meanwhile, the company is leaving no stone unturned to lay a concrete foundation for its banking forays. The non-banking finance company (NBFC) owned by the renowned Bajaj group is so far known for serving affluent customers.

Rajeev Jain, CEO, Bajaj Finance
Saikat Das

Banking is the buzz of the season. The Reserve Bank of India (RBI) has received a set of 26 applications for the new banking licence across the spectrum. If  "credible brand" remains one of the key determinants for final selection, Pune-based Bajaj Finance holds potential chances to access public savings, the cheapest source of funds for any institution.

Meanwhile, the company is leaving no stone unturned to lay a concrete foundation for its banking forays. The non-banking finance company (NBFC) owned by the renowned Bajaj group is so far known for serving affluent customers. It is considered to be India's largest white good financing company that gives loans to buy TV, fridge, air conditioner (AC), washing machine, micro oven and other appliances.

Also Read: Bajaj Finance Q1 net rises 27% to Rs 176 cr, provisions up

"We will convert Bajaj Finance into bank if RBI issues us a licence, " Rajeev Jain, CEO, Bajaj Finance told moneycontrol.com.

"As per RBI guidelines, we will have 18 months time for such conversion. We have enough the required wherewithal to do the business of banking. Through our current NBFC set-up, we are primarily serving affluent customers. However, we are trying to expand our product kitty to include more customers. We have just entered the rural markets," he said.

Bajaj Finance is the subsidiary of Bajaj Finserv , which has actually applied for a banking licence.

 In June, the company launched its financing business in rural markets with seven specialised and 30  franchised branches across Maharashtra. It plans to disburse around Rs 175-180 crore loans in the current financial year.

"We are positively surprised at the initial response. There is a significant demand from the rural population to buy LCD/LED TVs. By 2014, we will open another set of seven branches and 30 spokes (franchised units) in rural Gujarat. We will gradually expand this business, " Jain said.

With this retail initiative, Bajaj Finance made its foot-print for the first time in the rural belt. One can juxtapose the move with the RBI’s mandate of 25 percent rural branches for new banks.

The company is operating in the same product vertical (consumer durable). However, it will now be exposed to the rural masses particularly for financial products. In the auto segment, Bajaj group is already an established brand.

Must Read: RBI issues guidelines for new banking licence

Later, mopping up public deposits wherein the ‘trust’ is the key factor will not be any insurmountable task for Bajaj Finance. It can also sell other form of loans.

Earlier in January, 2013; Bajaj Finance had launched home loan products for its affluent customers, whose yearly income is not below 12 lakh.

"We are lending to those customers with an average ticket size of Rs 60-70 lakh. It goes above Rs 1 crore metro cities, "  the CEO added.

The home loan experience, according to market analysts, will add value to the NBFC, which will have to run home loan products in a large scale if they finally obtain a banking licence.

Also Read: RBI names 26 applicants for new banking licence

As of June 30, 2013; its total assets under management (AUM) stood at Rs 19,230 crore, up 33 percent year-on-year. Out of total assets, a big chunk to the tune of 40 percent is mortgaged.


Bajaj Finance stock price

On November 27, 2015, Bajaj Finance closed at Rs 5578.10, up Rs 21.30, or 0.38 percent. The 52-week high of the share was Rs 5717.70 and the 52-week low was Rs 3040.00.

The company's trailing 12-month (TTM) EPS was at Rs 194.73 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 28.65. The latest book value of the company is Rs 895.60 per share. At current value, the price-to-book value of the company is 6.23.

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