Note: Replugging this column after Rahul Bajaj resigned as the chairman of Bajaj Auto on April 29, 2021.
For a man who is believed to have said “Only fools retire”, Rahul Bajaj’s stepping down as chairman of Bajaj Finance may seem a bit odd. Still sprightly at 82 and sharp as ever, will the man who turned his fledgling family business into Humara Bajaj, be content with a seat at the family dining table?
The release from the company was carefully worded: “Rahul Bajaj, non-executive chairman of the company, having been at the helm since its inception in 1987 and the group for over five decades, as part of succession planning, has decided to demit the office”.
The reference to succession planning holds the key not just to this decision but also the man’s singular achievement that goes beyond just the numbers.
Indeed, Rahul Bajaj’s single biggest accomplishment might have been the smooth transfer of his power to his sons and then in turn the bifurcation of business interests between the two of them.
No stranger to simmering discontent between siblings which in the past led to a bitter parting with his own brother, last year, he engineered a family settlement with his cousins, Shekhar, Madhur and Niraj, that laid down the terms of joint ownership of group companies along with a formal process to handle any future conflicts.
Plan this way
What’s more, he has also made sure that his sons are free from any such tensions.
With that the senior Bajaj has laid out a perfect template for Indian business families on how they can enhance value from one generation to another.
Defying the unwritten rules of Indian business families, it is the fourth generation of the Bajaj family, led by Rajiv and Sanjiv, which has grown the empire the most and created enormous shareholder wealth in the bargain.
Today, three Bajaj group firms, Bajaj Finance, Bajaj Finserv and Bajaj Auto rank among the 35 most valuable companies in the country.
It was in 1968 that Rahul Bajaj took over the small family business of scooters, cement and electrical appliances from his father Kamalnayan Bajaj who in turn had inherited it from his father Jamnalal Bajaj whose contribution to India’s freedom struggle far exceeds that to Indian business.
Through the 1970s and 1980s, Rahul Bajaj turned the company into a household name stretching the business to the limits permitted by the asphyxiating license-permit raj of the era.
When liberalisation came, the feisty, outspoken business leader was among those who raised their voice against the sudden assault of foreign capital and technology and asked for no more than a level playing field.
Soon enough though, the canny businessman figured out the new rules of the game and played it better than most. By the late 90s, Bajaj Auto was once again king of the Indian roads.
But here’s where Rahul Bajaj departed from the time-honoured script for successful patriarchs. He knew when it was time for him to step back. With both his sons having apprenticed long enough on the shop floor, the man who had built the company into a two-wheeler giant transitioned smoothly into a mentor and guide, leaving operational control to them.
A good call
It was a wise and ultimately enriching decision.
Rajiv, the elder of the two and the appointed heir to the two-wheeler business, steered it out of a mini-slump following the onslaught of motorcycles in which arch-rival Hero Honda took the lead.
Soon though Bajaj had recovered lost ground and in 2009, the company took the momentous, though at that time highly, questionable decision to exit the scooters business. Subsequent events show that what the company lost on market share it made up in profitability.
But it is the newer business of financial services that has proved to be a bonanza for the group.
Outspoken and frank in public, Rahul Bajaj is anything but reckless in his business. Even as many Indian businessmen flamed out following ill-thought through forays into disparate businesses, Bajaj stuck to knitting through the company’s healthy balance sheet, allowing it to constantly explore related opportunities. Financial services were an integral part of that diversification strategy.
Though the entry into this business was largely Rahul Bajaj’s idea (in 2001, the company signed up with Allianz SE to start a general insurance business) he left it to Sanjiv to grow it the way he thought best.
To Sanjiv’s credit after 10 years learning the ropes of the two-wheeler business, his ability to make a success of the financial business turning Bajaj Finance into one of the largest retail asset financing NBFCs in the country, is a remarkable feat.
Just as the evolution from the Bajaj Chetak to the Pulsar bike marks a generational shift in the group’s two-wheeler business, the emergence of a powerful financial services entity whose market cap dwarfs that of the original entity Bajaj Auto marks an equally successful diversification.
In both these, Rahul Bajaj provided the ballast and more significantly the original impetus by empowering his sons at the right time and giving them distinct lines of business to run.
(Sundeep Khanna is a senior journalist. Views are personal.)