Plan to finance products on e-commerce websites: Sanjiv Bajaj

Bajaj Finserv's third quarter earnings were boosted by strong two-wheeler sales because of the festive season, the company's Managing Director, Sanjiv Bajaj tells CNBC-TV18. 

Going forward, the company plans to finance products on e-commerce websites, he said.

Bajaj FinServ reported a 48 percent gain in its net interest income (NII) to Rs 1320 crore year-on-year (YoY) for the third quarter and net profit grew 58 percent to Rs 408 crore (YoY).Below is the verbatim transcript of Sanjiv Bajaj’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: Before I get into the nitty-gritty’s of the numbers I just wanted your own sense of what the turf is looking like. We have been hearing a lot of comments about green shoots, about improvement in certain sectors like autos, etc but you are the man who knows all the ground details, what is the sense you are getting, is the worst over? A: I don’t know if the worst is over but at least what we are seeing right now for say the last quarter is not worse than earlier. There is clearly a lot of hope on the ground. When we look at our different segments, we are seeing growth picking up in the SME segment. On the consumer side, you see the overall growth, for example, consumer durable sales has not been great but it has not been great for the last couple of years in the country. I think we have done well just because of all the stuff that we are doing for improving penetration or financing and expanding the range of consumer products that are available on our EMI finance where the overall growth is still reasonably stagnant. However, yes you talk of green shoots, if you see in the last quarter, there is noise now or some amount of movement on the ground but I would wait a couple of quarters to see if we really get to see strong or even medium strong but steady numbers of higher growth.Latha: 41 percent AUM growth doesn’t that look really solid, what is your idea of even better growth? You are gunning for what 50 percent growth in Q4? A: We have always said that 20-25 percent growth is a sustainable growth for Bajaj Finance when you look at, at least the next couple of years; we can’t project beyond that but there are always periods when you end up doing significantly better. What worked for us last quarter was the festival season; we came out with this significant I would say outreach program to existing customers. In Bajaj Finance now, we have about 13 million existing customers, we are adding a couple of million new ones in every year and of these of about 9-10 million are credit stamp, we are cross selling to them multiple products and not just loan products, we are doing insurance, we are doing fixed deposits, we are doing mutual funds so we are acting as a financial products relationship distributor there as well to them and all this has helped us grow. If I also see in the last quarter, as I said, we have seen some positive movement of the SUV side, we saw that book grow as well. The net result of that but led by the consumer sales, consumer durable financing led to the 40 percent plus growth on AUM. Sonia: We keep hearing about a slowdown in the rural markets that continues. You have this time seen a loan book growth of 6 percent in the two wheeler and three wheeler space compared to a decline in the past four quarters. What is the sense you are getting about the two wheeler space itself, is there still quite a bit of pain there and what could the growth rate be in the loan book for the next say two to three quarters? A: Our two wheeler is the only line which is still captive where we finance only Bajaj owned products and that is why the growth in the two wheeler financing ends up by and large mimicking growth for Bajaj Auto in the domestic market. We have seen some amount of growth over there, partly because of again the festival season that we saw last quarter but we have to see some stable growth coming through but that is now about 6-7 percent of our books. So, from a book perspective it is not as significant but yes it gives us a sense of what is happening on the ground. Far more important on rural is we are now in overall 300 rural towns and villages through a hub and spoke model in and across Maharashtra, Gujarat, Karnataka, Madhya Pradesh and this is growing well. We see again significant demand for gold financing, for consumer durable financing, refinancing of second hand vehicles, we have started doing some amount of –SUV financing there and while in general we all hear about the rural economy being slow but again because it is a new line for us we have been able to grow pretty well over there. Latha: Last time you told us that you have an alliance with the Flipkart’s and the Snapdeal’s and you give loans to their suppliers, have you since got on to more such more digital marketing places as well are you speaking to any payment bank guys to ride on their network to sell loans? A: If you see, we are currently doing resale financing with bunch of the major guys including Flipkart and Snapdeal that you talked about. The next step of this is to end up offering EMI finance to consumers. So, if somebody wants to go and buy Rs 7,000-8,000 of goods on Flipkart, Snapdeal or Amazon or anywhere of these other sites why should they have an option like they have an option for the Master Visa or COD and option of conserve EMI where you can distribute your purchase three months, six months, nine months depending on the kind of scheme that the retailer wants to put in place. We are speaking with some of the big boys there and I hope by April we will at least have this service available with one of them. What it ends up doing is, it ends up further expanding for them the sources of funds available for people to go and buy stuff. If you see in India, a lot of them really grown because of cash in delivery (COD) but a large part of cash in delivery gets returned back. The minute somebody is buying it even on loan, the basic thinking is to be more serious about your buying and the returns should come down dramatically. So, this would help the retailers as well. So, this is something that we are focusing on now. Latha: Your margins will improve you think for FY17 first half at least if you can give us a margin guidance or even this quarter? A: I don’t give a margin guidance. Margins are a blend of a number of moving parts because they differ by a significant amount across for example our short tenure, more volatile but high RoA consumer financing to SME which sits somewhere in the middle and commercial which sits right at the other end where lowest risk, longest tenure but lower margin. So, it is a mix of moving parts and I never hazard a guess on that. Sonia: If you have to hazard a guess on what the consumer loan growth could be, just a realistic growth rate over the next two to three years for yourself and for the industry, what would your best guess be? A: As far as the industry is concerned, when we are talking of loan growth, we today end up accounting for more most of the industry as far a s consumer lending is concerned. These are products that are less than USD 600-700 in terms of loan ticket size. Banks find it expensive to do this. This year for example we will do over 5 million such loans. We transact nearly 23-25 million such payments a month. So, it is a huge operational factory and you need those volumes to support this business and for you to be meaningful to the manufacturers. So, firstly it is something that we have built over the last 10-12 years, not very east to replicate. Coming to what kind of growth levels we are seeing, if you see for this year, I think we would be in the region of 35-45 percent. I would again say 45 percent steady growth rate, next couple of years but looking at everything that we are seeing around us, as the economy should start picking up and we should start seeing this maybe in two quarters or so, hopefully earlier then this number should move further up.(Interview transcribed by Priyanka Deshpande)