Bajaj Finance Case Study: Business Model, Financials, Competitors, and KPIs

Have you ever heard about an Indian financial services company named Bajaj Finance?

This company is a part of the financial conglomerate Bajaj Finserv Group, which includes an insurance arm (Bajaj Allianz) and an advisory firm (Bajaj Wealth Management). This blog will discuss Bajaj Finance’s target audience, business model, services, and other offerings. Let’s take a look at the company’s profile.  

Overview of Bajaj Finance

Bajaj Finance Ltd., or Bajaj Finance, is a subsidiary company of Bajaj Finserv Ltd. It is a deposit-taking NBFC, which stands for Non-Banking Financial Company (registered under the Reserve Bank of India) and is also classified as the NBFC-Investment and Credit Company (NBFC-ICC). The company specializes in lending and accepting deposits. It offers diversified loan facilities across retail, SME, and commercial customers with an established presence in rural and urban India.

Let’s have a look at the company profile overview:

Company Type	Public
Founder	Rahul Bajaj
Founded on	May 2007
Headquarter	Pune, Maharashtra, India
Industry	Financial services

After having a brief knowledge of the company, we will move on to some important statistical data related to Bajaj Finance. Here are the company’s essential statistical data  represented below:

Market Cap	₹ 4,11,263 Cr.
Current Price	₹ 6,654
Stock P/E	29.8
Book Value	₹ 969
High / Low	₹ 8,192 / 5,486
Dividend Yield	0.45 %
ROCE	11.8 %
Net Profit	₹ 10,289.74 Cr.
ROE	23.5 %
Promoter Holding	54.78 %
Face Value	₹ 2.00

Financial Highlights of Bajaj Financ

Income Statement KPIs

Particulars	FY2023	FY2022	FY2021
Revenue	41,398	31,641	26,673
Interest (Paid)	12,701	9,855	9,519
Financing Profit	16,018	9,906	6,314
Net Profit	11,508	7,028	4,420

Balance Sheet and Cash Flow KPIs

Particulars	FY2023	FY2022	FY2021
Borrowings	216,690	165,232	131,634
Reserves	54,251	43,592	36,798
Cash From Operating Activity (CFO)	-42,140	-37,090	-807
Cash From Investing Activity (CFI)	-10,365	6,347	-429
Cash From Financing Activity (CFF)	50,675	32,275	1,741

Competitors of Bajaj Finance

We observed the market capitalization, overview, and many other statistical data of Bajaj Finance. Here we’ll look at some of the rivals: 

• Aditya Birla Capital Ltd
• Edelweiss Financial Services Ltd
• L&T Financial Holdings Ltd
• Muthoot Capital Services Ltd
• Reliance Capital Ltd

Services Provided

In this section, we will understand the services offered by the company. These are:

Durable Finance

People can purchase household goods such as washing machines, refrigerators, air-conditioners, microwaves, furniture, and many more in this finance service. Consumers can avail of up to Rs 4 lakh with zero or low-interest rates.

Personal Loan 

This finance option provides collateral-free loans up to Rs 25 lakhs by meeting simple eligibility criteria and submitting basic documents. Consumers can avail the service by applying online personal loan application and also get it approved instantly without any hustle, and enjoy the flexible payment tenure ranging from 12 months to 60 months.

Gold Loan

A Gold Loan helps to meet a person’s financial needs. Bajaj Finance will provide a high loan limit of Rs. 20 lakh with attractive interest rates and flexible repayment options.

Home Loan

The company provides a lot of facilities to its consumers. Here a consumer can take a loan of up to 3.5 crore with low interest. The facilities provided are easy balance transfer facilities, minimal documentation, faster processing, and flexible tenure.

Loan against securities

Bajaj Finance gives the opportunity to take a hassle free loan without any liquidation of the asset. You can get a loan of up to Rs 10 crore with 0 Part Payment/Foreclosure charges while getting supported by a dedicated relationship manager.

Fixed Deposits

It is the safest way to invest and enjoy the flexibility and offers that the company will provide. Investors can easily choose a tenure between 12 months and 60 months per their financial requirements.

Business Model of Bajaj Finance

The Bajaj Finance business model primarily focuses on lending while maintaining a steady influx of low-cost capital in the form of deposits. They achieve this by offering cheap and low-cost loans to individuals and corporates while simultaneously providing higher-than-normal interest rates on deposits.

While this strategy may appear to reduce Net Interest Margin (NIM), it fosters higher deposits from retailers and facilitates a greater amount of loan dispersal over time. This approach builds trust and comfort among both depositors and borrowers, solidifying Bajaj Finance’s position in the financial services sector.

Income Model

The company earns from several sources, like delayed loan charges, processing fees, penalties, etc. Let’s break down some of the sources of Bajaj’s income. These are:

1. 0% EMI

This tends to attract the consumer as the customer won’t have to pay a single rupee in interest to the bank. Thus benefiting the manufacturer. In turn, the manufacturer pays a fixed percentage to the bank as the bank’s facility caused the increase in sales. 

2. Loans

Consumers can take secured or unsecured loans from the company. The interest component on these loans becomes the company’s income source.

3. Interest Income

The company has made significant investments across asset classes, and interest received from such investments also acts as a significant source of income. 

Success Factor

No one can replicate Bajaj Finance in the lending business because of their unique consumer-oriented services. Bajaj Finance mainly focuses on its Assets Liability Management. It is pretty hard to snatch the market share from Bajaj Finance because of the company’s consistent track record of low-interest loans while providing best-in-class services. These factors push the company and gain the trust of consumers, creating a trustworthy consumer base. 

Conclusion

Bajaj Finance has become a household name because of its unparalleled services. At the same time, this has created a very loyal customer base and caused some distress to the company’s financials. We can see from the graph above that the company’s Cash Flow position is not healthy, and a downward trend is visible over time. This can lead to substantial problems in the long run if not corrected soon. 

Frequently Asked Questions (FAQs)