Bajaj Finance Limited
June 2011
This presentation has been prepared by Bajaj Finance Limited (the “Company”) solely for your information and for your use. This presentation is for information purposesonly without specific regards to specific objectives, financial situations or needs of any particular person and does not constitute and should not be deemed to constituteor form part of any offer or invitation or inducement to sell or issue any securities, or any solicitation of any offer to purchase or subscribe for, any securities of theCompany, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract or commitment therefor. Thefinancial information in this presentation may have been re-classified and reformatted for the purposes of this presentation. You may also refer to the audited financialstatements of the Company before making any decision on the basis of this information.
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Disclaimer
2
potential future performance of the business of the Company. Any opinions expressed in this presentation are subject to change without notice. None of the Company,book running lead managers, their affiliates, agents or advisors, the placement agents, promoters or any other persons that may participate in any offering of anysecurities of the Company shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents or otherwise arising inconnection therewith.
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• Promoted by the Bajaj Auto group in 1987
• Demonstrated consistent profitability track record in lending space for the last 24 years.
• AUM of ` 75.71 billion, with a history of disbursing over 6.00 million loans, as of FY11. Disbursed 1.57 million loans in FY11
• A diversified lending business with 9 product lines focusing on consumer finance & SME business
Executive Summary
3
• Strong distribution reach with more than 225 points of presence and more than 4,000 distribution partners and dealers across India
• Strategy is to focus on mass affluent customers in consumer businesses and affluent and HNI customers in small businesses, through a judicious mix of:
– Lower risk and lower returns products, for building scale and stability
– Moderate risk and higher return products, for profit maximization
• Stable and deep management structure with top 100 management team members having experience from leading Multi National Companies and Transnational companies.
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
Table of contents
4
Financial information
Industry Overview
Annexure – Portfolio Performance
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
5
Financial information
Industry Overview
Annexure – Portfolio Performance
Bajaj Holdings and Investment Limited
Bajaj AutoLimited
Bajaj FinservLimited
31.49% 38.69%
Bajaj Group structure
6
Limited Limited
Auto Business Arm Financial Services Arm
Bajaj AllianzLife Insurance
Company Limited
Bajaj AllianzGeneral InsuranceCompany Limited
Bajaj FinancialSolutions Limited
Bajaj FinanceLimited
Wealth Management & Advisory
LendingProtection and Retirals
74% 74% 100% 55.98%
Key Business Lines
Product Key Features Target Customer BaseIndicative Terms, as of June 2011
• 26% of the portfolio as of FY11
• Captive financing.
• Financing only Bajaj auto vehicles.
• Mass customers
• 12% of the portfolio as of FY11
• One of the few organized players with cutting edge technology architecture & robust risk management framework.
• Mass Affluent and
• Affluent
• 6% of the portfolio as of FY11
• Loans to existing customer with very good credit performance track record.
2 Wheeler & 3 Wheeler Finance
Consumer durable financing
Personal Loans Cross sell• Mass Affluent and
• Affluent
• Maturity : 12 – 24 months
• Repayment : EMI
• Maturity : 8 – 12 months
• Repayment : EMI
• Maturity : 12-36 months
• Repayment : EMI
Co
nsu
me
r fi
nan
ce
7
• 30% of the portfolio as of FY11
• Includes loan against property
• Affluent and
• HNIs
• 10% of the portfolio as of FY11 (SBL)
• 4% of the portfolio as of FY11 (VF)
• SBL to affluent small businessmen.
• VF to vendors of large auto manufacturer
• Affluent and
• HNIs
• 8% of the portfolio as of FY11
• Launched in FY11.
• Assets backed funding to Small, Mid & strategic contractors.
• HNIs and
• Affluent
• 4% of the portfolio as of FY11
• Launched retail loans to HNI customers in FY11.
Mortgage
Small Business Loan (“SBL”) & secured vendor financing (“VF”)
Loan against securities • HNIs
• Maturity :60 – 180 months
• Repayment : EMI
• Maturity :12 - 36 months (SBL)
• Maturity : 1 - 24 months (VF)
• Repayment : EMI (SBL & VF)
• Maturity : 12-42 months
• Repayment : EMI
• Maturity : 10 – 12 months
• Repayment : Bullet
• Launched in FY12.
Construction Equipment Finance
Infrastructure financing• Medium / large
infrastructure companies
• Maturity : NA
• Repayment : Moratorium period followed by EMI
Sm
all
bu
sin
ess
Co
mm
erc
ial
• 8 product line company focused on homogenous segments
• Profitable mix of consumer & SME business
• Balanced mix of secured and unsecured assets
Diversified lending business model
• Focus on acquiring & servicing affluent & HNI clients (with the exception of captive
2Wheeler financing business)Affluent & HNI customer focused business
• Promoted by erstwhile Bajaj Auto Ltd. Post the de-merger of Bajaj Auto, the
shareholding in the Company was vested with Bajaj Finserv
• Debt free balance sheets of the promoter, Bajaj Finserv and of the primary holding
company, Bajaj Holdings & Investments Limited
• 56.07% holding with promoter and promoter group.
Strong promoters
What differentiates Bajaj Finance
8
2Wheeler financing business)
• Integral to risk management strategy
• Large wallet size allows deep cross sell framework
Affluent & HNI customer focused business model
• 100% dealer “Point of Sale” terminalisation and E2E enterprise data warehouse for risk
management and data mining capabilities
• Distinct business, underwriting & risk management structure for robust risk
management.
High technology orientation and robust risk management
• Top 100 management team members from leading MNCs.
• SBU business structure allows scalability.
• Top management vintage of 3 years.
Stable & deep management structure.
• More than 225 points of presence across India
• More than 4,000 distribution partners and dealersStrong Distribution Reach
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
9
Financial information
Industry Overview
Annexure – Portfolio Performance
Diversified lending business model
Consumer finance Small business
Historical
2007–08 100% POS link up.3 Min-TATStarted PL
Launched POS ins. cross sell.
Launched project 3sec-TAT.Launched post sale insurance cross sell.
Launch EMI card – 3 second TATLaunch co-brand credit card.
2008-09
2009-10
2010-11
2011-12
Launched PSBL & Mortgages in
Launched “ no insurance no loan”.Launched cutting edge
Expanded to 23 cities.Portfolio seasoning for PSBL & Mort.Launched CE & HL.Launched partnership
Launch SBS cross sell to cross collateralize portfolios and deepen wallet size.
2008-09
2009-10
2010-11
2011-12
10
Historical business model.3 day TAT.No cross sell.
Consumer Durables &2-wheelers
Personal Loans
Cross-sell
Insurance services
EMI card
Credit Card –Partnership
Acquisition Cross-sell
Competitive Advantage
• Data Mart and Cross sell capabilities
• Customer Lifecycle Management
• Low ticket - high volume transaction domain specialization
Started PL cross sell to existing good customers
cross sell. cross sell. & Mortgages in 16 cities.Unique sales & collect model.
cutting edge underwriting platform.
partnership model
Acquisition Cross sell Rel. model– S,C & C
Competitive Advantage
• Relationship model– Sales & Collect
• Premium customer experience model
• Cross sell to Small Business segment
+ + + +
Strong Distribution Reach
Geographic presence
Business Line FY08 FY09 FY10 FY11
Sales Finance 116 87 79 79
2W - Hubs 116 55 54 54
2W - Spokes 300 200 150 150
Small Businesses 0 15 15 23
Distribution
Business Line FY08 FY09 FY10 FY11
Sales Finance –
Dealer19,000+ 4,500+ 2,000+ 2,500+
2W– Dealer/ASCs 1,400+ 1,400+ 1,275+ 1,400+
11
Deep distribution, sizeable acquisition engine and growing balance sheetDeep distribution, sizeable acquisition engine and growing balance sheet
2W– Dealer/ASCs 1,400+ 1,400+ 1,275+ 1,400+
Small Businesses –
Partner- 175+ 225+ 250+
Small Businesses –
Support- 175+ 225+ 275+
# of New Loans Disbursed (‘000s)
Business Line FY08 FY09 FY10 FY11
Sales Finance 621 352 515 1,038
2W 397 219 378 522
Small Businesses 0 3.5 5 9
Total 1,018 574 897 15,60
Assets under management (`̀̀̀ billion)
FY08 FY09 FY10 FY11
AUM 24.78 25.39 40.32 75.71
Map not
to scale
High technology orientation and robust risk management – An illustration
- Call
- Fax
- Data SSP
3 m
inutes T
urnaround Tim
e (“
TAT”)
Data moves to Data-
mart and B2B / B2C
Customer gets Username
& Password for online
access
Cross Sell offers to
customers @ 4
Month
Data
Entry
RTGS to dealer
Account (<24
Hrs)
2
1
7
11
12
13
14
Dealer
De-dupe
Engine
Application
Score
Credit
bureau
a b c
12
Product Delivered at
Home By Dealer for
address Verification
Fraud early
warning
score card
Confirmation &
Verification SMS /
Email to Customer
Provide KYC
Documents
Files at
Branch
Inward
Central /
national
operation
centre
Disbursal
Co
uri
er
Customer
RTGS to dealer
Processing Shop 5min
1 d
ay
3 -4 days
TVR
Re-verification of application details by
call centre
15 minutes TAT
4
3
5
6
8
10
11
Files at Branch
Inward
9
Stable & deep management structure
• Rajeev brings with him more than 18 years of
experience in the consumer & Small Business
Segment lending industry.
• He has been with the Company for 4 years and
has worked towards steering the organization
onto a path of fast-paced growth and defined
an ambitious trajectory of building a
diversified lending institution.
• He has earlier worked with AIG, GE money and
American Express.
• A Management graduate with 15 years of
varied experience across Strategic Planning,
Sales & Marketing, Product Design &
Rajeev JainChief ExecutiveOfficer
• Deepak has an experience of 20 years in
Financial Services, ITES, and Manufacturing
industry.
• Deepak is responsible for driving people
strategy for the organization and making Bajaj
Finserv Lending the Employer of Choice.
• He earlier worked with Reliance, CRISIL and
SREI.
• Deepak has over 20 years of experience in
distributing Financial Services & Consumer
Durables.
Deepak GuptaChief HumanResources
13
Sales & Marketing, Product Design &
Development, to Six Sigma, Collections, and
Analytics.
• He has worked for GE & Citi.
• Amit manages the high growth Mortgages
business for Bajaj Finserv lending.
• Ashish has 13 years of rich and varied work
experience across manufacturing, FMCG and
Retail Banking in large multi-national
organizations across credit cards, secured and
unsecured assets as well as liabilities.
• He join the Company from Barclays & would be
responsible for launching credit card business.
Amit Gainda Business HeadMortgages
Ashish PanchalBusiness HeadCredit Cards
Durables.
• He joined us from American Express, where he
held various positions in their Personal Loans &
Consumer Card businesses for over 9 years.
• Deepak manages our unsecured business &
personal loans.
• A chartered accountant by profession, Devang
brings with him 15 years of experience in
consulting and financial services.
• Joining us from AIG, where he worked as Vice
President – Business Development & CRM for
the consumer finance business.
• Earlier he worked with GE money for 8 years.
Deepak Reddy Business HeadPersonal & Small Business Loans
Devang ModyBusiness HeadSales Finance
Stable & deep management structure (cont’d)
• Diwakar has nearly 12 years of varied and rich
work experience, with the last ten years in
Risk Management.
• He joins us from Citigroup, where his last
assignment was managing risk and credit for
West & South India regions for the Small &
Medium Enterprises (SME) business.
• He would be managing the commercial credit.
• Pankaj joined Bajaj Finserv Lending in 2006,
bringing with him a rich experience of 28 years
in financing, financial accounting, cost
Diwakar PundirChief CreditOfficer
• Rakesh has an overall experience of 18 years in
finance & technology industry.
• He has played several leadership roles
encompassing CIO responsibilities, IT Product
Mgmt., and Delivery.
• Currently, as the chief architect of our
technology initiatives, he has successfully
harnessed technology to introduce many
innovations
• Has earlier worked with GE money, Reliance
and AIG.
• Sanjeev is a chartered accountant by profession
• 19 years of experience in Retail Consumer
Finance, SME mid-markets, and Corporate
Rakesh BhattChief InformationOfficer
14
in financing, financial accounting, cost
accounting, tax, and systems
• He is a Mathematics Graduate and a Chartered
Accountant
• Pankaj has provided invaluable advice and
direction that has helped the Company grow
from a single business company to a diversified
NBFC.
• Rajesh is a management graduate with over 14
years of experience in financial services across
consumer and commercial lending.
• Rajesh joins us from HSBC where he was
handling the portfolio risk management unit
for HSBC’s consumer credit risk function.
• Rajesh is responsible for maintaining portfolio
quality. He earlier worked with GE money and
Standard Chartered.
Pankaj ThadaniChief FinancialOfficer
Rajesh KChief RiskOfficer
Finance, SME mid-markets, and Corporate
Finance for sectors such as Infrastructure,
Industrial, Healthcare, Transportation, Auto,
and Securitization of Receivables
• Sanjeev manages construction equipment
business in strategic & retail space
• He earlier worked with RBS and Citi.
• Vivek joined Bajaj Finserv Lending in 2007.
• He is a Chartered Financial Analyst and holds a
Cost Accountant degree from ICWAI.
• He has an experience of 22 years in strategic
planning, process and operations management,
accounts, funds management, budgeting, and
MIS
• He worked across operations, LAS business & is
currently responsible for setting up corporate
audit services.
Sanjeev VijBusiness HeadConstructionEquipment Finance
Vivek LikhiteCorporate AuditServices
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
15
Financial information
Industry Overview
Annexure – Portfolio Performance
Product line strategy
Profit Maximisers• Relatively higher RoA
• Lower asset base and lower capital requirements
• High risk and return
Scale Builders• Relatively lower RoA
• Higher asset base and higher capital requirements
• Lower risk & return
Co
nsu
me
r
Non qualifiers• Low ROE – Lack of competitive
advantage
• Customer segmentation
Relatively higher RoA
Not a bank’s business
Large cross sell opportunity
Sale
sF
inan
ce
Relatively low RoA
Captive financing
E2E Integration play
leading to higher ROA2 W
he
ele
r F
inan
ce
Relatively high RoA
Critical to full scale SF business
Credit Card partnership (WIP)
Captive play
Car loans
Customer segmentation issues
Gold loans & Micro finance
16
Sm
all
bu
sin
ess
Relatively higher RoA
Meet working capital needs of
MSME & SME clients
Sm
all
Bu
sin
ess
Lo
an
s
Relatively low RoA
Un-penetrated space
Meet working capital needs of
MSME & SME clients
Mo
rtgage
Relatively higher RoA
Regulatory advantage.
Meet working capital needs of
MSME & SME clientsLo
an
Again
st
Se
cu
riti
es
Relatively low RoA
Dominated by non banks.
Large upstream opp.
Co
nst
ructi
on
E
qu
ipm
en
t
Specialized business
Commercial vehicle
Relatively low RoA
High growth rates and high
demand potential
Infr
a
an
cil
lary
Co
mm
erc
ial
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
17
Financial information
Industry Overview
Annexure – Portfolio Performance
Summary financial statement
` in billion
Financials snapshot FY08 FY09 FY10 FY11 CAGR
Deployments 30.36 24.51 45.85 94.35 46%
Assets under finance 24.78 25.39 40.32 72.70 43%
Assets under management (AUM) 24.78 25.39 40.32 75.71 45%
Income from operations 5.03 5.99 9.16 14.06 41%
Interest expenses 1.70 1.64 2.02 3.78 30%
Net Interest Income (NII) 3.32 4.35 7.15 10.28 46%
18
Operating Expenses 1.93 2.20 3.20 4.54 33%
Loan Losses & Provision 1.09 1.64 2.61 2.05 23%
Profit before tax 0.30 0.51 1.34 3.70 131%
Income tax 0.09 0.17 0.45 1.23 136%
Profit after tax 0.21 0.34 0.89 2.47 129%
Ratios FY08 FY09 FY10 FY11
Total Opex to NII 58.1% 50.7% 44.7% 44.1%
Loan loss to Assets under finance 4.4% 6.4% 6.5% 2.8%
Return on Average Asset under finance 0.9% 1.3% 2.8% 4.3%
Earning per share (Rs.) 5.68 9.27 24.43 67.47
Return on Average Equity 2.0% 3.2% 8.0% 19.7%
Financial performance trends FY-11
# of Loans Disbursed (‘000) Disbursements (` billion)
397 239442 522
621
355
681
1,048
1,018
594
1,123
1,570
FY-08 FY-09 FY-10 FY-11
2 Wheelers Others Total
40%
14.84 7.83 13.64 20.3415.52
16.68
32.21
74.0130.36
24.51
45.85
94.35
FY-08 FY-09 FY-10 FY-11
2 Wheelers Others Total
106%
19
AUM (` billion) Revenue (` billion)
16.47 11.75 13.93 19.53
8.31 13.6426.39
56.1824.78 25.39
40.32
75.71
FY-08 FY-09 FY-10 FY-11
2 Wheelers Others Total
88%
5.035.99
9.16
14.06
FY-08 FY-09 FY-10 FY-11
53%
Financial performance trends FY-11 (cont’d)
NII (` billion)
3.324.35
7.15
10.28
FY-08 FY-09 FY-10 FY-11
44%
Operating Expenses % of NII
58%
51%45% 44%
FY-08 FY-09 FY-10 FY-11
20
Loss provision (` billion)
1.09
1.64
2.68
2.05
FY-08 FY-09 FY-10 FY-11
21%
Net NPA & Provisioning coverage
7.0%
5.5%
2.2%
0.8%
79%
55%
32%27%
FY-08 FY-09 FY-10 FY-11
Net NPA coverage
Financial performance trends FY-11 (cont’d)
Pre-tax profit (` billion)
0.300.51
1.34
3.70
FY-08 FY-09 FY-10 FY-11
176%
Return on Assets & Return on Equity
0.9% 1.3%
4.3%
2.8%8.0%
19.7%
3.2%2.0%
FY-08 FY-09 FY-10 FY-11
ROA ROE
21
Capital adequacy
40.7% 38.4%
25.9%16.8%
3.2%
40.7% 38.4%
25.9%20.0%
FY-08 FY-09 FY-10 FY-11
Tier-I Tier-II Total CAR
Earnings per share (` )
5.689.27
24.43
67.47
FY-08 FY-09 FY-10 FY-11
176%
Financial performance trends Q4-FY11
# of Loans Disbursed ( ‘000)
118 125 123 146 128
143266
194
345242
261
391
317
491370
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
2 Wheelers Others Total
42% YoY
Disbursements (` billion)
4.34 4.69 4.72 5.79 5.14
8.9215.77 16.56
21.95 19.7313.26
20.46 21.28
27.74 24.87
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
2 Wheelers Others Total
88% YoY
22
AUM (` billion)
13.93 15.13 16.47 18.41 19.53
26.3934.25 41.26
50.27 56.1840.32
49.3857.73
68.68 75.71
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
2 Wheelers Others Total
88% YoY
Revenue (` billion)
2.572.97
3.26
3.88 3.95
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
54% YoY
Financial performance trends Q4-FY11(cont’d)
NII (` billion)
1.982.24
2.43
2.85 2.76
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
39% YoY
Operating Expenses % of NII
37%41% 43% 44%
48%
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
23
Loss provision (` billion)
0.89
0.61 0.62
0.450.38
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
58% YoY
Net NPA & provisioning coverage
2.2%1.8%
1.1%0.8%
1.4%
79%77%75%
63%55%
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
Net NPA coverage
Capital adequacy
25.9%22.0% 19.5% 17.9% 16.8%
3.3% 3.20%3.2%
2.3%
25.9% 24.3% 22.7% 21.2% 20.0%
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
Tier-I Tier-II Total CAR
Financial performance trends Q4-FY11(cont’d)
Pre-tax profit (` billion)
0.35
0.710.78
1.151.06
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
200% YoY
Earnings per share (` )
6.88
12.7814.42
20.8719.40
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
182% YoY
24
Promoters Shareholding
50.5% 50.5%
55.2% 55.5% 56.1%
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
25
Financial information
Industry Overview
Annexure – Portfolio Performance
85120
325
FY-09E FY-10E FY-14P
Strong growth momentum withunder-penetration
Nominal GDP Movement (` Trillion)
28.832.8
37.845.4
52.358.7
FY-05 FY-06 FY-07 FY-08 FY-09 FY-10
CAGR 12.6%
28.832.8
37.845.4
52.861.3
73.1
FY-05 FY-06 FY-07 FY-08 FY-09 FY-10 FY-11
Loan Against Property in India (` Billion)
5%
19%33%
43%
Housing Finance Co. NBFCs
Pvt. & Foreign Banks PSU Banks
Disbursement Market ShareFY05-11 CAGR 17%
FY 10–14P CAGR : 28%
26
295
72 84 99150
380478 657
37% 33% 30% 33%
0
200
400
600
800
FY- 09E FY- 10E FY- 11P FY- 15P
New 2W Sales New 2W Finance Finance Penetration
Two wheeler finance disbursements and finance penetration (` Billion, %)
Source: Central Statistical Organisation (CSO)
Source: CRISIL Research (Update Retail Finance Auto, May 2011)
Housing loans outstanding and % of GDP(` Billion, %)
5,5886,640
12,363
4,765
9.0%
9.1%9.1%
FY09 FY10 FY11-P FY15-P
Housing Loans Housing loans as % of GDP
Source: CRISIL Research (Update Retail Finance Housing, Feb. 2011) and CSO
Source: CRISIL Research (Loan Against Property , December 2010)
FY 11-15P CAGR : 17% FY 11-15P CAGR : 11%
Table of contents
Bajaj Finance Overview
Key Competitive Strengths
Strategic Overview
27
Financial information
Industry Overview
Annexure – Portfolio Performance
Credit Quality of Bajaj Finance customers across products
Consumer Durable Loans – 90+ DPD Personal Loans – 90+ DPD
0.84%1.30%
0.15%0.83% 0.69%
0.23%
0.40%
0.41% 0.58%
0.31% 0.54%0.28%
0.49%
Auto Loans Business
Loans
Consumer
Durables
Loans
Credit
Cards
Home
Loans
Personal
Loans
NBFCs Banks Bajaj Finance
1.60%
1.00%
4.00%
Bajaj Finance Banks NBFC
28
Small Business Loans – 90+ DPD Mortgage and Loan Against Property – 90+ DPD
0.42%
0.71%
1.87%
Bajaj Finance Banks NBFC
0.08%
0.75%0.93%
Bajaj Finance Banks NBFC
Source: Data from CIBIL -TransUnion DatabaseNote: Conclusions drawn are Company’s inference