Running a business is not all always about putting your foot on the accelerator: Sanjiv Bajaj

Sanjiv Bajaj, 43, has varied interests - photography, tennis, basketball and business related books, which he prefers to consume in audio form. But it is the Bajaj group's financial services business, which he has been handling for the last five years, that takes up most of his time. His competitors include behemoths from HDFC and ICICI  to companies which are part of the Aditya Birla and Tata groups. At the headquarters of Bajaj Finserv, the holding company that runs the different financial firms, located in Pune's Viman Nagar, Sanjiv Bajaj spoke to Anand Adhikari. Edited excerpts:

Q. It is five years since the Bajaj demerger following which you got independent charge of the group's financial services business.  How has the journey been?  
A. Five years ago, when we started looking at financial services, what we had was a small mono-line company called Bajaj Auto Finance. It was predominantly an auto finance company. It also did a little bit of consumer financing. We had two insurance companies in life and non-life in different stages of growth. That was really all our presence. Our plan at the time was to have a large focus on consumers to build the financial services business, (moving) from lending to investment management to protection products. What we also decided was that, since our 'Bajaj' brand resonates very well with consumers, we should focus a large part of our business on consumers and also exploit cross-selling opportunities within the operating companies. The focus was to build these businesses for the long term. For this, you have to focus on long term sustainability and you also have to create value differentiators. You cannot be a copycat in a crowded financial services market. The second part of the strategy was to have profitable growth. This has been the message to each of the teams.

Q. Are you happy with the way each of the businesses has performed?   
A. Bajaj Finance has grown very satisfactorily. If you look at insurance side, both general and life, we have the largest presence in the consumer segment. For example, if you take the total general insurance industry, 60 to 65 per cent of business comes from corporate houses for the industry whereas it is dominated by retail for us. Around 70 per cent of our business is retail focused. In the life insurance business, we are one of the most profitable companies. The general insurance has also been profitable from day one. The next line is the investment management. Our investment management has two businesses - AMC (assets' management company), and financial advisory & wealth management. In AMC, we have decided to build a mutual fund business with Allianz which is also a partner in our insurance businesses.  

Q. Your mutual fund business is still at the drawing board stage despite getting SEBI approval a year ago…
A. We don't have a firm business plan yet.  The reason for the delay is that the entire mutual fund industry has gone through tremendous change. All commissions have come down because of regulatory changes. The distributors have lost interest and there is also no support from the stock market. We are taking our time to work on the right strategy for the mutual fund foray.  If we have to do the same thing (as the others) we will be AMC No. 38 or 39 in the market.  The new business must complement what we are doing. We don't want to act like venture capitalists. We'd rather focus on the long term and build businesses which we think have tremendous value. I must admit this is a business which has been slow to start. If you look at our general insurance business, we made money in the first few years when many others made losses. It is a question of doing things differently.  

Q. Are you thinking of an acquisition to build scale in the new business?
A. We are open to all opportunities. The joint team of Bajaj and our partner Allianz is working on the strategy.

Q. You are also tweaking your strategy in the wealth management business launched a year and a half ago.
A. Today, wealth management products are available to the super rich. But as India is growing, everybody needs them. The middle class definitely needs them and they need them more.  But there are challenges in terms of making people understand the need for participating in such products. There are also operational challenges. It is a heavy business or a push kind of a model where you have to manage the cost well.  In the last one year, we have been thinking of how to scale up the products.  If you really believe in the cross-sell model, why not use Bajaj Auto's customer base? We are building a digital framework so that simple wealth advisory can be done over the Internet. And for higher value, we can build the relationship managers.  So that's the strategy and we will roll out a plan from April 01, 2013.This really completes the bouquets of services we have.

Q. Is the financial services business more complicated than manufacturing?
A. What is clearly different is the impact of regulations. These change much more and are much more involved in the financial services business than in the auto business. After all, you are dealing with the money of the common man. Banking is heavily regulated and so is the insurance sector. That clearly means interacting with the regulators, putting across your point of view and understanding theirs. This is very important.  While in manufacturing, once the norms are put in place for emissions, sound etc, you can follow them and start making your product. Secondly, in financial services, consumer finance, life insurance, general insurance and wealth advisory are all completely different businesses.   

Q. Has the slowdown impacted the financial services business more than manufacturing?
A. I don't think so. If you look at us, we have grown very strongly, but for the life insurance business. In life insurance too, it was more our desire not to unnecessarily burn capital that has held us back. Now from Q4 (Jan to March) of last year, we have started growing. If you see the first six months of 2012/13, the life insurance industry has seen negligible growth in new business premium, whereas we are up almost  17 to 18 per cent. Choosing when to grow, and growth of the right quality, is also a very important part of strategy. It (running a business) is not all about always putting your foot on the accelerator. You will either have an accident, or stop abruptly when you run out of fuel.

Q. Coming from a manufacturing background, what have been the learnings in managing a new business?  
A. The learning has been tremendous. We have some great people. Our vice -chairman, both at Bajaj Finance and Bajaj Finserv, is  Nanu Pamnani , who is also an uncle of mine. Pamnai was a career Citibanker. He has retired now. He was the CEO of Citibank in Citi India in the 1980s. He has brought in tremendous knowledge and discipline not only in Bajaj Finance, but across the Finserv businesses.  We have some very good people in our operating companies. Each of our business heads are leaders in their own right. My job is to keep challenging them.   

Q. The next logical step for you is the banking licence. You have made it clear you are keen on one.
A. The way we are building our NBFC (non finance banking company) Bajaj Finance, it can continue growing along three lines of business - commercial loans, SME (small and medium enterprises) loans and consumer finance for a very long time.  So lack of a banking licence has not hampered us. However, If I look at the business 10 years down the line, having a bank licence makes it much more solid and stronger especially on the liabilities side.  A banking licence makes sense in the long term but in the short run not having one is not a hindrance to our growth.

Q. Don't you think there are too many aspirants for banking licences?
A. One keeps hearing a whole bunch of names. I think banking in India has been protected for too long. I can understand that RBI wants to control it so that it grows in a stable manner, but controlling it by creating a shortage is not the answer. Controlling it on a regular basis by giving licences and allowing banks to innovate is the answer.  Look at what some of the new generation private sector banks have done. They have revolutionised the banking space with ATMs, retail loans products, etc.  Think of banking 10 to15 years ago. There is tremendous progress that has come out of giving more licences. We have seen dozens of new players in the life as well as in the general insurance space.  Why cannot we do the same in banking?