80% of Bajaj group’s valuation comes from financial services – Times of India


Mumbai: Rahul Bajaj’s business legacy are group companies with a market capitalisation of over Rs 8.4 lakh crore with around 80% of the group’s valuation coming from the financial services twins – Bajaj Finance and Bajaj Finserv.

Almost every industrial group in the country has an in-house financial services company. More so for companies in the auto industries considering that they have a captive business to finance. However, in all business groups, financial services are usually an adjunct to the manufacturing business.

Much of the valuation of the financial services business comes from the lending business. What makes Bajaj Finserv a superstar among lenders is its success in small-ticket lending building a personal finance loan book bigger than most banks. The company’s Use of technology and efficient underwriting process has ensured that it can lend instantly without defaults.

What enabled Bajaj’s financial services business to come to its own, was the decision to demerge businesses in 2008. The Bajaj Group is a rare instance where a division of businesses among family members has led to a multiplication of wealth. In 2006, when Rahul Bajaj began the process of unlocking value at Bajaj Auto one of the outcomes was the demerger of the financial services business from the two-wheeler business and the separation of responsibilities between his two sons Sanjiv and Rajiv.

The demerger resulted in the splitting of the business group between two brothers with each having a market capitalisation of around Rs 8,000 crore. This was although, at the time of the demerger, Bajaj Finance was not even among the top five finance companies. Yet, what gave the company the valuation was the ownership of a stake in Bajaj Allianz Life and Bajaj Allianz General Insurance.

Rahul Bajaj’s venture into insurance has an interesting back story. Bajaj had got into the insurance business in 2001 after being approached by the German insurer which had fallen out of a partnership with Alpic Finance and was looking for a big name most of which were already taken. So keen was Allianz for a partnership that it had agreed to fund a large part of the investment into the insurance business despite having a minority stake of 26%. The deal was that Bajaj would enable Allianz to pick up a majority stake at a pre-determined price in 2016 provided the rules allowed. However, the restriction continued even after 2016 and Bajaj remained the majority shareholder. Today the two insurance companies are among the most valuable in the country.