THE LAST YEAR HAS BEEN ONE OF

unparalleled challenges for Indian businesses. While we have not encountered recessionary trends
like some countries in the developed world, we have been faced with a period of significant slowdown
after many years of tremendous growth. This has required a sudden change in short-term strategy
and business plans.
At Bajaj Finserv, we are building our financial services business around four pillars. The first pillar
is Lending, where Bajaj Auto Finance (BAFL) is evolving from a pure-play auto finance company to a
broader consumer finance entity. The second pillar is Insurance, where we have Bajaj Allianz Life
(BALIC) and Bajaj Allianz General (BAGIC). Third is Investments—here we have announced a joint
venture with Allianz Global Investors to form an asset management company and will shortly apply
to SEBI for a license. We hope to get off the ground in the first half of 2010-11 Finally, we have plans
for starting a Distribution and Advisory business early next year.
With the above plan as the backdrop, it is relevant to understand how we chose to grow over the
last year through the slowdown. I have three general takeaways from the slowdown. One- excessive
leverage is bad, equity is sacred and the days of growth without profit are gone. Two- one can expect
tighter regulations in financial services in the coming years, particularly focused towards protection of
consumer and investor interest. Thirdglobalisation will take a step backward as countries and
companies focus inwards.
Keeping in mind the above, our actions were in five focus areas. First, it’s timely to choose new
business opportunities including expansion of current ones keeping in mind the need to balance
growth with profit. In BAFL in 2008-09, we reduced our exposure to auto and consumer durable
loans where the average ticket size is between Rs 20,000-40,000 and added new business lines
including small business loans, loan against shares, etc. with average ticket size of Rs 10-80 lakh.
While our disbursals fell 19% to Rs. 3036 crore, revenues actually increased 20% to Rs. 600 crore
and profits increased almost 70% to Rs. 34 crore. In our effort to combat
the slowdown in the Insurance business, we first consciously decided what ‘not’ to do. We reduced
our exposure to less profitable business lines including group health in BALIC, and corporate business
(including fire and engineering) in BAGIC. That allowed us to focus on and grow the more profitable
retail business. In 2008-09, BALIC reported a 9% growth in GWP to Rs. 10,625 crore and a profit of
Rs. 45 crore while BAGIC GWP grew by 10% to Rs. 2649 crore while profit was Rs. 95 crore. These, I
believe, are amongst the best performances in the industry.
Second, in periods of slowdown, the customers’ ability to spend also reduces. Hence, customer
nature would be to buy products/services that are either cheaper or of greater value. From a
manufacturer’s point of view, while it’s easier to cut prices in the short term, a challenging but more
sustainable strategy is to increase value to customers. This requires a strong and differentiated brand
and hence, it’s critical to keep building your brand through this period. Somebody correctly said that
‘products sell but brands profit’. In BAGIC and BALIC, we consistently attempt to improve customer
service through speedy and accurate policy issuance and quick and fair claim
settlements. We believe these capabilities will over time create a strong and competitive brand.
Third, you must continue to improve the productivity of your internal resources as well as across the
supply chain focusing on value, not just on cost. Until 2007-08, we used to run BALIC operations on
a pan-India basis through 1,200 branches. In 2008-09, we consolidated our operations by setting up
seven regional hubs, thereby cutting operating expenses from 21% to 18% of gross premium. This
year, we have embarked on similar consolidation for our general insurance business. Also, in BAFL in
2008-09, we outsourced a large part of our operations, thereby moving a significant part of our fixed
costs into a variable structure.
Fourth, this is the time to focus on your employees who can get de-motivated in a slowdown. Identify
and prepare your critical resources to look for current and future opportunities for growth and profit.
At the same time if there is a need to downsize the workforce, ensure the exit process is as clear and
transparent as possible.
Finally, it’s most important to maintain the highest level of corporate governance standards, since
during tough times, employees, customers, investors and society in general, derive comfort from
those they trust more.
 For now, the worst may be behind us but we still have a challenging year ahead. From all the data
and indicators that I see, the first six months will be sluggish but business will pick up in the second
half of 2009-10. By the end of 2010, in the absence of a new blow-up in the West and with our
government focusing on growth, India should be on the path to prosperity all over again.

QUESTIONS:
1.Discuss the culture prevailing in the
company.What values are being promoted by its
MD-Sanjiv Bajaj
2.How Bajaj Finserv has planned to differentiate
its offerings?