THE NAYA BA­JAJ

How Ba­jaj be­came the fourth most valu­able group in the coun­try and what it is do­ing to stay on top

Business Today - - CONTENTS - BY NEVIN JOHN PHO­TOGRAPHS BY RACHIT GOSWAMI

AS HE RE­LAXES at home on the premises of Ba­jaj Auto’s plant in Akurdi, near Pune, Rahul Ba­jaj, 80, has ev­ery rea­son to smile. The year 2018 has been good for the Ba­jaj group. Ba­jaj Fi­nance, run by younger son San­jiv Ba­jaj, has been on a tear over the past few years, and the stock has been in­cluded in the BSE Sen­sex from De­cem­ber 24 as a proxy for the fi­nan­cial ser­vices sec­tor.

Mean­while, elder son Ra­jiv

Ba­jaj is plan­ning to in­tro­duce new su­per­bikes in as­so­ci­a­tion with the British mo­tor­cy­cle maker Tri­umph, launch elec­tric ve­hi­cles, and cap­ture the com­mer­cial car mar­ket with the quadri­cy­cle Qute. Mukand Ltd, the group’s steel arm, has started work on the ` 600-crore steel rolling plant of Mukand Sumi Spe­cial Steel in Kar­nataka – a joint ven­ture be­tween Mukand Ltd (run by cousin Ni­raj Ba­jaj) and Su­mit­omo Cor­po­ra­tion of Ja­pan.

Above all, the Ba­jaj group ended the year 2018 as the fourth biggest in the coun­try by mar­ket cap­i­tal­i­sa­tion (the mar­ket cap of the group was ` 3.77 lakh crore on De­cem­ber 31, 2018, as against ` 30,321 crore on March 31, 2007), be­hind just HDFC, Tata group and Re­liance In­dus­tries, and pip­ping such wor­thies as the AV Birla group, the Wa­dias, the Go­drejs, the Mahin­dras, the Ada­nis...They are now the third-largest fam­ily group af­ter Tatas and Am­ba­nis.

In a first ever ex­clu­sive in­ter­ac­tion with the Press, the en­tire Ba­jaj fam­ily met with Busi­ness To­day in Mum­bai and Pune, to talk about what the next steps would be for the many busi­nesses that the fam­ily mem­bers head.

The Ba­jaj group has seen sharp growth in the past few years pow­ered by the dream run of its fi­nan­cial ser­vices com­pa­nies, which have been punch­ing way over their weight. Though the group is still rel­a­tively small in terms of rev­enues – group rev­enues were ` 65,000 crore as of March 2018 (in­clud­ing over ` 17,000 crore gross writ­ten pre­mium of two in­sur­ance com­pa­nies) – it is im­mensely prof­itable. In FY18, it boasted prof­its of around ` 10,000 crore. While most peo­ple still as­so­ciate the group with Ba­jaj Auto, over the past decade, rev­enue and profit growth has been driven by the fi­nan­cial ser­vices com­pa­nies headed by San­jiv.

Till 2007, the fi­nance busi­ness hardly ex­isted. Be­cause Ba­jaj Auto was so cash rich, it had an auto fi­nanc­ing divi­sion for Ba­jaj two-wheel­ers. Rahul Ba­jaj de­merged it from the auto busi­ness to cre­ate Ba­jaj Fin­serv, be­sides cre­at­ing a hold­ing com­pany, Ba­jaj Hold­ings & In­vest­ments (BHIL), with the cash pool that both auto and fi­nance busi­nesses could ac­cess. He ac­knowl­edges that the move to delink the lend­ing busi­ness from Ba­jaj Auto was the game changer. “It was the tough­est and yet the most suc­cess­ful de­ci­sion of my life,” he says.

“The Ba­jaj group rightly sensed that fi­nan­cial ser­vices was go­ing to boom and stayed fo­cused on it, cash­ing in on the big data,” says Raamdeo Agrawal, co­founder of Moti­lal Oswal Fi­nan­cial Ser­vices. To­day, the two listed fi­nan­cial ser­vices busi­nesses — lend­ing arm Ba­jaj Fi­nance and its hold­ing com­pany Ba­jaj Fin­serv — are to­gether around three times the mar­ket size (`2.55 lakh crore on De­cem­ber 31, 2018) of the far bet­ter known Ba­jaj Auto, the third-largest mo­tor­cy­cle maker in the world. While con­quer­ing new heights on one side, the Ba­jaj group is only now try­ing to get equally ag­gres­sive in its other two busi­nesses — elec­tri­cals and steel. (Shekhar Ba­jaj, who is also Rahul Ba­jaj’s cousin, runs Ba­jaj Elec­tri­cals.)

“We are now so well aligned that we don’t need to de­bate ( over) any­thing” NANOO PAM­NANI Vice Chair­man, Ba­jaj Fin­Serv

LENDER’S PRIDE

When San­jiv Ba­jaj was picked to head the new com­pany in 2008, he was given one cru­cial aide from within the ex­tended fam­ily – Nanoo Pam­nani, the brother-in­law of Rahul Ba­jaj’s wife who had just then re­tired from Citibank. Pam­nani had been one of Citibank’s youngest CEOs at 37, and his achieve­ments in­cluded turn­ing around the bank’s pri­vate bank­ing busi­ness of the Asia Pa­cific re­gion, as well as set­ting up its global ser­vice cen­tre in In­dia, which was later sold to TCS. He had been look­ing for­ward to re­lax­ing and tour­ing the world but Rahul Ba­jaj made him change his mind and take over as Vice-Chair­man of Ba­jaj Fin­serv, with him­self as Chair­man and San­jiv as Man­ag­ing Di­rec­tor.

In 2001, soon af­ter in­sur­ance was opened to the pri­vate sec­tor, the Ba­jaj group had set up both a life and a non-life in­sur­ance com­pany in part­ner­ship with the Ger­man in­surer Al­lianz Group – Ba­jaj Al­lianz Life In­sur­ance and Ba­jaj Al­lianz Gen­eral In­sur­ance. Af­ter the de­merger in 2008, both were brought un­der Ba­jaj Fin­serv, and a non-bank­ing fi­nance com­pany (NBFC), Ba­jaj Fi­nance Ltd (BFL), floated un­der it (Ba­jaj Fin­serv has 55 per cent stake in BFL and 74 per cent each in two in­sur­ance com­pa­nies). San­jiv and Pam­nani in­ter­viewed over 30 can­di­dates be­fore choos­ing Ra­jeev Jain as Man­ag­ing Di­rec­tor of BFL — and it is this trio of Ba­jaj, Pam­nani and Jain that has since charted the com­pany’s amaz­ing rise. “We’re now so well aligned that we don’t

need to de­bate any­thing,” says Pam­nani.

In its short life, BFL has spread it­self across 1,613 lo­ca­tions (as on Septem­ber 2018), build­ing as­sets un­der man­age­ment (AUM) of ` 1,00,217 crore, which is 38 per cent more com­pared to the same time pre­vi­ous year. The AUM grew at a com­pounded an­nual growth rate (CAGR) of 42 per cent to ` 84,033 crore till March 2018. In 2017/18, BFL’s con­sol­i­dated op­er­at­ing in­come rose 34 per cent over the pre­vi­ous year to ` 13,466 crore and net profit 46 per cent to ` 2,674 crore as it dis­bursed 15.32 mil­lion new loans. Of these, the biggest chunk was for con­sumer durables and dig­i­tal prod­ucts. These two ac­count for over 45 per cent of BFL’s busi­ness. SMEs ac­count for an­other 30 per cent; com­mer­cial lend­ing and ru­ral busi­ness ac­count for the re­main­ing por­tion of the pie.

The com­pany is care­ful and gives loans only to cus­tomers it feels will never de­fault. “We’re in the busi­ness of risk,” says Jain. “Lend­ing is not an is­sue, but un­til the cus­tomer has paid the last in­stal­ment, the com­pany is not mak­ing money. My mar­gin lies in the last in­stal­ment.” This shows up in its net non-per­form­ing as­set (NPA) ra­tio, which at 0.53 per cent in the Septem­ber quar­ter com­pares favourably with the best run banks. (HDFC Bank had a net NPA ra­tio of 0.40 per cent while Ko­tak Mahin­dra Bank had a net NPA ra­tio of 0.86 per cent for the quar­ter.) The cap­i­tal ad­e­quacy ra­tio, as of Septem­ber 30, was 22.13 per cent as against reg­u­la­tory norm of 15 per cent. Bor­row­ings stood at ` 73,822 crore — 34 per cent from banks and 35 per cent through non­con­vert­ible deben­tures (NCDs). BFL has been able to bring down the rel­a­tively ex­pen­sive bor­row­ing from banks, which used to be nearly 80 per cent in its early years. The cost of bor­row­ing fell 0.75 per cent in the last fi­nan­cial year.

Deven Chok­sey, Man­ag­ing Di­rec­tor, KR Chok­sey In­vest­ment Man­agers, says the Ba­jaj’s fi­nan­cial ser­vices busi­ness is bet­ter placed to take on the es­tab­lished banks. “The over­all liq­uid­ity crunch in the mar­ket has af­fected the busi­ness of NBFCs but BFL has man­aged to bounce back since it has a bet­ter as­set-li­a­bil­ity ra­tio.” The en­tire NBFC sec­tor has seen a sharp ero­sion in value af­ter the de­fault by IL&FS Fi­nan­cial Ser­vices, and BFL and Ba­jaj Fin­serv have suf­fered too. Their mar­ket cap fell around ` 30,000 crore end-Au­gust but started re­cov­er­ing from No­vem­ber.

Jain be­lieves BFL has en­tre­pre­neur­ial nim­ble­ness

and in­sti­tu­tional strength. “We’re con­stantly in­no­vat­ing and dis­rupt­ing, iden­ti­fy­ing the gaps in our prod­uct port­fo­lio and fill­ing them,” he says. San­jiv adds one more rea­son. “We looked at long-term busi­ness op­por­tu­ni­ties and stayed away from short-term prof­itable dis­trac­tions.” For in­stance, BFL shut down its two-yearold in­fra­struc­ture lend­ing busi­ness in 2012 sens­ing a down­turn.

Over the years, with ex­ten­sive use of tech­nol­ogy, BFL has striven to make bor­row­ing eas­ier and less costly. It claims to process loans in 30 sec­onds. “When we en­tered the busi­ness, the pro­cess­ing time was four days,” says Jain. To make things eas­ier, BFL dis­trib­uted ex­ist­ing mem­ber iden­ti­fi­ca­tion (EMI) cards to 15 mil­lion cus­tomers. The com­pany’s Wal­let app pro­vides in­stant loans of ` 5,000-15,000 to those with EMI cards. The com­pany has also launched a credit card in part­ner­ship with

RBL Bank; over half a mil­lion have been dis­trib­uted in two years.

To in­crease its cus­tomer base – the costli­est part of any fi­nan­cial ser­vices com­pany’s op­er­a­tions – BFL uses cross-sell­ing and cre­ates ‘ propen­sity mod­els’ based on an­a­lyt­ics. Of the 15 mil­lion new loans BFL gave in the last fi­nan­cial year, 9.2 mil­lion were to re­peat cus­tomers.

Much of BFL’s con­sumer fi­nanc­ing busi­ness comes from tie-ups with man­u­fac­tur­ers, which leads to fi­nanc­ing from Ba­jaj be­ing pro­vided rou­tinely – of­ten at no in­ter­est – to buy­ers. “Win­ning over busi­ness houses is a hard job; much tougher than deal­ing with re­tail cus­tomers,” says Jain. Its part­ners in con­sumer durables fi­nanc­ing in­clude LG, Sam­sung and Sony. “They give us a com­mis­sion for the ad­di­tional sales they get be­cause of our fi­nanc­ing, usu­ally out of their mar­ket­ing spend. This en­ables us to of­fer zero per cent in­ter­est. But they have to be con­vinced we’re adding value.”

The in­sur­ance busi­ness has also in­creased in the past few years. “In gen­eral in­sur­ance, the mar­gins are ra­zor thin. But we have been able to grow the busi­ness faster com­pared to the in­dus­try. The gen­eral busi­ness is ` 1.5 lakh crore. The in­dus­try’s an­nual growth is 16-17 per cent, but we grow at 24-25 per cent,” says Ta­pan Singhel, MD and CEO, Ba­jaj Al­lianz Gen­eral In­sur­ance.

BFL has democra­tised en­trepreneur­ship within the com­pany. “Once we’re con­vinced of an em­ployee’s new idea, we give him all the tools to build the busi­ness,” says San­jiv. “We have 30 dif­fer­ent CEOs run­ning 30 dif­fer­ent lines of busi­ness. The en­tre­pre­neur­ial free­dom we have given em­ploy­ees helps us keep at­tri­tion low.”

As In­dia’s econ­omy grows, so will the loan mar-

“Un­til the cus­tomer has paid the last in­stal­ment the com­pany is not mak­ing money. My mar­gin lies in the last in­stal­ment” RA­JEEV JAIN MD, Ba­jaj Fi­nance “We have be­gun re­search on how to cut down EV ( elec­tric ve­hi­cle) costs. We need our own bat­tery man­age­ment sys­tem...” PRADEEP SHRIVASTAVA ED, Ba­jaj Auto

ket. Jain main­tains that the best for BFL is yet to come. “The op­por­tu­nity will in­crease as the coun­try’s GDP per capita crosses $2,000, which it is ex­pected to do by 2020/21,” says San­jiv. “We are com­mit­ted to grow­ing our bal­ance sheet by 25-27 per cent each year and net in­come by 20-22 per cent, in the medium term. We want to dou­ble our bal­ance sheet and profit in the next three-and-a-half years.” He be­lieves that while BFL’s range of prod­ucts is largely com­plete, dis­tri­bu­tion cov­er­age – de­spite 862 ur­ban branches and 751 ru­ral ones – can still be dou­bled. “We now serve a ` 14 lakh crore mar­ket but want it to be­come a ` 30 lakh crore mar­ket in the next decade.”

Liq­uid­ity squeeze is a big is­sue, but BFL is at an ad­van­ta­geous po­si­tion due to low as­set-li­a­bil­ity gap com­pared to its peer NBFCs. BFL’s as­sets ma­tur­ing in less than a year are 28 per cent, which is more than its debt re­pay­ments obli­ga­tions, says a re­port by Jef­feries Fi­nan­cial Group. BFL has been po­si­tioned rea­son­ably well on all ma­jor pa­ram­e­ters that are used to gauge NBFCs in this tough en­vi­ron­ment — di­ver­si­fied li­a­bil­ity pro­file, bet­ter as­set li­a­bil­ity man­age­ment, di­ver­si­fi­ca­tion of loan book, strong cap­i­tal­i­sa­tion and sta­ble credit rat­ing, says Os­car Martins, Man­ag­ing Di­rec­tor (Fi­nan­cial Ser­vices), Pro­tiv­iti Mem­ber Firm for In­dia.

How­ever, many an­a­lysts feel that the Ba­jaj Fi­nance stock has be­come too ex­pen­sive be­cause of its re­lent­less rise. The ag­gre­gate mar­ket value of all the fi­nan­cial ser­vices com­pa­nies BHIL, BFL and Ba­jaj Fin­serv, at ` 2.87 lakh crore, is above that of SBI (`2.6 lakh crore), ICICI Bank (`2.3 lakh crore) and Ko­tak Mahin­dra Bank (`2.4 lakh crore), as on De­cem­ber 2018. HDFC Bank (`5.7 lakh crore) is the only one way ahead of them.

SIN­GLE TRACK CHAMP

Mean­while, elder brother Ra­jiv Ba­jaj has his own plans to put Ba­jaj Auto on a high-growth, high­profit tra­jec­tory with su­per bikes, elec­tric ve­hi­cles and the quadri­cy­cle. Ba­jaj Auto re­ported 31 per cent growth in mo­tor­cy­cle sales in De­cem­ber at 2,98,855 units. The over­all sales in­clud­ing three-wheel­ers in­creased by 18 per cent to 3,46,199 units. The ex­ports stood at 165,848 units in the month, an in­crease of 16 per cent.

Ra­jiv says his fo­cused busi­ness strat­egy works in favour of the com­pany. “Do what­ever you think best, but be the best at what­ever you do.” This motto, of Ra­jiv’s grand­fa­ther Ka­mal­nayan Ba­jaj, re­peated to him by Rahul Ba­jaj when Ra­jiv joined Ba­jaj Auto (BAL) in the mid 1990s, res­onates in his mind. At that time, BAL ex­ports were al­most nil; the likes of Yamaha, Suzuki, Honda, Kawasaki, BMW, Du­cati, Har­ley David­son and Tri­umph dom­i­nated the global two-wheeler mar­ket.

The odds were heav­ily stacked against BAL mak­ing an im­pact glob­ally. “Our to­tal man­power at the time was about 10,000, while a com­pany like Honda had 10,000 peo­ple in its R&D divi­sion alone,” says Ra­jiv. He de­cided – in keep­ing with his learn­ings from mar­ket­ing gu­rus like Al Ries and Jack Trout – to nar­row BAL’s fo­cus.

He de­cided that the com­pany would not make all kinds of twowheel­ers but stick to one seg­ment: mo­tor­cy­cles. “Across the world, it was the biggest in gen­er­at­ing sales and prof­its and had the high­est pro­file and the most so­phis­ti­cated tech­nol­ogy,” Ra­jiv says. If that meant giv­ing up on mopeds and scoot­ers – de­spite the rep­u­ta­tion the Chetak had ac­quired – Ra­jiv de­cided he would do so. The de­ci­sion was highly con­tro­ver­sial, with even Rahul Ba­jaj op­pos­ing it, but Ra­jiv was de­ter­mined. (BAL, how­ever, did not give up three-wheeler man­u­fac­tur­ing – it still makes many of the ‘ au­tos’ and three-wheeler goods car­ri­ers – 62 per cent mar­ket share – on In­dian streets and also ex­ports them to sev­eral African and South­east Asian coun­tries.)

BAL had ear­lier made mo­tor­cy­cles in 1986, in col­lab­o­ra­tion with Kawasaki, but the al­liance ran into rough weather af­ter the Ja­panese com­pany raised qual­ity is­sues. Restart­ing work on a new bike, the Pul­sar, in 1998, Ra­jiv fo­cused heav­ily on qual­ity. He in­tro­duced the dig­i­tal twin spark ig­ni­tion tech­nol­ogy, which has since be­come a Ba­jaj trade­mark. Pradeep Shrivastava, who started with Tata Mo­tors, was put in charge of the fac­tory in Chakan, Ma­ha­rash­tra, which would man­u­fac­ture Pul­sars, the first lot be­ing pro­duced in 2001. Shrivastava re­duced the num­ber of sup­pli­ers – each com­po­nent ear­lier had mul­ti­ple sup­pli­ers – from 800 to 200, and in­tro­duced the tough ‘ Ja­panese work cul­ture’ with the guid­ance of a Ja­panese con­sul­tant. Pro­duc­tiv­ity shot up – while at the peak 25,000 work­ers pro­duced 1 mil­lion scoot­ers an­nu­ally, a work­force of 9,000 now makes four times that num­ber of bikes.

“About 85% of our ex­port rev­enue comes from coun­tries where we are the biggest in the mar­ket or the se­cond biggest” RAKESH SHARMA Chief Com­mer­cial Of­fi­cer, Ba­jaj Auto

To­day, Ba­jaj is the world’s third­largest mo­tor­cy­cle man­u­fac­turer with sales of 3.4 mil­lion units in the last fi­nan­cial year af­ter Honda (19.49 mil­lion in­clud­ing scoot­ers) and Hero Mo­toCorp (7.5 mil­lion in­clud­ing scoot­ers). Pul­sar is ex­ported to 30 coun­tries and is the top sell­ing sports bike in 19 coun­tries. “BAL ex­ports 40-45 per cent of its pro­duc­tion to 73 coun­tries,” says Ra­jiv. In com­par­i­son, TVS Ltd ex­ports about 15 per cent, Hero Mo­toCorp and Royal En­field about three per cent each. In 2017/18, BAL ex­ported 1.39 mil­lion mo­tor­cy­cles in all, a rise of 14.5 per cent over the pre­vi­ous year, while its ex­port rev­enue was $1.37 bil­lion, up by 25.3 per cent. Ex­ports have risen from $200-300 mil­lion a decade ago to $1.37 bil­lion in 2017/18.

Around 25 per cent of BAL’s over­seas busi­ness is in Cen­tral and South Amer­ica. “In Colom­bia, we are No. 1, with Yamaha and Honda as our main ri­vals,” says Ra­jiv. “In Peru and Ar­gentina, we are in the se­cond spot.” An­other 40-45 per cent of ex­ports are to Africa, and the re­main­ing mainly to West Asia, South­east Asia and the other South Asian coun­tries, though it has en­tered some mar­kets in Europe too. “About 85 per cent of our ex­port rev­enue comes from coun­tries where we are the biggest in the mar­ket or the se­cond biggest,” says Rakesh Sharma, who heads BAL’s in­ter­na­tional busi­ness. The com­pany has also en­tered into global tieups – start­ing with a 14.7 per cent stake in 2007, it has ac­quired 48 per cent eq­uity in Aus­trian bike man­u­fac­turer KTM Power Sports AG and sells KTM sports bikes and su­per­bikes in In­dia. In Au­gust 2017, it also be­gan a strate­gic non-eq­uity part­ner­ship with Tri­umph Mo­tor­cy­cles to both man­u­fac­ture some of its bikes and sell them in In­dia.

In rev­enue growth, BAL is no slouch. In 2017/18, rev­enues in­creased 10.72 per cent to ` 25,563 crore and net profit by 6.28 per cent to ` 4,068 crore. An­a­lysts say that there are chal­lenges to BAL be­cause of ris­ing com­pe­ti­tion in the en­try-level seg­ment. The man­age­ment started price cuts to gain mar­ket share in the en­try-level seg­ment. This, cou­pled with rise in raw ma­te­rial prices, is ex­pected to neg­a­tively af­fect the

EBITDA mar­gin, they say.

At a mar­ket val­u­a­tion of ` 79,000 crore, BAL is ` 18,000 crore big­ger than its ri­val Hero. An­other high mar­gin mo­tor­bike maker, Sid­dhartha Lal’s Eicher Mo­tors, which man­u­fac­tur­ers Royal En­field, is also be­hind BAL at ` 64,000 crore. (Eicher had once over­taken BAL a year back.)

Will BAL ever make scoot­ers again? Ra­jiv is quite sure it won’t. He is res­o­lute about stick­ing to what he calls the ‘ tri­an­gle strat­egy’ –one mass prod­uct (mo­tor­bikes) at the cen­tre of the tri­an­gle and niche ones (in­tracity ve­hi­cles like three-wheel­ers and Qute, ur­ban elec­tric ve­hi­cles and su­per­bikes) at the three corners. “I don’t want to get into two mass cat­e­gories like mo­tor­bikes and scoot­ers at the same time,” he says. “Those who have done so in the past lost in at least one.” In­stead, he wants to cover smaller seg­ments in the mo­tor­cy­cle cat­e­gory. “Dosa- mak­ing is one busi­ness, but some peo­ple get into mak­ing neer dosa, but­ter dosa, mysore masala dosa and more,” he adds. “That’s how vol­umes are in­creased.” The first prod­uct of the Ba­jaj-Tri­umph al­liance, for in­stance, will be an ‘ easy rid­ing’ or ‘ cruiser’ bike, which BAL at present does not have. “We’re de­vel­op­ing new brands and cre­at­ing more spe­cialised seg­ments,” says Ra­jiv.

In the niche ar­eas, BAL’s three-wheeler fac­tory at Au­rangabad also makes the four-wheeler quadri­cy­cle Qute, which has fi­nally ob­tained per­mis­sion to launch in In­dia af­ter years of wait­ing. First un­veiled at the Delhi Auto Expo in 2012, and ex­ported to 20 coun­tries since 2016, it was not seen on In­dian roads ear­lier for lack of clear­ances and var­i­ous pub­lic in­ter­est lit­i­ga­tions rais­ing safety con­cerns. In­tended mainly as taxis, and avail­able in CNG, LPG and petrol vari­ants, Qute is likely to launch first in Ker­ala and North East at a price slightly higher than a Maruti Alto 800 in Delhi, at ` 2.6 lakh.

How­ever, three-wheel­ers too are not go­ing to dis­ap­pear any time soon, and BAL is look­ing to ex­pand the Au­rangabad ca­pac­ity from 840,000 units a year to 1 mil­lion.

In su­per­bikes, BAL in­tends to bring more mod­els from the KTM and Tri­umph line-up to In­dia, in­clud­ing KTM’s Husq­varna. BAL is also work­ing on its first elec­tric mo­tor­bike un­der the ur­ban­ite cat­e­gory which it hopes to launch in 2019. (An elec­tric ver­sion of Qute is also be­ing read­ied.) “Elec­tric ve­hi­cle (EV) com­po­nents make up most of their cost, and are be­ing sup­plied by gi­ants like Bosch,” says Shrivastava. “We have be­gun re­search on how to cut down EV costs. We need to make our own bat­tery man­age­ment sys­tem and we are look­ing at that too.”

BEST OF THE REST

Auto and fi­nance busi­nesses have driven much of the growth in the Ba­jaj group but the other two listed com­pa­nies – Ba­jaj Elec­tri­cals and Mukand Ltd — have per­haps not cap­i­talised on all op­por­tu­ni­ties, though they have both be­come far more ag­gres­sive of late.

Ba­jaj Elec­tri­cals (BEL) suf­fered an un­ex­pected set­back in Au­gust 2018 with the death of its Man­ag­ing Di­rec­tor Anant Ba­jaj, 41, who was the only son of Chair­man Shekhar Ba­jaj, plung­ing suc­ces­sion into some un­cer­tainty.

Anant, along­side his fa­ther, had been cru­cial in trans­form­ing BEL from a mere mar­keter of elec­tri­cal prod­ucts into a man­u­fac­turer, set­ting up a unit at Ran­jan­gaon, Ma­ha­rash­tra, to make power dis­tri­bu­tion re­lated equip­ment such as trans­mis­sion tow­ers, var­i­ous kinds of poles and other fab­ri­cated struc­tures. BEL also started an EPC (en­gi­neer­ing, pro­cure­ment and con­struc­tion) arm which has pro­vided the light­ing for a num­ber of

iconic in­fra­struc­ture pro­jects such as Kolkata’s Vidyasagar Setu and Mum­bai’s Ban­dra-Worli Sea Link. “Anant took a num­ber of ini­tia­tives, in­clud­ing tough de­ci­sions, and they were yield­ing re­sults,” Shekhar Ba­jaj had said in an ear­lier in­ter­view to Busi­ness To­day.

Be­fore his un­timely demise a few months ago, Anant Ba­jaj, who was the Man­ag­ing Di­rec­tor of Ba­jaj Elec­tri­cals, had spo­ken to this re­porter about how the com­pany had un­der­gone changes. Dur­ing the in­ter­ac­tion, he said, “I im­ple­mented Or­a­cle ERP (en­ter­prise re­source plan­ning) sys­tem and The­ory of Con­straints (ToC) method. But the se­nior staffers showed re­luc­tance to the new sys­tems and pro­ce­dures. In 2012, when I be­came joint MD, I asked the se­niors to ei­ther im­ple­ment or quit. It worked out... With its im­ple­men­ta­tion, the top line got hit, but it even­tu­ally im­proved mar­gins.” Though it has not al­ways been smooth go­ing, BEL is grow­ing rapidly, its turnover in 2017/18 reach­ing ` 4,700 crore and its mar­ket cap al­most dou­bling in the past year to ` 5,156 crore.

It was in the last three years that BEL so­lid­i­fied its po­si­tion in the mar­ket, but is yet to match up with com­pa­nies like Havells In­dia, which is val­ued at ` 43,000 crore in the stock mar­ket. BEL re­cently ap­pointed for­mer Vi­a­com18 ex­ec­u­tive Anuj Pod­dar as its Ex­ec­u­tive Di­rec­tor to head op­er­a­tions.

Mean­while, the Ba­jaj group, de­spite its fi­nan­cial clout, has not re­ally be­come a big player in steel. It rather fo­cused on the smaller niche mar­ket of spe­cialised al­loy and stain­less steel. In a way, the con­ser­vatism helped Mukand Ltd be­cause it avoided the trou­ble that ag­gres­sive in­vestors like Ruias of Es­sar or Bhushans of Bhushan Steel and Bhushan Power got into with their ex­ces­sive lever­age.

The steel com­pany is grow­ing at its own pace with a new joint ven­ture with Su­mit­omo Cor­po­ra­tion of Ja­pan. Mukand Ltd, to­gether with its group com­pa­nies, makes more than 400 grades of spe­cial and al­loy steel used for di­verse pur­poses in the au­to­mo­bile and auto com­po­nent in­dus­try. With a turnover of ` 3,106.25 crore in 2017/18, it has an­nounced plans to ex­pand ex­ist­ing ca­pac­ity fur­ther, as well as start green­field ven­tures.

FAM­ILY MAT­TERS – THE FU­TURE

Rahul Ba­jaj’s brother Shishir Ba­jaj and his son Kusha­gra sep­a­rated from the group en­tirely in 2008, tak­ing the su­gar and power busi­ness, Ba­jaj Hin­dusthan Su­gar, and the con­sumer care busi­ness, Ba­jaj Con­sumer Care, which they had been run­ning, with them. Post the exit of Shishir and fam­ily, the Bajajs for­malised their suc­ces­sion and own­er­ship process. In June 2018, the 22 mem­bers of the fam­ily signed a Fam­ily Set­tle­ment Agree­ment (FSA) which de­lin­eates how the fam­ily wealth will be di­vided and who will man­age which com­pa­nies.

The fam­ily wealth in­cludes shares in listed com­pa­nies and real es­tate hold­ings, be­sides in­di­vid­ual in­comes from salaries and div­i­dends. “We don’t want any prob­lems later on,” says Ni­raj Ba­jaj, Chair­man and Man­ag­ing Di­rec­tor, Mukand Ltd, who played a lead­ing role in for­mu­lat­ing the FSA. “It’s so easy for that to hap­pen when the stakes are high.”

As part of the suc­ces­sion plan­ning, the older Bajajs passed on their wealth to the younger gen­er­a­tion and re­ar­ranged own­er­ship through sale and pur­chase of stocks among them­selves in the var­i­ous listed com­pa­nies of the group, says Ni­raj Ba­jaj, who is also trea­surer of Ba­jaj hold­ing com­pa­nies and the fam­ily wealth. It is es­ti­mated that around ` 7,000 crore worth of stocks were trans­ferred in Jan­uary. The fam­ily has more than 50 per cent stake in all its listed com­pa­nies.

The FSA lays down that the en­tire fam­ily through re­spec­tive com­pany boards will choose the right can­di­date to run each com­pany who could ei­ther be a fam­ily mem­ber or a pro­fes­sional. “We are re­spon­si­ble to ev­ery stake­holder and need to get the best per­son to do the job, be it from within the fam­ily or out­side,” says Rahul Ba­jaj. “For­tu­nately, we have got out­stand­ing pro­fes­sion­als within the fam­ily,” says Mad­hur Ba­jaj, Vice Chair­man of Ba­jaj Auto.

“The legacy of my grand­fa­ther Jam­nalal is in­valu­able. Gandhi ji con­sid­ered him as his adopted son. This value sys­tem helped our fam­ily grow,” says Rahul Ba­jaj. The group con­trols 40 char­i­ta­ble trusts, in­clud­ing in sec­tors like ed­u­ca­tion and health­care, and its func­tions are man­aged by Ni­raj Ba­jaj. So far, Rahul Ba­jaj has been the head of the group, but in the fu­ture a coun­cil of fam­ily mem­bers will de­cide on cru­cial is­sues.

“In gen­eral in­sur­ance, mar­gins are ra­zor thin, but we’ve been able to grow the busi­ness faster than the in­dus­try” TA­PAN SINGHEL CEO and MD, Ba­jaj Al­lianz Gen­eral In­sur­ance

COVER PHO­TO­GRAPH BY RACHIT GOSWAMI

Ra­jiv Ba­jaj MD, Ba­jaj Auto Mad­hur Ba­jaj Vice-Chair­man Ba­jaj Auto

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