Where Bajaj Finance hopes to make the real difference is in service: It wants to disburse loans faster than its peers, allow customers to pre-pay loans from their desktops and return documents on loans against property in less than five days — an industry record. Of course, customers have round-the-clock access to its call centres.
The plan seems to be working. “The company is now stimulating demand for 8 to 10 per cent of LCD televisions sold in the country every month, a reflection of the strategy to pursue affluent customers,” says Jain. The loan book grew to Rs 3,500 crore at the end of September 2009 from Rs 2,500 crore a year ago. While it’s hard to look too far ahead, Jain is hoping to grow the book by 30 to 40 per cent over the next 18 to 24 months. Though provisions might depress profits in the current year, the business should become more profitable from next year onwards as costs come off their peak and spreads improve in a better macroeconomic environment.
Bajaj believes unsecured loans can fetch rates of 22 to 24 per cent, while loans against property can bring in 13 to 14 per cent. So given the cost of funds at 8.5 to 9 per cent, the spreads could be as high as 1,000 basis points for some products.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at email@example.com