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What Bajaj Finance’s Billion Dollar Fundraising Plan Mean

by Paul Morgan

The festival season is in full swing, and along with it comes the season of sales and discounts. From branded clothes to accessories to electronics, smartphones, and motorbikes, everything is available at attractive prices. And to make it even more convenient, easy EMIs are being offered for all these purchases. One company that is capitalizing on this season and emerging as a major player in the lending space is Bajaj Finance.

Bajaj Finance operates in over 3,700 locations across the country and has a vast distribution network. In the fiscal year 2023, the company acquired a record 11.6 million new customers, taking its total customer base to 69.1 million. This impressive growth is a testament to its position as the largest lender for financing discretionary spends across consumer electronics, furniture, and digital products in both urban and rural India.

But what sets Bajaj Finance apart from other lenders? The answer lies in its data-driven approach. By funding a significant percentage of electronics, smartphones, and organized furniture sales in India, Bajaj Finance has access to massive amounts of customer data. This data helps the company make informed decisions about lending and determine the eligibility of underserved customers.

Bajaj Finance leverages technology, including AI, to analyze borrowing needs and customer patterns. This allows the company to create hundreds of customer clusters and tailor loan offers based on AI models. By using data points such as repayment history, banking details, education, and employment, Bajaj Finance can accurately assess creditworthiness and offer loans at attractive terms.

In addition to its data-driven approach, Bajaj Finance has also built a cross-sell customer franchise that allows it to sell multiple products to customers repeatedly. By reducing its cost-to-income ratio and focusing on technology, the company has been able to achieve profitability and deliver impressive returns on equity.

To further fuel its growth, Bajaj Finance is looking to raise nearly a billion dollars this financial year. While there are concerns about the usage of these funds, it is important to note that Bajaj Finance is not just a traditional NBFC focused on making higher margins and minimizing NPAs. The company is investing heavily in technology, including big data, cloud migration, and AI, to continue its growth trajectory.

By leveraging technology, Bajaj Finance aims to sustain a growth rate of over 25% in assets under management while keeping NPAs low and delivering shareholder returns. The proposed fundraising could have a temporary impact on the company’s valuation, but it is expected to make the stock relatively more attractive to long-term investors.

It is important to note that the information provided in this article is for informational purposes only and should not be considered as a stock recommendation. Investors should conduct their own research and analysis before making any investment decisions.

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