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India’s financial sector is dominated by large government-owned and private-sector banks.
Major players like State Bank of India (SBI), HDFC Bank, and ICICI Bank control much of the financial space, spanning lending, insurance, and asset management.
However, Bajaj Group is now challenging this dominance, thanks to the high profitability and market capitalisation (mcap) of its financial arms such as Bajaj Finserv, Bajaj Finance, and the newly listed Bajaj Housing Finance.
Following the initial public offering (IPO) and listing of Bajaj Housing Finance this month, Bajaj Group has emerged as the third-largest financial group in the country by mcap, behind the HDFC and ICICI groups but ahead of the SBI group.
Bajaj Housing Finance, which more than doubled on listing day, added Rs 1.36 trillion to the group’s mcap.
The four listed financial companies in the group — Bajaj Holdings, Bajaj Finserv, Bajaj Finance, and Bajaj Housing Finance — had a combined mcap of Rs 10.36 trillion on September 23, compared to Rs 9.6 trillion for the three SBI group companies — State Bank of India, SBI Life Insurance, and SBI Cards & Payment Services.
HDFC Group tops the league with a combined mcap of Rs 15.75 trillion, followed by the ICICI group at Rs 11.95 trillion.
The ICICI group has four listed companies — ICICI Bank, ICICI Prudential Life Insurance, ICICI Lombard General Insurance, and ICICI Securities.
However, the total assets of Bajaj Finserv and Bajaj Finance remain a fraction of the overall assets of the country’s top banks.
Bajaj Finance, the group’s retail lender, is the most profitable (absolute profit) non-banking financial company (NBFC) in the country by a wide margin.
The retail lender reported a net profit of Rs 14,451 crore in 2023-24 (FY24) on revenues of Rs 54,990 crore, with total assets of Rs 3.7 trillion at the end of March 2024.
It is followed by Shriram Finance, which posted a net profit of Rs 7,366 crore in FY24 on revenues of Rs 36,413 crore, with total assets of Rs 2.45 trillion at the end of March 2024.
On a standalone basis (lending operations), Bajaj Finance is now the country’s sixth most profitable lender, ahead of leading institutions such as Kotak Mahindra Bank, Punjab National Bank, and Bank of India. On a consolidated basis, the Bajaj group’s financial firms posted a combined net profit of Rs 15,424 crore in FY24, behind Kotak Mahindra Bank but ahead of public sector lender Canara Bank.
Bajaj Finserv is the holding and promoter company for all of the group’s financial services arms. It holds a 51.34 per cent stake in Bajaj Finance.
The company also owns a 74 per cent stake in both Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance.
Bajaj Finance, in turn, is the owner and promoter of Bajaj Housing Finance, holding an 88.75 per cent stake in the mortgage lender after listing. Bajaj Finserv was promoted by Bajaj Holdings, which held a 38 per cent stake at the end of June this year.
According to analysts, Bajaj group’s higher profitability and faster growth have made it a formidable competitor to banks that benefit from low-cost deposit access.
“Bajaj Finance has pioneered retail lending through partnerships with banks, retailers, and large investments in technology and digitisation.
"This has enabled it to grow at 30 per cent year-on-year for nearly a decade.
"Its lending business is also one of the most profitable in the industry, allowing it to self-finance its growth,” says Dhananjay Sinha, co-head of research and equity strategy at Systematix Institutional Equities.
Bajaj Finance reported a return on assets (RoA) — a key measure of profitability and efficiency in the banking and finance industry — of 3.9 per cent in FY24, over three times the average RoA of listed banks, which stood at 1.14 per cent last financial year.
According to Business Standard’s calculations, Kotak Mahindra Bank leads its peers with an RoA of 2.3 per cent in FY24, followed by ICICI Bank at 2.2 per cent.
Similarly, Bajaj Finance’s return on equity (RoE) of 22 per cent at the consolidated level in FY24 is 1,000 basis points higher than the average RoE of listed banks, which stood at 12 per cent last financial year.
A relatively higher RoA and RoE gives Bajaj Finance the financial headroom to grow its loan book at a faster rate without relying heavily on balance sheet leverage — a key risk for NBFCs, as they don’t have access to low-cost deposits.
Banks, by contrast, grow their loan books largely by leveraging low-cost current account and savings account deposits.
Bajaj Finance has now unveiled its updated long-range strategy, aiming for profitable growth and positioning itself among India’s top 20 profit-making companies and top five financial services firms by 2027-28.
As part of its growth strategy, the lender has launched nine new lending products, including commercial vehicle finance, industrial equipment financing, automobile leasing, affordable mortgages, postpaid credit, co-lending, assured buyback on new cars, embedded insurance, and electric vehicle financing.
“The long-range strategy highlights the company’s ambitions, philosophy, competitive positioning, and aspirations for market share.
"Bajaj Finance plans to enhance its business agility, optimise its cost structure, and deepen customer relationships to capture a larger share of its customers’ financial needs,” write analysts Abhijit Tibrewal, Nitin Aggarwal, and Raghav Khemani of Motilal Oswal Financial Services in a recent company update.
However, brokerages remain cautious about the stock, citing concerns about rising capital costs, increased delinquencies in retail loans, and heightened competition in retail lending.
Bajaj Finance has underperformed, with its stock price down 3 per cent in the past year compared to a 28 per cent rise in the S&P BSE Sensex over the same period.
Bajaj Finserv, on the other hand, is up 24 per cent, while Bajaj Holdings has gained 50 per cent over the past 12 months.
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