A Detailed Analysis of the Conglomerate

Group 4

Ankit Goel 20/2009

Lokesh Yadav 38/2009

Mounis Parwaiz 47/2009

Ina Arora 76/2009

Saurabh Agarwal 78/2009

Submitted to: Prof. Ram Adhar Chopra

Presented by:

Date: 3rd October 2010

• Objectives of the Study• Overview of Bajaj Group • Bajaj Auto Limited• Bajaj Allianz Life Insurance Limited • Bajaj Allianz General Insurance Limited • Bajaj Finserv Lending• Wind Energy Business• Diversification Plans and their Prospects• Conclusion• References

Primary Objective:

To analyze the strategy and performance of Bajaj Finserv (BFSL) over the past few years and identify the prospects of its diversification plans

Secondary Objectives:

To analyze growth of the Life Insurance and General Insurance businesses of BFSL

To analyze the prospects of wind energy business of the company To gauge the financial strength and adequacy of Bajaj Finserv Lending, a

subsidiary of BFSL, as per RBI norms

Founder: Jamnalal Bajaj Founded in: 1926Employee Strength: 36,000 Market Cap.: ` 276 bn*

*At exchange rate: 1US$= ` 46.00

Overview of the Group

Businesses: (34 companies) Auto (two & three wheelers) Manufacturing Home Appliances Insurance and Finance Steel and allied products

Holding Company: Bajaj Holdings and Investments Ltd. (BHIL)

Flagship Company: Bajaj Auto Limited (Turnover of `120 bn)

Bajaj Auto Ltd. (BAL): Manufacturing services of the groupBajaj Finserv Ltd. (BFSL): Strategic businesses consisting of wind farm and financial services

Joint Ventures:

Flagship company of the group

Date of Incorporation: Corporate Office: Pune Employee Strength: 2,265 Listings: BSE, NSE

THRUST AREAS• Industry• Introduction to Non Banking Financial Companies (NBFCs) in India• Company History• Company Profile and Business• Performance on the Street• Company Performance (last 5 years)• Competition• Risk Management

•

• Company registered under Companies Act 1956• Not allowed demand (CASA) deposits, cash credits , overdrafts, etc.• Modes to access public funds: public deposits (only for NBFCs- D), CPs,

debentures, inter-corporate deposits and bank finance • No prudential norms for cap on exposure to parent group or co. i.e. intra group

transactions (ITEs), but have exposure limits to single/ group borrowers

• Similar norms applied except CRR, cap on exposure capital market, financing M&As, etc.

• Unlike customers of banks, NBFC customers not allowed deposit insurance Source: www.rbi.org.in (CC.No. 86/ 03.02.089 /2006-07)

ASSET BASED CLASSIFICATION CLASSIFICATION BASED ON BUSINESS

Asset Finance Companies NBFC- D

Investment Companies NBFC- ND

Loan Companies NBFC- ND- SI

Infrastructure Finance Companies Residuary NBFC (RNBFC)

Company History

Source: Company Web Site

Company Profile & Business

Erstwhile called Bajaj Auto Finance Ltd. (BAFL), changed name because portfolio widened

Credit Portfolio: Two Wheeler Loan (under the name of BAFL) Consumer Durable Loan Small Business Loan Personal Loan Loan Against Property Loan Against Securities Construction Equipment Finance

Source: Company Web Site

2009-10 2008-09 2007-08 2006-07 2005-06Deployment 45,851 24,509 30,363 26,313 19,545

Operating Income 9,100 5,947

Total Income 9,161 5,993

Interest and Finance Charges

2,017 1,643

PAT 893 339

ROE (%) 7.75 3.11

RoA (%) 2.05 1.31

EPS (`) 24.43 9.27

DPR (%) 24.64 21.54

Growth Rate (%) 5.84 2.44

CAR (%) 26

Company Performance

Figures in ` mn unless specified otherwise

Company Performance

Source: Company Web Site

Loan Book Analysis: • High credit growth: 87% increase yoy• Robust auto demand (75%)• Rising demand for home loans (266%)• SMEs, MSMEs (71%)• Cautious Retail lending (-54%)

`mn

Deposits’ Details:

2009-10 2008-09 2007-08 2006-07 2005-06 2004-05Tenor (months) 36

No. of Depositors 794 128

Amount of FDs (` mn) 24.48 2.2

NIM (%) 4.35 0.62

Source: Company Web Site

Company Performance

Performance on the Street

Source: Company Web Site and www.bseindia.com

Good performance due to robust industrial activity causing high credit demand

Scrip has outperformed BSE Sensex over past 1 year

Share has gained 26% since January 2010

Competition

Competition:

Company Market Cap. (`bn)

Income(`bn)

PAT (`mn)

Net NPAs

Manappuram 50.25 4.76 1,120

Bajaj Finserv Lending 28.34 9.11 893 Cholamandalam 18.81 9.26 154

M&M Financial Services (Tractors) 60.75 15.30 3,427

Shriram Transport Finance (Comm. Vehicles)

173.64 44.39 8,731

Risk Management

Associated Risks: Credit Risk Market Risk Operational Risk

Increased investments in Credit Analytics, Credit Bureau and technology for upgradation

ALCO set up in line with RBI’s recommendations to tackle liquidity issues

Multi Layered Audit Structure: Internal Audit Deptt. (IAD): Checks compliance with all laid down norms Audit Committee of BoD: Supervises and reviews working of IAD

WIND ENERGY BUSINESS

Installed Capacity: 65 MW Plants

Wind Energy 138 windmills in Maharashtra with installed capacity of 65.2 MWStarted to reduce dependence on conventional sources Investments in non conventional energy is totally tax freeMarket leader: SuzlonAt 3,100 MW, the industry is growing at 30% annually