Bajaj Finserv, the financial services arm of the Bajaj Group, has recorded a net profit of Rs 42 crore for the quarter ended June 30, 2009, as against a loss of Rs 36 crore in the corresponding period last year. Sanjiv Bajaj, managing director of the company, tells Business Standard that the growth was mainly driven by the group’s life insurance firm. Excerpts:
How have you managed to turn the corner?
From a loss of Rs 3 crore, the life insurance company has made a profit of Rs 68 crore. Profit-after-tax for Bajaj Auto Finance has gone up to Rs 15 crore from Rs 3 crore, while non-life grew from Rs 7 crore to Rs 27 crore. In our life insurance company, we have focused on cutting down our commission. Clearly the swing came from the life company. We have consciously looked at not only building our top line and increasing our premium, but have also focused on bringing down our costs. Our total commission to gross premium has come down to 8.8 per cent from 12.92 per cent, while operating expenses have come down from 22 per cent to 19 per cent. Provisions for doubtful debt have gone up from Rs 41 crore to Rs 66 crore. Given the stress in external environment, we have experienced increased losses on loans.
How do you see the movement in interest rates?
It will depend on both government borrowing programme and what happens to the monsoon. Especially with the delayed monsoon, we will wait and watch till the second quarter of the financial year. In case of interest rates moving up, with most of our business being consumer loans, we do have the bandwidth to take it up. For us the cost of funds at the moment is 9 per cent.
By when do you think 49 per cent of foreign direct investment (FDI) will be allowed? At what valuation will Allianz raise its stake when the Bill allows it?
In the next six-nine months, we expect the Bill to be passed. The last government has tabled the Bill. Our understanding with Allianz allows them to increase their stake from 26 to 50 per cent in the non-life company and to 74 per cent in the life insurance venture by 2016. There is a fixed formula on which it is calculating the value and the number keeps on changing year-on-year. Up to 2016, there is a fixed formula. After 2016, it will depend on valuation of the company.
You had plans to enter the distribution and advisory business. What is the update?
We will roll out two ventures by the middle of the next year.
Are you seeking license for an asset management company?
We will apply to the Securities Exchange Board of India by the end of this month. Hopefully, we will start our mutual fund business at the same time (middle of 2010).
What is your growth estimate for the current financial year?
We have not put any growth estimate for this year as we have just come out from a period of slowdown. We are extremely cautious. Even this year, we need to be extremely cautious. There could be some negative impact of the monsoon.