Bajaj Finance Bank In All But Name The Ken Intermission E02

TITLE: Intermission E02 - Bajaj Finance CHANNEL: The Ken DATE: 2026-05-11 ---TRANSCRIPT--- It’s roughly 20067 and a 30-year-old industrialist with a famous last name has been fighting a very public, very ugly battle with his uncle over his share of the group’s fortune. They’ve gone back and forth on reaching an agreement. So when this 30-year-old is asked in an interview when he’s going to meet his uncle, he says the raja has to decide when he wants to meet the praa. How will I decide when he has to pay me? Praa means subject. Raja means king. So the raja he’s referring to is Rahul Bajaj. And the praa is Kushagra Bajaj. Kushagra really wants to get under his uncle’s skin and the uncle is not an ordinary man. He is the patriarch of Bajage group, one of India’s oldest conglomerates and largest and he’s also one of the most prominent faces of Indian industry for decades. He’s never one to pull his punches. In 2007 when Kushagra Bajage mentioned this in the interview, Bajage Group makes two-wheelers, sugar, appliances and finances vehicles and even sells insurance and it’s headed for a split in a year or so. And Kushagra Bajage and his father are set to walk away with a sugar company and an FMCG company. This marks the end of the United Bajage group which as we know it was founded in the late 1920s by Rahul Bajaj’s grandfather Jamnal Bajaj a close associate of Mahatma Gandhi. But the end of the United Bajage group also coincides with the start of what is in my opinion one of the most spectacular successes of the group. A financial services behemoth that has no peer whatsoever. In the restructuring of the group, Rahul Bajaj decides to spin off Bajage Auto Finance which finances scooters and three-wheelers made by the Bajage group from Bajage Auto so that his younger son Sanjie could run it. His older son Rajie gets to run Bajage Auto which is known for its once iconic scooters and now motorcycles. Rahul Bajad says at the press conference you know which he has to announce the de merger there is no separation in the family if somebody does not like it I can’t help it baj auto finance and non-bank lender mostly gives out loans for baj vehicles as I mentioned but also consumer durables and personal computers as a business at this point it’s merely a footnote to baj auto but over the next two decades Sanjep whom I met for this episode and bajage Finance transform how Indians buy phones, TVs and refrigerators. Bajage finance also becomes synonymous with 0% EMI or no cost EMI. It elevates cross-selling to an art and it lends money for everything from homes and hair transplants to MRI machines and business expansion for lawyers and chartered accountants. At the time of the split, Bajage Finance was giving out under 3,000 loans a day. Now it gives out 150,000 loans a day. Bajage Finance is so big that it’s too big to fail. It’s a bank in all but name. What’s even more incredible is that Bajage Finance’s market cap right now is roughly 5.7 lakh cr. That’s more than twice as big as Bajage Auto from which it was spun out. No one. I mean no one would have put their money on Bajage Auto Finance which became Bajage Finance becoming bigger than Bajage Auto at some point. How did it get here? It’s a story of counterintuitive thinking, lasting relationships with retailers, consistent innovation, relentless salesmanship, and top executives who are never happy with the status quo. Welcome to Intermission. I’m Sitha Raman Ganes, the Ken’s deputy editor.

And I’m Rowan Dharmmakumar, the co-founder and CEO of the Ken. This is a show about India’s greatest companies and how they came to be. Through hundreds of hours of research, reporting, and conversations, we take a close look at the leaders, rivalries, and events that shape these companies and what the future holds for them. There are anecdotes, there are insights, there are numbers, and there are opinions. But above all, there is a compelling story in every episode. So Rohan the origin of Bajage finance is in well good old money lending Sakram Bajaj a money lender from Sikar in Rajasthan moves to Nagpur which is in central India sometime in the 18th century he’s one of many Marwadis who relocate from Rajasthan which is where they’re originally from to other parts of the country including eastern and central India and he’s one of those people. What causes this migration like you know the rajas like him moving from Rajasthan to Maharashtra? Rajasthan is an Arab state right? Uh so he’s just searching better for opportunities else. Yeah absolutely that’s that’s that’s one of the reasons why he moves out and he goes to Nagpur and he actually flourishes. He does well in money lending and also trading of cotton bales and he has four sons. Cotton bales again. Huh? Yeah, absolutely. Um, anyone who hasn’t listened to the first episode can go to that the Asian paints one and figure out why we’re talking about cotton bales, right? Um, he’s a he’s a trader who’s doing very well. He has four sons and one of them is Bach and he has a falling out with his other three brothers and he moves to a place called Vardha which is about 70 km from Nagpur and interestingly the other brothers fall on hard times and he continues to do really well. What what’s he doing? Same thing money landing and cotton trading. All right. And Bach is often referred to as Sait Bach in all these books, right? Even the Bajage websites call him Sat Batraj. And you will find his name in several companies later on. He gets married but he’s childless. And he adopts a boy from Rajasthan who happens to die immediately after getting married. So he and his wife, wait, who who dies? Son, adopted son dies. So he and his wife actually go back to Sikar, which is where they’re from because now they want to adopt a grandson. And they find this peasant uh who has a son and they decide to adopt him. His name is Jamal and he is born in November 1889. Do you know who else was born in the same month? Oh, literally the same month in 1889. Just 10 days later. I mean, I would like to say I can take a guess, but that would be lying cuz it’s

1889. I have no idea. Who is it?

Just about 850 kilometers from Sikkar in Alabad. Jawal Nero is born. Whoa. Okay. Yeah. So, Jamnal is born in Sikkar. Nu is born in Alabad. And Batraj brings Jamnal back to Varda and he gets married at 12. Jamal is 12 and his wife Jani is 9. That was the norm in those days, right? Kids got I mean married at like 10, 11 or even 8,

9. Then Bach’s wife dies in the process and then Bach becomes really insecure and starts lashing out at Jam Nalal. Wait, I mean I I I just want to kind of observe what you’ve been saying all this while, which is really the number of deaths and the number of adoptions back in those days was so high

because mortality was high. People died of diseases, people died of curable diseases in childbirth etc. So it’s just one of the things that we’ve I guess started taking for granted that it doesn’t happen, right? But if you actually go back to those times just like there people dying there are kids dying there are we’ve heard stories of people in our own families dying at 30 35 right and my grandmother had 14 kids and four was still born and she had her first kid at 14 she got married at 10 very different very brutal times actually absolutely so Bach’s wife dies uh he’s very wealthy But uh he becomes insecure. He’s very wealthy through money lending and cotton and cotton trading and Jamnal is his only heir and he lashes out at Jamnal repeatedly. At one point sometime in the early 1900s I think this is 1906. Jamnal is about

17. He’s had enough. He says I’m walking out. I don’t want any of your money. And he actually wants to go to Harido to become a sasi. Okay, you can imagine

I mean I can imagine a 17-year-old lashing out against her father but not saying I want to go to Harido to follow spirituality. So there’s obviously something different about Jamnal. Yeah. And you you see this later as well. He’s got this sort of streak of defiance in him. Um and and spirituality I guess. Uh I’m not really sure about that. Uh but yes I mean he does go on to build temples in Varda right and we will get to that later. Um so he decides to go and Bachj panics right you you’re talking about a Marwari who’s built a mini empire in Varda and he has just one heir which is Jamnal and now Jamnal says I’m going to leave I don’t want and he actually writes a letter to him and that letter letter you can actually find on the Baj websites uh we what does it say I don’t want uh you know uh I don’t want your money uh I’m sorry I’ve disappointed you right I don’t want any of your money. I’m leaving. Does the story ever stop of children telling their parents that I’m sorry, I’ve disappointed. But do they tell them I don’t want your money? I’m not sure. So uh then Bach actually pleads him to uh stay back and he does stay back. But Bach dies soon after that. Okay. And now he inherits a fortune. It’s about six lakh. That’s the that’s what he inherits from him in 196. Yeah. That must be a princely sum. What must it be worth in today’s terms? Yeah, if you actually calculate that. Yeah, if you actually look at the price of silver then and now, it’s roughly 100 cr now. And if you actually look at the price of gold then and now, it’s actually 500 cr. That’s a lot of money. And much of what we know about Jamnal Bajaj actually comes from this book by BR Nandanda. It’s called in Gandhi’s footsteps. The life and times of Jamnal Bajaj. So Jamnal Bajaj he’s obviously doing very well um thanks to his father state bach’s fortune which he’s inherited and he’s also good in his own that’s an assumption he’s got the money but you is he doing very well with it has he decided what to do with it? He continues in the same business and this is where I mean he decides to expand beyond Verda because the cotton trading business has obviously become bigger and bigger. So he expands to Bombay which is the the financial nerve center even then of the country. Kolkata was but Bombay was a close second. It’s almost inevitable that if you’re dealing with cotton absolutely the the center of Palmer is like Bombay. Yeah. And we talked about this defiant streak in him, right? I mean, he doesn’t want to stick to the norms of those days, right? U he’s very ethical. In in those days, it was common for cotton traders to actually wet the bales before selling them to sort of pat up the weight. He refused to do that. So in Bombay, the people in his office were a gasast. They said, “Why would you not do this? You’re going to make more money off this.” He said, “Sorry, I’m not doing this.” and he actually wanted those bales labeled water-free and he’s also different from his fellow Marwadis in a different way. I’m quoting from BR Nandanda’s book. He says Jamnal was free from the proverbial stinginess of Maruadis. He lived well and spent liberally on comforts for himself and his family. He travels first class on trains. He goes to Kolkata and I like Jamal. He is actually living the life of a rich uh trader. Um when his wife is pregnant with their first kid, he hires not a midwife, which is what everyone did those days, right? Your grandmother, my grandmother, right? Uh I’ve heard about a lot of births happening at home. He actually hires a gynecologist instead. And this gynecologist, um Dr. Nanekbai Dadina is actually the daughter of Dada Naroji, one of the founders of the Indian National Congress. Wow. And he gets her to come to Varda from Bombay. He pays her 800 rupees then. And he puts her up and gets her to stay for 2 months for the child birth. So that’s the kind of guy he is. And obviously he’s doing very well. and he meets this Marawadi lawyer from Kolkata and this is where his interest in social service and the freedom movement begins. I think this is sometime in the early 1910s. They collect money for famine relief in Rajasthan and floods in eastern India and Jamnal actually seeks out freedom fighters like uh Nao Roji of course when he’s in Bombay and Bal Ganga Tilak and then he actually meets Gandhi Mahatma Gandhi when he returns to India from South Africa in 1915. What an interesting timeline. all in about 10 years flourishing uh money lender and cotton trader meets a lawyer gets interested in all this right uh and then he seeks out these leaders and then meets Gandhi it would turn out to be the the how do I put it it’s probably one of the most formative moments in his life and his life changes completely after that he meets Gandhi in 1915 um and then starts working with him very closely after that and that’s that’s the year um a few months after he meets Gandhi his first son Kamal Nayan is born and he’s drawn to Gandhi’s austerity and he contributes 31,000 rupees uh for Gandhi’s asham in Saburmati right he’s like you know I want to be like you I’m a I’m a so so Jamal is a man of contradictions also right you said he loves to live the high life travel in first class but you also say that he’s drawn to austerity he’s contributing to Gandhi he’s interested in the Indian I think earliest versions of like you know the freedom movement etc and stuff so so it’s quite possible to to hold the hold all these different ideas in your head right being and practice them as well yeah absolutely being a madi why would you not I mean it’s in your blood right we talked about Gujarati in the first episode right and if there’s one thing you know about large Indian conglomerates it’s that you know a lot of them are run by maradis and a lot of them are run by gujaratis right so it’s inherently in him to be a good trader businessman you know but the such were the times that you know he couldn’t help being drawn to these figures and he becomes so close to Gandhi and Gandhi actually takes a shine to him such a shine to him that he actually calls him his fifth son Gandhi has four sons Wow. And he calls Jamnal his adopted son or his fifth son. That would be twice adopted because Jamnal himself was adopted. Yeah. I mean there must be something special about him, right? Like so sometimes they say it’s like fate, right? But for Mahatma Gandhi to call you his adopted son after you were adopted the first time. But Gandhi wasn’t quite the figure that he became in 20 years still. This is what 1915. Yeah. 1920 or so. And and what’s Jamnal Bajaj doing right now as his business? It’s still money lending and cotton. Cotton trading largely. So Jamnal Bajage sets up what we’ve come to know as Baj Group in 1926. And the company that sort of gets this going is called Bach Factories. That’s his dad. That’s his dad. I told you right at the start a lot of these companies will carry his father’s name. and the first big company. It’s really nice cuz at one point he was estrange and said I’m going to leave and go to Harido. Yeah. But now he’s uh naming the company after his late dad. I guess it’s his way of acknowledging that he probably wouldn’t be where he is without his without his father because his his biological father his biological parents were very poor. Right. So Batraj factories Oh, so he wasn’t an orphan. He he was just from a poor family. Yeah. In Sikar. So Batra’s factories actually runs cotton jinning and pressing units. Cotton jinning is where you you know separate the fibers from the seeds right. They set up factories in Verda obviously and Gour in Wow. in present day Andra. Two really hot semi-arid regions. Uh is that where cotton grows? Yeah. you find a lot of uh I you know you know in one of my earlier stints I used to do a lot of stories on cotton farmers and I’ve been to these parts you know especially near Maratada and near Nagpur. I’ve been to Vadha too uh to meet some farmers roughly about 10 years ago. Did you know fate would bring you back to today? Not at all. I didn’t even think of this group when I went there. Um so this company is actually still around Bach Factories. When is when is this set up? It’s what? We’re still 1920. 1926. Wait, 1926. Yes. Okay. So, that’s like 100 years. Yes. And from where we are, neither of us knew when we started working on the episode that the group is in its 100th year. And they’re actually celebrating obviously the 100th anniversary. It turns out they actually have an event in Bombay on the 11th of May to celebrate the anniversary. Hm. Yeah. Talk about destiny and fate. Yeah. So, you know, obviously he’s working with Gandhi more and more. He’s involved in the Congress. He’s actually at some point he’s the treasurer of the international congress. Uh and Gandh put his skills to good use. Yeah. Gandhi actually begins his Harajan Yatra to eradicate untouchability in Varda in

But Jam Nalalal even before this had opened his family temple to all communities. So he’s obviously defiant you know he you know he’s

oh he’s he’s spiritual he’s progressive. Yeah. He’s a freedom fighter and and a very I told you I love Jamnal and very good business acumen too. So Gandhi actually moves to Sheam near Varda. uh I told you I mean earlier also when um Jamnal actually contributed 31,000 rupees for his ashram in Gujarat I believe he actually wanted Gandhi to move to Varda which Gandhi does finally um in 1936 and there’s an ashram built for him on Jamnal Bajaj’s ancestral land and Gandhi insists that not too much money be spent on the ashram obviously and then Jamnal dies in 1942. Six years after Gandhi moves there and five years before India becomes independent right and in his book uh Gandhi the years that changed the world historian Ramchandra Guha actually says he that is Jamal al- Bajaj had put his wealth at the service of the freedom struggle his personality at the service of his leader other industrialists such as Ambal Sarabhai and Gshamas Gi Burla which is Ganamas Baha had given Gandhi moral and material support But they had not gone to jail on his behalf. Baj had several times. He had also acted as the treasurer of the Congress and was instrumental in Gandhi’s move to central India. Wow. So add conviction and fearlessness also to Jamal Alvaj’s qualities. Yeah. Absolutely. And after his death there’s obviously Kamill Nan and a few years after Kamill Nan Jamal’s second son Ramak Krishna is born. So on his death the sons take charge of the group in 1942. This is Bach trading. Bach factories. Bach factories. Yeah. So with a father like Jamnal, it’s almost impossible for Ramak Krishna and Kamal Nayan not to be like him. I I don’t of course I don’t know or knew Jamnal Albaj deeply but I sort of get the sense that he’s a man of values and he would definitely be living and instilling them and passing them on to his kids and obviously they also get to meet Gandhi and other leaders very frequently right u you know we we discussed how Kamal Nan was born a few months after Jamnal’s first meeting with Gandhi so there’s No way this is not going to shape your it’s like the air around you. Absolutely. And there’s a very interesting story you know that tells you a lot about their outlook to life Kamal lines especially. So he gets married sometime in the 30s to Satri um who’s from Kolkata. So his family goes to Kolkata by train and there are only 15 people uh that goes from Jamna Kamal lion’s family to Kolkata and Jamal is still around. This is in the 30s. Um and this is u Kamal lion’s mom Jani Dvi in her memoirs she says the girl’s family the bride’s family they met us at the station before Kolkata and wished for Kamal lion to allight the train in this wedding attire but he was content wearing his white khadi ka dohi cap and a saffron shawl continued to wear these for the ceremony so whatever he was wearing on the train he got off he had the ceremony And I think I also read somewhere that GD Burla wanted to host a reception for them but they didn’t want much. So they just you know packed up and went back to Vera almost immediately. This is the kind of guy he was. We keep you know there’s this phrase that we’ve heard from from when we were kids about the independence era and what Gandhian values were. I mean I think this is an example of Gandhian values right which is really that you know no pomp no splendor simplicity austerity yeah but and unlike Jamnal who was not formally educated Kamal actually goes to Cambridge uh so he’s seen the world but like a lot of uh the leaders perhaps a Gandhi influence I mean a lot of these leaders actually were educated in England right and they came back So uh Kaml N is a Cambridge graduate and his first kid Rahul Bajaj is actually born in the late 1930s and he’s named by Jawal Neu who was born 10 days Wow after it’s a bunch of different threads coming together and converging here. Yeah. Uh and when Rahul is very young his mom is part of the freedom movement. His uncle Ramak Krishna is also part of the freedom movement. And I think when Rahul Baj is about 3 years old, his mom actually spent Sabatri actually spends um a year in prison, right? This is this is crazy, right? The entire family is involved in this and they have a business to run. Of course, I mean to contextualize this in present terms, these are I mean this family must be what we today call like a super billionaire family because if you essentially take their wealth and transpose it to today’s right this is the equivalent of billionaires deciding to spend like fight for causes that they believe in and spending a year and not just contribute right it’s it just doesn’t happen not just in India but anywhere in the world right absolutely Okay. And then obviously India becomes free in 1947, right? Uh Jam Nalal is gone. Um Rahul Baj is what like 7 8 years old in 1947. Uh and it’s a great moment for Kamal Nayan the freedom fighter but it’s not a particularly great moment for Kamal Nayan the industrialist because he has a steel factory in Lahore which he has to give up. Oh, because during partition and this steel factory was set up at the same time as Bach factories which was into cotton jenning and oh I missed this part. So they essentially diversified from cotton and money lending to steel. So they are now much set up a sugar company which exists to this day. Oh it’s a diversified conglomerate by now. Yeah from money lending cotton. Yeah it’s a conglomerate already clearly. Um so he actually manages to get all his workers back to India but he has to give up the factory. Um so the company is called Mukun iron and steel works. So then he actually sets up a new factory at Gore which is a suburb of Bombay after 1947. But before independence I mean at this point it didn’t seem like this. In 1945 uh they actually set up a company that would actually make go on to make Bajage a household name but it didn’t carry the Bajage name. What is called Bach Trading Corporation. Okay. The idea was to basically import scooters to India. Obviously we didn’t make any at that point. Uh so you know they just wanted to import scooters. You had to apply for a license. I’m reminded of these black and white Hindi Bollywood movies where you see these roads of Bombay and like you know these old cars passing by every now and then and some scooters passing by now and then more scooters than cars right yeah so the the visual cycles and then and then cars you know all these visuals of marine drive right uh and I think not so I mean I don’t know how much of and the art deco buildings yeah absolutely right um So, Bacharaj Trading Corporation uh and uh this company would in a few years be renamed actually in 1960 be renamed Bajage Auto. H what an interesting arc and series of events leading up to what we now know of course as Baj Auto or the Bajage brand itself. Yeah. So India is free. Uh in 1947 Baja just set up Bach Trading Corporation to import uh scooters to India. What scooters are these? What brands are they? Let me get to that. So there’s another family which will play a very important role in this business, right? Do you have any idea? Not in India obviously because they’re importing their scooters. Okay, I’ll let me start guessing. They’re importing scooters. So, where are they importing from? Italy. Yeah, of course. Yeah. Right. Uh, what is it? But why do you say Italy? I mean, do you is there a is there a particular reason or you’re you’re sort of aware of the crossro? I’ve seen uh nonbaj scooters in my lifetime being driven on Indian roads. For example, Lambertas. Uh is is that no there’s actually an interesting uh story there. This is actually um the piano. Is it a vesper? Yes. Ah there. See I’ve Yeah. Exactly. So Lamberta and and benefits of being born in the 70s and 80s and having lived through the 80s and ’90s and I I read somewhere there was a story on Lamberta and Vasper. They said you go to uh the hometown of uh the Lamberta. You don’t mention the Vasper. Okay. Oh. So it’s it’s it’s it’s like a Ferrari and uh what a Lamborghini kind of like Manu Manchester United and Arsenal, right? So getting back Pepsi. Yeah. Getting back to the story. Um so the Piao family um you know they are also an industrial family. These two brothers Enrio and Armando they inherit their family’s engineering business. uh and actually at the start of the second world war they start making aircraft which Italy uses in the war uh but America bombs the factory towards the end of the world war in 1945 uh so the war is over they don’t have a factory but they still need to be in business they need to sell something right so just for context we’re in 2026 America is still doing some bombing so they actually get an aeronautical engineer. His name is Corodino Dascano. I love Italian names. They’re also mysterious and swashbuckling. Who designed one of the first helicopters, they get him to design what becomes the Vesper, which means wasp. Apparently, you know, Enrico and Armando saw it and it resembled a wasp. So, they said, “We’re going to call it Wasp.” Right. It’s I mean I saw pictures of the first Vesper. It’s still a thing of beauty, but it’s classic Italian design. Is classic Italian design. It’s a single seater and it’s got this bicycle like thin handlebar. I mean it would be a safety hazard now but it’s beautiful. Absolutely gorgeous. Right. And common line actually applies for a license to import Vesper scooters to India. And these are not fully built scooters. You have this term in auto called CKD which are completely knockown knockown kits, right? So you just get the parts of the vehicle and you assemble them. So he applies sort of like IKEA furniture. Absolutely. But you don’t do it yourself. Someone else does it for you. Uh so he begins assembling Westpar scooters uh in in a factory in Bombay in 1948. This is one that you said they set up in Gorang. Absolutely. In Gorang which is a suburb of Bombay. So Bajage has begun assembling uh Vesper scooters in India in the late 1940s right you mentioned Lamata a very interesting story apparently Kamal Nan wanted to manufacture scooters in India so he applied for a license at the same time so TT Krishna Machari was the finance minister of India then from Tamil Nadu so when he applied for a license he apparently called Ma Chadamaram who was an industrialist from Chennai. The Chennai cricket stadium is named MH Chadam cricket stadium and MH Chadam had actually become a Vespa dealer and Krishna Machari called him and said hey I’ve got this license for uh you know manufacturing westpa scooters why don’t you apply for no conflict of interest there uh to make Lamreta so he applies for a license and he gets it before uh Kamaline gets it in the late 50s he does get it eventually um when Nero becomes finance minister I mean he takes charge of that portfolio and then they get the license so they start they set up their factory which is still around near Punea it’s called the the place is called Akuri so they set up their first factory in around 1960 and they start making scooters in that factory um and where do they get the knowhow from this is still Vasper I mean you’re still getting the technology so they’re still assembling it so they’re not really manufacturing a brand new scooter from scratch. No, they are I mean they’re getting the parts. It’s it’s not CKD, right? It’s a step above. What’s the brand on those scooters? It’s still Vasper. Oh, it’s still Vasper. Yeah. Yeah. Um and Rahul Baj has gone to Stevens, then he studies law in Delhi. St. Stevens in Delhi. St. Stevens in Delhi. Then he studies law. I mean he talks about how he barely spent any time in college especially and I think he talks about how his father gave him a vesper and he became the most sought after guy on campus I can imagine right um so then he goes to Harvard for for his MBA and he joins the group sometime in the mid 1960s the auto company he decides to I mean they have many businesses right they have steel sugar um cotton but he decides chooses to join in the auto company the one that made him popular on in college right yeah um and this is the time of the license raj right I mean many people now wouldn’t even understand the term license raj it actually means how would you describe what that license raj was uh you want to make anything uh you want to set up a factory uh you come to go to the government for permission you actually ask them how much you can make right you you want to make say I don’t know like in this case they apparently that the factory could make 24,000 scooters a year but they couldn’t make more than 6,000. So the thinking was our resources are limited right so you can’t make whatever you want there isn’t enough demand so why waste our limited resources so everyone that’s the thinking that this is this is a newly independent country which has been of course drained over the last so many like you know years um by the British so now we need to rebuild it so we don’t have enough resources so the state or the government will decide where to allocate state resources. Absolutely. You may be an industrialist who wants to make whatever like 24,000 scooters but we the state feel like we can’t afford to divert these resources to you. So you only make a fourth of it, right? And you know you don’t have all the components. These components are not not being made in India. So you need to import them. Which also means that you need foreign exchange, right? We don’t have all that. So they are asked to make only 6,000 scooters, right? But then this is not a market with too many players. I mean you obviously have maram selling lamata but baj becomes does that ma chidam have any relation to the former finance minister chadam? Yes. Uh Chadamaram is his nephew. Yeah. So another prominent we will come to these groups in the south at some point an intermission but again like maradis and gujaratis you have the chatty n to go to chhattias of tamadu right uh the murugapa group the mh dham pich dhamaram himself is from uh that community right again very very enterprising they leave also ttk is that the ttk group is that related to the same tk yeah uh So by 1966, Bajage is already the market leader. I mean I mean it’s pretty much scooter only scooters, right? So and Bajage is the market leader. Um and so Rahul Bajage is sort of firmly in charge of the group. He’s very young but uh Kamal Nan is in politics. Um he’s been a three-time MP member of parliament from Varda. Uh he represents I mean he he is in the Congress. Um I think he loses the fourth election I guess and his politics is not without its downsides for the group right this is where you see I mean until now you’ve had I mean you already had TT Krishna Machari giving the license to MH Dumbaram but this has serious consequences because uh you know the Congress splits in 1969 and obviously there’s the Indra faction and the other faction and he tends to side with he actually sides with the other faction And then Indra Gandhi, let me guess Indra Gandhi gets vindictive with him. Is that what happened? Yeah, she I mean she retains power in the next election and then Rahul Bajage actually goes to um one of the ministers for u you know he wants to expand the capacity of the factory and he’s apparently told that sorry you know you went against Indra Gandhi I can’t allow you to expand uh you know your facto’s capacity uh a lot of this actually I found in this very interesting book called Rahul Baj an extraordinary life by Gita pram gita Tapla is someone who’s actually chronicled a lot of India’s family businesses. Um so a lot of these interesting details and Rahul Bajad really opens up you know in in you know in in this book and he talks about I think I don’t remember I think probably Tari was the minister and he went to him and he said you know more capacity and he said no Narendi don’t ask me how I remember that I just do it just came from absolutely yeah um but this I mean this is a problem for Baj but then there aren’t too many brands like I said and they launched the Chetak in the early ‘7s s and they launch the Priya scooter in the mid70s, right? And they both blockbuster scooters, you know, they they sell like, you know, people people couldn’t get enough of these scooters. You had to wait 10 years to get your hands. Wait, what? 10 years? Yep. Right. So this is the equivalent of you’ve got your kid in school and you’re hoping one day your kid will graduate and then you book a scooter so that by the time he graduates he can be as popular in college as Rahul Bajage was when he got a spa. No, considering how difficult it was to get your hands on a scooter, the very fact that you got one, it it doesn’t matter that you booked it 10 years ago, right? You would still come across as being very cool and Rahul Baj obviously is a where they get the knowhow, they they develop this knowhow because I’m guessing that all the years of assembling uh Vespa. Yeah. So they teaches them not they still don’t know everything they need to know, but they’ve got that it’s been what it’s been roughly about 10 years, right? I mean, they’ve been importing for 20 years now, right? And obviously, you know, I mean, I’ve read about some of these scooters being uh like a couple of generations old in India. I mean, older versions of what’s being You mean the Westp? Yeah. But I mean, we we didn’t have much of a choice. Have you ever driven a West? No. No. Have you ever driven a Chetak? No. I have both. Oh, you can you can actually ride a scooter. I mean, the geared one. Yes. Cuz before we had automatic scooters and bikes, we had geared scooters and cars and and I can tell you. Sorry. Go ahead. No, go on. No. The Baja Chetak, my uncle, my dad’s late brother or Chittapa um as I used to call him. He had a blue bajachet. And I’m talking about the 80s and I’m probably what, like 10, 11, 12 or so. Um and I still remember it was magical because of course there were like not too many I mean of course in our family itself no no one else had my dad didn’t have a scooter and I could it was like trying to tame a beast right cuz you would turn the this thing and it would jerk. Everything about it was hard. You sat down on the seat and the seat pushed back at you cuz the spring was so hard. You tried to change the gear and it would jump on you. You try to take it off the stand. you try to put it on the stand and it would jump you. So, as a kid, it’s almost like this, you know, so you’re trying to tame this unruly beast. And thankfully, I mean, uh, my uncle never like, you know, called me out for like secretly. Maybe I’m sure he knew that whenever he used to come to our place and he’s sitting and like, you know, chatting, I would like try to kind of steal the key and try to figure out how to tame this beast. But I still have memories of that blue chak and you know riding pillion with him and my sister or my cousins and going to India gate um in the evenings to have um ice cream a full nostalgia trip. Yes. Again like there are some benefits of having been around in the 1980s and being a kid back then but I think the blue bajach was a huge this thing. The vespa though was was much smoother. Of course I I’d ridden a later model of the West Park than the Chetak. I mean we didn’t have a Bajad scooter but we had uh the I mean we didn’t have uh Chetak but we had MAT remember. So we used to call it in Tamur we used to call it Palarindi. So that milkman milkman’s because a lot of it was a workass. Yeah. And it was this really bulky thing, not quite as elegant as the chuk and we had it for seven years and all the things that you’re talking about, you know, you just this is that on steroids. So yeah, I mean Rahul and Rahul Bajage in a safari suit posing with a Bajad scooter. That’s an iconic image, right? You look up Rahul Bajal on Google, you find him this really tall guy standing next to a scooter or sitting on one of his scooters, right? Uh that’s one of the images that sort of defined Indian industry, right? I fully agree. Safari suits are gone. Have you ever owned a safari suit? Me neither. Now I actually wish but I do see security. Maybe I should get one. If you’ve been to a movie shoot, all the the the the security folks, they all wear that. Yes. Yes. Not just a movie shoot. If you see the security politicians and real estate dealers etc. they all have this sort of dark grayact safari suit which is like sort of like the the giveaway. Yeah. Getting back to the man who made safari suits very popular. So he’s obviously he uh is precautious. He’s a wonder as you know wonderkind. You know where I’ve heard that phrase. What is wonderkind? Why didn’t you say wonderk kid? That’s the term that’s the original term which is what language is it from? German. German. Yeah. Ted Lasso is when you remember have you seen Ted Lasso? You remember is basically you know what Surajbar Jatya would have made had he made a you know TV show for Apple on football. I’m not going to comment on that reference at all. Uh but yeah, I mean Nate uh I think you know started out as a wonderkind and then I think it of course became wonder. So that phrase just stays with me. Wonder and wonder kid. Yeah. Very interesting. I mean you go back and read all his interviews he’s a very call a spade a spade kind of guy and I think that continued till his you know till his late years. I remember when I was with the economic times I was a reporter there in 2019. um they had these awards for uh I mean ET awards they call it and he was one of the invitees and there were three ministers on stage and someone gave him the mic and said do you want to ask them something and that’s it so I was standing right behind him and then he just goes off he says I was born anti-establishment and I was named by Nu you may not like this okay these are ministers from Modi’s government uh you may not like this and he talks about how there is you know there is lack of tolerance in this country religious tolerance um and he says he’s like all these industrialists everyone is scared uh you know they none of them would ask you this right but I don’t care I’m asking this right that’s the kind of guy he was right he spoke for about five six minutes and I remember the press coverage that resulted from yeah you can still watch it on it’s still on YouTube right and that’s the kind of guy he was and even then he was very much he was very much like that and again like his mother and his grandfather the sort of independent street was it his mother or was it grand his grandmother who spent a year in jail his mother his mother so it’s it’s it’s very much runs in the family yeah yeah so in the early 1980s Indra Gandhi is still prime minister she decides to you know open up the economy a little bit right and this was sort of uh it sort of laid the foundation for what happened in the early ’90s the 91 reforms um so a bunch of Japanese automakers come to India in search of partnerships. So you have uh Yamaha, you have Honda, you have Suzuki and Kawasaki. Uh Yamaha goes with Escorts which is an industrial uh group and then Honda actually goes with the Ferroia family of Punea I think for scooters and with the Munjals for motorcycles and then Suzuki joins hands with TVS from Chennai and Maruti which is the government’s own you know small car initiative Mari Maruti Udyog so there’s Maruti Suzuki and TVs Suzuki and Baj has a technical collaboration with Kawasaki. So suddenly you have all these players, right? I mean of all these I mean the only vehicle that I have some it’s like a certain wave of Japanese automotive influence coming in and merging with a lot of these families. I’m assuming that a lot of these partnerships were required because you had to set up in the license raj you had to set up a locallyowned joint venture. Yeah. and and and Japanese automakers were also looking for markets outside of Japan because I think they were going through a difficult time. I think there was an economic downturn. So they had all this knowhow and brands and whatnot but they needed a market which is why they came to India. Um, and do you remember some of the Do you remember this motorcycle called IND Suzuki which was the first the precursor to the TPS Suzuki was that then of course we were talking about scooters the first automatic scooter kinetic Honda my god like you know that was like if you learned on manual scooter then kinetic Honda was so much more easier but I’ll tell you this it’s a very interesting anecdote from Kerala where I used to spend my summer vacations in Kerala the kinetic Honda would be called kinetic Honda kai in malalam means hand netti means forehead so kinetic means hand on your forehead because it would break down so often in the kerala air right it was convenient but it would just keep breaking down so it was called kinetic on know I had a handme-down actually came from my dad’s friend I don’t know how many years old it was and I got it in the late ‘9s okay and I used to take it to school and the and the and the mileage was so poor okay but it didn’t matter because it’s a two-heer right so it broke down so often almost like you know like clockwork every single week it broke down. There’s a charm in taming those beasts. Yeah. So Indians suddenly have a bunch of options to uh choose from. I mean all these automakers believe there is demand. Sure. Everyone wants to have that. But do they actually have the capacity? Do they have can they afford these cars? I mean these two wheelers I don’t think so. Right. Uh India is still a relatively poor country. You have all these options but you don’t have the money to buy these two wheelers. Right. Um we actually did some math. The Chetuk in 1987 uh cost under 11,000 rupees, right? That’s literal back then. Back then 11,000 rupees. And that was actually 31 months of the average Indian’s income. So you needed to work for 31 months to be able to afford those three years, right? And the Chetak actually came back uh as an electric scooter a few years ago. And right now it costs about you know a lakh 90,000 to a lakh and that’s only five months of the average Indian’s income. Says a lot about the distance India uh India’s economy and wages have traveled in the period as well. Absolutely. So long in the 80s you know you have to wait for years and you had to save for years in a way you know that 10 year weight is good cuz cuz now you have to maybe you can buy three scooters at the end. Sorry. Yeah. No banks are not interested in financing these uh you know why not because they they’re only I mean you’re talking about a time when you had stateowned banks and they would you know fund say certain corporates or certain projects that the government wanted funded because obviously they would do the government’s bidding right whoever the government wanted funded it’s still largely a relatively closed economy where a lot of the direction is set by the government yeah and I don’t think anyone borrowed money I don’t know maybe even to buy a house you would save for years right and if you were a salaried professional you would use your provident fund corpus to buy your retirement home right so there was no question of getting anything financed living within your means was the only way there was very much so right um so banks are not interested so Baj decides to do something about this and interestingly city bank the American in you know a financial services giant shows them the way. This is a great time to talk about Zerodha. Um you remember when we right after we launched the first uh episode um we launched intermission with the episode on Asian Paints Nin Kat co-founder of Zerodha actually went on Twitter and LinkedIn and he actually opened his post with India has a rich business history and much of it is undocumented. Yeah, I remember cuz I had reached out to Nathan after we’d released the episode and asked him for feedback and he said, “Give me a few days to listen to it fully and I’ll come back and he did.” So that was came back to you and No, he didn’t. Okay. His feedback was largely through his post etc. He also dropped me an email but that’s separate. So I mean as journalists we’re obsessed with what’s happening right now. We as business journalists we want to know what’s happening in companies right now and maybe what could play out in the next few years, right? We don’t really pause to think about all the years and sort of decades that led up to the company being what it is. That’s also a journalistic bias at times, right? We in our normal course of things don’t look at history because we’re like the present and the future is where the action is. And we also tell ourselves we don’t have the time to go back, right? There’s enough happening right now, right? But we have realized that just going back uh to the origin story of a company can tell you so much about where the company is headed how well placed it is to face its future and that’s exactly why we decided to do intermission. Right. Absolutely. I mean from today’s story if you really see if you go back to the origin story you begin to see why Rahul Baj was who he was because you understand Jamnal Bajaj and the entire history 100%. Uh and that’s why we’re really excited about intermission and we’d like to thank Zeroda for their support. So there’s this uh interesting story that I heard. This was by S Mukharji who runs Masterless Investment Managers. This was on a podcast. We’ll link it in the show notes. Um he talks about I think this is the ‘8s 198687 and we talked about how you know scooters were unaffordable and Baj decided to do something about it and uh interesting city bank right we will get back to city bank uh you know in a while city bank plays a very important role uh in Bajage finance so city bank obviously goes to uh I mean it’s interested in consumer lending it goes to Bajage Finance uh to explore the possibility of giving out loans for its scooters. Okay. So the executives of both companies what they’re in Punea obviously Bajage is you know uh it’s factories in Punea. So they actually go to the Tata Motors factory in Punea and they first go to the uh engineers and tell them would you be interested in borrowing money from city bank to buy Bajad scooters right so apparently they do the math and they said just too expensive we’re not interested and then they go to the workers canteen right when you say it’s too expensive I’m assuming that the loan plus the interest is too much too too much for them so then they go to the workers and the workers apparently lap it Obviously, they’re not doing this math, quick math, right? So, they obviously want to own a scooter, but they can’t afford it. So, they say yes. And the response apparently is so good, they go for three consecutive days, the executives of Bajage and City, and they book 2,000 scooters. Wow. Okay. And so, Bajage is like, wa, there is interest. People want to take out loans to buy scooters. So why don’t we do this ourselves? This is an interesting flipping of what you said earlier, right? Earlier you said Bajage wanted to make more scooters but it wasn’t allowed to do so. Correct. Which is really like uh you know I mean supply side constraint. Right. Correct. Now you’re saying well they wanted to sell more scooters but people didn’t have the money to buy them. But now thanks to City Bank the demand side is also getting fixed. Well the license Raj hasn’t yet fully gone away. It’s still a few years uh from that. Uh but you know there is demand. So would you say it ever went away? Um so yeah so in 1987 they set up Bajage Auto Finance. It’s a subsidiary of Bajage Auto. So as Sor Mukharji puts it on the podcast unwittingly City Bank had done a beta test for what has become one of the most successful lenders. Wow. Do you know what else was set up in 1987? No. Satyam. You know what Satyam is? Yeah. Yeah. Of course. Satyam. IT. Yes. An IT services company. It’s set up from South India in Hyderabad. It would end up becoming the fourth largest um IT services company in India. 1987. Okay. Yeah. Interestingly, since you mentioned City Bank, I’ll give you another City Bank reference from around those time. You know what was set up in 1989? It’s it starts out as credit capital venture funds in 1989. Its parents are UTI, Central Bank of India and HDFC. It changes its name to ILFS venture corporation after about a decade or so in 1997. Then finally it becomes ILFS and um ILFS investment manager in 2002. It’s led by Ravi Parasaarti who’s from Immedabad and interestingly he’s a former city banker. Ah but both these companies that you mentioned Satyium and ILFS would end up being quite infamous right Satyum would have the accounting scandal right and ILFS would uh you know would go bust in the NVF I’m just telling you what happened around that time exactly 1987 what happened in 1989 around the same time all of this was going on because this is a period where there is suddenly a lot of economic activity right you can see it’s like the precursor. Sometimes you can sense that before the doors are actually open because these are businessmen, these are family groups etc. They get a sense that something is about to happen, right? You sort of get this like you rightly said uh liberalization has still not happened but the air is sort of ripe with something’s got to give. Correct. So you know City Bank goes and finds that you can sell 2,000 scooters over 3 days. So it’s almost like something is about to happen but it hasn’t happened yet and there’s all this action that’s taking place. Interesting. So in March 1987, Bajage Auto sets up Bajage Auto Finance. Um it is what you call a non-banking financial company. What non-banking financial company? That’s like calling motorcycles non-scooter two wheelers, right? Why non-banking? Because anyone that’s not a bank who’s lending is called a non-banking finan that’s a that’s a we say NBFC all the time now right it’s very very popular we say NBFC banks and NBFCs that’s it right two categories of lend so in those days it wasn’t so popular like I said banks were pretty much the only game in town uh so anyone who was in the business of lending but wasn’t a bank didn’t have the banking license was called NBFC right and this term hadn’t become very popular Then um so Bajage auto finance is set up and Rahul Bajaj gets his cousin from Kolkata Deepak Podar an MIT uh graduate to head Bajage auto finance. Okay. And Bajage auto finance is finally in the business of higher purchase finance. Not a very sexy term, not a term that’s used a lot right now. What’s what’s that? What’s that? What’s higher purchase finance? Uh it’s basically, you know, I’m I give you a loan to buy a a vehicle, for instance, and until you pay the last EMI, I own the vehicle. So I you get you get to uh take possession of the vehicle, but I don’t transfer ownership of the vehicle until you pay the last DMI. And this is a this is a new thing. It’s it’s not it’s not actually very new because uh Sundam Finance which is actually part of the TVS group in Chennai uh pioneered this in the 1950s uh for for commercial vehicles and but there I suppose the the there’s no emotional aspect to ownership because it’s a commercial vehicle but when it comes to people um you know average Indians buying a scooter for personal use I assume that ownership becomes more important. So this is a relatively new thing and I think in the 80s every it’s not just the Bajage group right everyone sees what’s happening. So uh the Tata group Reliance Industries uh the other group they all set up uh I mean it wasn’t the other Tibila group then but they all set up um high purchase finance arms uh in their respective groups. What are they funding anything? What what kind of funding vehicles? A lot of them are funding vehicles. Um but you know Bajage auto has its back to the wall right now because you have all these foreign automakers who’ve come to India and they don’t have just scooters. So people are people can choose between Bajage scooters or other scooters but they also introduce motorcycles. We talked about hero and Honda joining hands with hero for motorcycles. So you have a lot more options and it’s Kawasaki Bajaj. Kavasaki Bajaj but Rahul Bajaj is still a scooter man right uh he thinks motorcycles are a distraction of sorts right uh he still believes in scooters because that’s the market right then right you for whatever reason he doesn’t think there’s a huge market for motorcycles yet he does go on to change his mind later um so they need to do something right so they are still the largest but their market share is falling um so they launch one of the most iconic campaigns ad campaigns that we’ve seen in India which is Hamaravaj right and Lintas is the agency that’s commissioned to uh do this campaign and obviously this that this is what the 1990 89 89 which is verge of 199 so and the iconic tagline right bulan bharati bulantas now you say that and the music is playing in my head it’s like one of those things where it’s almost akin to hearing sort of like the national anthem if someone just says the words and the music starts playing in your head. So I watched that repeatedly and you won’t believe it, you know, I was coming to the studio and I was just humming that song. I was actually singing I mean I don’t know the the entire sort of lyric but I just kept singing that line. Um so obviously Bajage is now a household name right it but it doesn’t really arrest the fall in market share. I think Baj’s market share so much advertising can do. Yeah absolutely. Uh I think in the 80s the market share was roughly about 85% before all these foreign companies came in. By the early ’90s it’s from 85% you can only go down go down. Yeah it’s down to about 60 62%. Right. Um and the industry is clearly shifting to motorcycles. But uh fortunately for Rahul Bajaj someone who actually thinks motorcycles are the future right joins the company that’s his older son Rajie in 1990 and he goes on to change his father’s mind about motorcycles this is now the fifth generation of Bajanch you have say Bach and then you have uh I mean Jamnal is his grandson okay Jamnal and then you have Kamal Nayan you have Rahul And then you have Rajie. Um his younger brother Sanjie joins the group joins Bajage Auto in 198 1993. So 3 years later uh they both mechanical engineers. They both uh I think mechanical engineers from the University of Punea. Then they both go to war to study to specialize in manufacturing systems. That’s the that’s the business they’re in. Uh then Sanjie like his father actually goes to Harvard Business School uh for his MBA and as all of this is happening India also sort of unshackles itself the the reforms that we talked about right in 1991 again India also had its back to the wall absolutely the unshackling didn’t happen by our own volition just like Bajage auto had its back to the wall India also had it there’s a balance of payments crisis and then we forced to liberalize yeah and we do away with license raj which means like you want to make whatever you want to make you decide uh if you think there is enough demand for it you make but if you have excess capacity that’s totally on you right um so homegrown business groups were not obviously very comfortable with this right so uh 16 industrial why because weren’t those same business groups once saying we want to make more scooters or products but you won’t let us so why they not suddenly comfortable with anyone can do whatever they want. the sort of the uh end of license Raj was not the only thing right the India actually opened up I said in the 80s the automakers came in and that was sort of the foundation it was not it was still sort of still controlled because through joint yeah here you said you want to come in come in right it’s still I mean India still sort of liberalized further in the following decades but then they said foreign companies are welcome to come and set up shop in India right so now all these Indian automakers was not just automakers across sectors, right? So, they were sort of subpar because they didn’t have the technology, they didn’t have a lot of raw materials, they were importing stuff uh and and they were competing largely within this market which is India and the barrier to entry was very high if they suffered from license raj it also meant that a new player couldn’t come in certainly not a foreign company all that changes with the reforms in ’

91. So 16 industrialists um including Rahul Bajage, there is Harish Shankar Singha of JK group which is a cement maker. There’s Jamshed Godidge of Godidge group. There’s Kishop Mahindra of Mahindra and Mahindra and Times Groups Ashoke Jen which is you know which it’s the country’s largest media company. They all meet up at the Belvadier Club at the Oberoy Hotel in Bombay because they’re all really annoyed with the reforms and they want to do something about it right and they anoint Rahul Baj the informal leader of the group uh and such Dalal I think she this is around the time she’s working on the hashad ma story which goes on which she goes on to break she reports this development and calls them the Bombay club. Okay. It’s sort of the anti-reforms Bombay club led by Rahul Bajaj. Um so they the the main argument that they have is they want a level playing field because they say that we don’t have the infrastructure that these companies have in their country. Our interest rates are high uh and we can’t hire and fire workers like these people can in their country. Right? So we need to first allow some time for our homegrown companies to get to a particular point and then you allow them to compete with uh foreign companies which have had far more favorable conditions to grow in. Uh but obviously there are differences between these 16 you know uh men. They’re all men. Uh and because they’re all in different groups they all have different interests, right? One is in cement, one is in motorcycles. There’s one making cars and tractors.

Media. media and they don’t agree and I think by the end of 1994 Ralaj as he puts it in the Gita praml book it’s a club of one he’s the only one left in it and we all know what happened right I don’t know what kind of lobbying happened at that point but not much changed in India just continued uh you know uh introducing more and more reforms and this Bombay club clearly failed you know what else happened in 1994 no okay let me tell you there’s a guy his name is Rajiv Jen he joins this company one of the we’re talking about um during this period there’s a bunch of international lenders in India we talked about city bank there’s another one it’s called Goney a subsidiary of General Electric back then still considered one of the largest most successful companies in the world today no longer Rajiv Jan joins G Money fresh out of college um he’s done his MBA from the TA PI Institute of Management in Manipal. Before that, he’s just done his BCOM from the American College in Maduray Maduray. Right. Fresh out of college, Rajiv Jan joins Goney as a business development manager. He’s amongst the first 10 employees if I’m not mistaken in Goney. He starts working obviously uh with this company in the southern markets and over the next four to five years when he works with them he brings them up to the leading position in South India in the auto lending space and in the consumer durables market over the next many years he would then move on to other companies like AIG MX um doing auto loans personal lending mortgage finance etc. Yeah. Yeah. You know who Rajiv Jen is but we shall leave that for a subsequent discussion. Yeah. I was actually going to get to consumers financing but before that you know we’re talking about the post-liberalization phase. Bajage auto finance has been around for what I mean it’s 1994. They’ve been around for 7 years and they’ve actually given out about 100 cr in loans to about 90,000 customers. So it’s not bad. 100 cr in the early ’90s is not a small number and 90,000 customers. Uh these are all Baj scooter. So it’s still what they call a captive lender. Yeah. Uh and to become even bigger it needs capital. Okay. So it decides to go public you know how much it raised? 10 cr. No not so not so little. It’s about 60 cr. Okay. And 94 a few months later actually in 94 is when it’s a this is a factor very interesting factoid Rajiv and Sanjie Bajj Rajiv Bajaj and Sanjie Bajaj both get married in Bombay there are two Rajiv cuz I introduced Rajiv as well talking about Rajiv Baj and Sanjiv Baj so they get married a day apart Rajiv first Sanjie next and then on the third day they have a common reception. Wow. Um yeah so I actually you know double checked this I read this somewhere and I double checked this with uh Sanjib Bajaj when I met him. What’s what’s the reason? I don’t know I don’t know what the reason I mean I I want to think you know the my mind always goes back to you know that the trip that you mentioned earlier when they all go to Kolkata and like you know I mean they don’t want to make a big pump and show off it. So I’m wondering is it austerity? Is it still playing out? Obviously cannot. No, not really. I think I I I remember I mean if I remember right I think Rajiv gets married at the Taj and Sanjie not not very austere I guess. So Sanjiv gets married at the turf club at Mar austerity changes India changes austerity changes. Um so next to the the kind of weddings we see now which play out over like months right this was fairly austere right. Um so yeah they have a common reception. Um and then you know the business is sort of chugging along fairly well and in 1997 the Reserve Bank of India which is the banking regulator uh actually says that anyone any non-bank which is in the lending business will have to get a a license from us will have to register with us. So far makes licenses again into Yeah. Yeah. It’s a recurring theme is it licenses. Yeah. But I think this is one financial services one area where licensing has actually worked in our favor. Uh and the Reserve Bank has done a fairly good job over the past few decades. So Bajage Finance actually registers as a deposit taking NBFC non-banking financial company in 1998. So there are two kinds of NBFCs which is like deposit. So you can bank all banks are allowed to take deposits but not all NBFCs are allowed to take deposits. This is like a D. It’s like an full inversion, right? First you said it’s a non-banking finance company. And the thing that really differentiates a non-banking finance company from a bank is that a bank is allowed to take deposits and typically non non-bank. But now you’re saying there are so kinds of deposits. So for instance uh you know an NBFC won’t be allowed to take what is called CASA which is current and savings account deposits. Ah right which banks love so you can’t open a savings account savings account but you can open a fixed deposit okay which and banks love current and savings accounts because they pay next to nothing they’re the cheapest source of funds right which is why a lot of NBFCs have wanted to become banks including Bajage Finance right because you get access to this huge pool of capital but it is a deposit taking NBFC and it registers with the RBI and there’s an interesting same time right I mean I found this number uh retail credit uh as as a percentage of India’s GDP or gross domestic product was only 7% in 19 in in 2000 um for Southeast Asia it was 35% back then back then so that tells you that you know we had a long way to go at that point you know there were all these lenders uh non-bank lenders but the market was really really tiny right And probably a lot of these players felt that you know if the other markets uh have so much retail credit what stops India from heading in that direction right um and retail credit at this point is largely home loans because home loans tend to be fairly lumpy um you know I mean at that point you’ll probably borrow like 10 lakhs or 20 lakhs to buy a home and maybe some families borrowed for their kids’ education and some vehicles being financed that’s about it there was nothing else right So when Bajage Finance actually begins dabbling in consumer durables financing in the late 1990s, no one expects it to become the behemoth I mean the business itself uh to become the behemoth it does eventually become in a few years, right? uh and no one can imagine that this is the business that Bajage Finance will be known for within a decade for a company that started out by just can we lend money so that people can buy our own products. Absolutely. Right. So Rohan, Vij sales is an incredible lens to look at financing for consumer durables and how TVs and refrigerators. What’s Vija sales? Getting to that. Um I mean there’s the equivalent of Vijay sales in every part of the country. It’s a an electronics retailer, an appliance retailer which is very popular in West India in in Maharashtra and Gujarat. So there is Pi and Giras in Karnataka. There is Vasanto and Tam Nadu. There is May in Kerala. These are all chains which of course pan India is the likes of Chroma and Reliance Dig. And the reason why I say that Vij sales is a great lens to look at this is that it it started off as a single store in the 1960s and is now obviously one of the largest electronics retailers in the country. Right. It’s got about 170 stores, revenue of 11,000 cr last year. Wow. Right. So, you can actually do a time-lapse video of Vijay sales and how people bought TVs and refrigerators to understand how financing has changed. Um, and Vijay sales like you know it predates Chroma and Reliance by 40 years. Reliance and I mean Reliance Digital and Chroma were founded in were you were set up in 20067. So I actually met Nilles Gupta whose father Nanu Gupta founded Vijay sales in the 1960s for this episode and that conversation. Oh that must have been fascinating. Absolutely fascinating. Uh so he actually walked me through step by step right how financing happened. He said until the 1980s his father it was still just one store at Mahim uh another suburb in Bombay near Bandra. So his father from the 1960s to 80s he was running one store. That’s actually some dedication cuz if you really think about it today and if you tell people that someone started a business and it was one store and he ran it for two decades before starting to expand it. A lot of people would say how I mean because you know I mean in the sense that you sort of always think that these businesses are just everything is just scale scale scale grow. Yeah. You remember what we discussed a little earlier that banks were not willing to give out loans to too many people, right? So you had to have the cash flow to actually go set up another store and you need to have enough people to buy it as well. So in some senses, Vijay sales was also limited by the same factors that held back as well. So his father until the 80s would give credit. But what would happen is this guy, someone would walk in and say, “I don’t have money to buy whatever this TV.” So he said, “Okay, I’ll you I’ll give it to you on credit. It’s 24% interest.” So if the TV is 1,000 bucks, you pay one, which is like about credit card interest rate types. 2 to 3% 2% a month. So 1250 at the end of the year. Um so and then obviously he would just ask him where do you live? Uh what do you do? And then he Oh, this is the earliest forms of KYC. Yeah. And obviously there’s no um there’s no proper credit assessment. He would ask them for their ration card, okay, for proof of address and then he would give them that loan. And for those born in the relative prosperity of the last few decades, ration cards are though like you know cards. I mean they still of course given out except you don’t see a lot of them in modern urban India. Each family had a ration card and that gave you literally rations which is subsidized grain, pulses, rice, etc. oils to buy from subsidized government stores. Yeah. And there’s still uh I mean the public distribution system and free rice and dal is still a big tool in elections, right? So how much a party promises to give its voters can be a decisive factor. So and the way Nanugupta or Nillesh Gupta told me the story he said then Sharma gi the original customer right it’s always Sharma it’s not even like Pandai or Mashra right so Sharma would John do Sharma Amit Sharma is the John Doe of not even the John do it’s really what’s I wonder what’s the equivalent of not even Amit Sharma just Sharma G so then Sharma G would go come back to the store with two more customers and tell Nanug Gupta these are people I know this is his social currency now. So, can you give them credit as well to buy something from your store? And then he would give them credit. And his father Nano Gupta whenever he sent someone from the store to collect uh the monthly payments, uh he would tell them when you go the first time, go and ring the neighbor’s doorbell, okay? And say, “Oh, are you Mr. Sharma? Uh you bought I’ve come to collect the payment on your loan.” And they’d say, “No, no, no, no. That’s our neighbor. Oh, I’m sorry. I’m really serious. And then you go to the go to Mr. Sharma’s house to collect the payment. So, so I have a question here. I have two possible explanations for this. You have to tell me which one is right. Explanation one is this is viral marketing because the neighbor then understands that even I can buy a TV or a fridge on loan from Vijay sales. Explanation two is this is societal pressure. This is so that the neighbor knows that my neighbor has taken a loan. So it just builds slightly which was I wish it was the first but it’s the second right. So he said obviously you know you didn’t want to be seen buying stuff on credit right it was not something that was looked upon favorably. So you do that once so that the so that Mr. Sharma knows that you know this is a possibility that if you don’t pay up the the the store owner could go to the neighbor and tell tell him about your behavior. Then you know uh this this kept happening and the the interest rate was 24%. And then in 1994 you talked about Rajiv Jen joining G money. That’s right. It wasn’t G Money then. It was actually called Countrywide and it was a partnership between HDFC which was a home loan. It was a mortgage financier and G Capital. It was called Countrywide Financial Services. And Countrywide had partnerships with uh Phillips, BPL, you remember BPL and LG and G had a joint venture with Godidge for appliances and then car makers like General Motors, right? And countrywide charges 16%. So it’s gone from 24% to 16%. And then 97 some of the Indian um finance companies also become interested in this. So um Kotak Mahindra walks up to Vijay sales. By then Nlesh Gupta has joined the firm. I think it’s become about three or four stores all in Bombay. Um and uh he the he said a senior manager from Kotak Mahindra uh told him uh we have something called K value finance and it’s 0% interest for the customer. Okay. Uh the customer just pays a 2% K value implying Kotuk. Kotuk. Okay. Yeah. I thought it’s maybe some acronym or something. No, no, no. And the customer pays a processing fee of 2%. And Vij sales had to pay about 4.5%. So in if the cost of the TV was a,000 bucks, uh, Kotak would give Vijay sales uh 9.95 and would charge 2% from the customer. Right? That’s what the the the lender earned on this. So the cost essentially makes money from both the customer as well as the seller. Yeah, but it is labeled no cost EMI according to NLE. This is called processing fee. Yes. So it’s not interest technically, right? So um according to NL Gupta, this is the this was the first 0% EMI plan. I couldn’t independently verify it, but I couldn’t find any other examples from that time where a retailer when was this? This is 97. So the cost of the loan has gone from 24% to 16% to 0%. Right? All in about 7 8 years. And then ICICI and city we talked about city as well. City they also enter the frey. And then in 99 obviously Bajage auto finance it’s still called Bajage auto finance also starts financing consumer durables. Right. In a few years all these guys exit the market. Interestingly by the mid200s Kotak city countrywide because this is all like tiny loans for them like 10,000 20,000 rupee loans and it’s very complex and they’re not making a lot of money off it because people are not a lot of people are borrowing uh from them to buy TVs and all. So they it’s not worth their while so they exit the market uh in the mid200s. So, so a lot of these foreign banks and financial services companies come to India, they set up this business and show that there is a market there but not a very large market. Yeah. Right. And then they exit. Yeah. Yeah. And this is this is what the doctor ordered for Bajage Auto Finance because I mean it’s it’s just doing okay in vehicle financing. uh and there’s pretty much no one left in consumer durables financing and Bajage auto finance has that market pretty much to itself. But before capitalizing on that, there is something close to home that the family that owns Bajage Auto and Auto Finance has to fix. What’s that? So it’s 2001 and there is a Bajage family gathering at the Bungalow in a Kuri which is where the Bajage auto factory is near Punea. Um and Shish Bajaj who is Rahul Bajaj’s younger brother I think he’s I think younger by about 10 years or so he walks up to Rahul Bajaj and their three cousins Shakhar Madhur and Niraj for a chat he calls him aside for a chat and he tells them he and his son Kushagra who’s now studying in the US actually want control of Baj Hindustan Sugar this is the sugar company um Jamnal Bajadaj set up in the 1920s and Baj consumer care which is an FMCG company and Rahul Bajaj actually thinks this is a prank. Apparently Shashir is known to playing pranks and they used to do that when they were kids in Bombay. Uh and he obviously doesn’t take this seriously and then 7 months later there’s another family gathering and this time Kushagra is right here with Shishar Bajaj’s father and they make the same demand again. It’s interesting because the demand is for a a split of the Bajage family businesses. Yeah. So Rahul Bajaj and Shishar Bajaj are sons of Kamal lion and then there’s Kamal lion’s brother Ramak Krishna who’s got three sons Shakhar, Madhur and Nirj and Rahul Bajaj is the oldest and obviously the first among equals the one who’s made Bajaj Otto which is they’re all still sons. Are there any daughters in the Bajage family but just not in this family succession? Yeah. Yeah, absolutely. So um and and Rahul Bajage has obviously grown the group. Bajage auto is the crown jewel. I think roughly about 80% of its revenue and 90% of its profits actually comes from Bajage auto. So and all these five sons right you know Kamalan’s family and Ramach Krishna’s family they own 50% each of Baj Seasham which is the main holding company of the group and that 50% is divided among the sons. So Rahul Bajaj and Shishir Bajaj have 25% and the cousins have about roughly about 17% each. So ownership is equal but control is firmly with Rahul Bajaj and by this time Rahul Bajage is two sons. So it’s when you say control is firmly with Rahul Bajaj that’s not because of any contractual document. It is just because of just the understanding that he’s got it. and he’s been running the group for a while and that’s why he’s taken a back when Shisharbaja tells him right because until now they’ve done everything together they it’s a very close-knit family and by this time his two sons Rajie and Sanjie have been part of Bajage auto for roughly 7 to 10 years u and there are multiple versions of what actually played out uh and there’s this very interesting book on business battles or splits uh it’s called family feud business battles family feuds that changed Indian industry by Shaman Majjuna. Uh and there are a bunch of articles and interviews from that time. It was a very public battle, right? Uh and Kushagra was doing most of the talking for himself and his father and there was Rahul Bajaj defending himself. So it was actually Rahul Bajaj and the three cousins and Shishar Bajaj and his son. So one version is that Shishir Bajaj wanted Sanjie and Kushagra’s roles to be swapped. So he wanted Kushagra Bajaj to be part of Bajage auto and he wanted Sanjiv Bajaj to be given Bajaj Hindustan sugar which Rahul Bajaj shot down apparently and there’s another version which is that you know Kushag that doesn’t sort of align with what he asked for right you said he asked for um you know at the two family gather originally he wanted this apparently and Kushagra Bajaj apparently asked his tawaji or uncle that he be given financial services the financial services business from Bajage auto right but again he didn’t and that’s why they went and made this sort of they said you know we want Bajaj Hindustan sugar now and Bajage consumer care because we’re not getting Baj auto finance which is the finer business so and Kushagra Baj actually claims that Shikhar Bajaj is one of the cousins was actually with them but he quote unquote we’ve entered a parallel timeline into succession yeah we he chickenened out and went back to Rahul Bajaj is what he said in an interview. The fight drags on. I think it starts in 2001. I think 2002 or three. Um they go to the company law board and then there are mediators brought in. Very interesting. Can you guess the kind of mediators they bring in? Some of the biggest lawyers in India, ministers. Uh close not industrialists, industrialist bankers. No, no, none of that. politic minister politician. So they get Shahhat Paw. Oh okay. Right. Um who’s former as powerful as they come in Maharashtra back then. Yeah. Yeah. Former chief minister of Maharashtra. And he he’s sort of his bastion is western Maharashtra. Bahamati which is near Punea. Um and Baj is now you know and the sugar cooperatives etc. And on sugar. Yeah. So he mediates I don’t think it goes very far. Then there is S. Gurumi who’s a corporate adviser and charter accountant from Chennai. He’s known for his articles against his investigation into Reliance for the Indian Express in the 80s. So he’s brought in and they work out an agreement in June 20 June 2005 and the agreement is that Kushagra and Shashir Baj will actually buy their stake uh buy the the Rahul Bajajas and the cousin stake in Bajage Hindustan sugar and consumer care and the other camp will do the same by you know sort of like a swap swap right but this doesn’t happen not the swap that shares originally intended uh yeah wanted rather so this doesn’t happen because there is a a crazy rally in the stock market the value of all the listed baj companies especially baj auto and bajaj hindustan sugar shoot up so now suddenly they’re like okay how am I I’m not paying so much for this right I’m not paying market there’s a mismatch so the shares of baj auto are worth much more than baj no yeah I mean bajage auto is a bigger company but actually baj hindustan sugar at that point rallies more and Bajage auto. So now they’re like, “Oh, we’re not buying it at this price. This doesn’t work for us.” Right? Um so this multiple versions of this keep happening and this is I’m also assuming that at this point people in the stock market are aware of these negotiations going on because this played out fairly publicly. Yeah. Very very you’d never know that these valuations going up is investors just deciding this is the time when all companies shot up, right? this is you know and uh and we actually open the episode with Kushagra Bajadaj saying Rahul is a Raja Rahul Baj is a raja who doesn’t have time to meet his praa right and he also accuses Rahul Bajaj of being quote unquote sunentric and this is when just him the entire story up till now has very son um and in 20078 the tide in the market begins to turn global global financial crisis onset of the crisis in the US obviously all these Wall Street giants are in trouble because they’ve issued hundreds thousands of hundreds of thousands of loans subprime loans as in these are oh the global financial crisis is here mortgage loans to borrowers who don’t deserve it right and housing prices crash and they default so and the crisis spreads to other countries I mean India is relatively unaffected but there is certainly panic uh in the market and then the prices of all these companies crash. The value of Bajach companies overall market value of all these companies goes from something like 35,000 cr to 12,500 cr. Oh, so wait a minute. So the larger picture this is like that a butterfly flaps its way and there is a storm somewhere else. So this is like in the US subprime loans cause a crash, Lehman goes down, that crash spreads to India, stock markets crash and the crash caused by that stock market brings the Bajage brothers and family back to the negotiation table because now everyone is like sure we can afford this swap. Would have seen that coming. So I think there’s this I read this somewhere that Kushagra Bajage and and Nirvaj uh his his dad’s cousin they used to run into each other because they were still working out of the same u you know office or rather building uh at Naraman Point and they used to run into each other they said okay let’s just thrash this out let’s find a solution to this and they swapped and and and the the split is done but in the process something else has happened which is actually more sort of relevant to what we’re talking about which is a restructuring of Bajage auto itself. So Rahul Bajage uses this opportunity to basically figure out a succession plan for his sons within Bajage Auto. So Rajiv Baj was the first to join Bajage Auto and he’s the one who sort of spearheaded the move away from scooters and towards motorcycles. He’s the one as well. Yes. He’s about 3 years older than Sanjiv Bajaj and uh so Rahul Bajaj is sort of it’s sort of uh everyone understands that he’s going to be the next in line. So Sanjiv Bajage needs something and so there’s Bajage auto finance. So that’s taken out of Bajage uh finance and in roughly in the early 2000s and 2001 or so when India sort of uh ended the monopoly of life insurance company and general insurance company and allowed private players to come in Bajage uh got into a joint venture with Alians which is a German financial financial services conglomerate. Um so those two insurance ventures Bajage Auto Finance they’re all taken out of Bajage Auto they parked in an entity called Bajage Finserf which Sanji Bajage is supposed to lead from here on. So the automaker rather the scooter maker or motorcycle maker is with Rajiv Bajaj the very tiny financial services business is with Sanjiv Bajaj. So there’s a possible parallel universe version of this story where Shishir Bajaj never raises this issue at the family meetings and the Bajage group continues as it is and we are not having this discussion about Baj Finance or possibly Kushagra Bajaj gets Bajage auto finance and Sanjiv Bajaj gets Baj Hindustan Sugar it’s a different company completely different company so and it’s a very interesting structure I mean if you look at there’s a nesting all arrangement of ownership. So there is Bajage Holdings which is listed. It’s nothing but an investment company. It owns Bajage Auto and Bajage Fenser and Bajage Fenser owns Bajage Finance and Bajage Finance owns Bajage Housing Finance. All these companies are listed and this is all part of Rahul Bajaj and the three cousins. Kushagra and his father now run a completely different group with these two companies and a few possibly a few other sugar and FMCG FMCG. So right now Baj Bajach Finance is not very big. I think in in 2008 uh their loan book is roughly about 2,500 cr and 85% of that is auto loans. We talked about their sort of diversification into consumer durables, but it’s really tiny. And these auto loans are also mostly baj scooters and three-wheelers, right? Their own market. We discussed earlier that this company’s reason to exist was so that it could finance the purchase of its own products. Yeah. Right. So had this split not been forced onto the Bajage group, there would have been no reason to spin out Bajage Finance into a separate independent company. it would perhaps continue to operate within the larger Bajage umbrella. Yeah. And Rahul Bajage has given his younger son the financial services business but he’s not someone who’s very clued into this world. He’s an auto guy. He’s a scooter guy. He needs to find someone to mentor his son. And that mentor finds Sanjiv Bajaj the CEO who will end up making Bajage Finance the storied company that it’s become. So Sanjiv Baj is no stranger to finance though he’s an engineer and an MBA. um between 97 and 2007 he’s been involved uh in finance for Bajage Auto. He was actually part of the team that put together the plan to enter insurance with the joint ventures with Alian. But he still doesn’t understand the world of consumer financing which they think is the next big opportunity which is why Rahul Baj feels that he needs a mentor and there is one in the family and remember we talked about city coming back to play an important role in Bajage financ’s evolution and that is through this guy named Nanu Pamani. Nanu Pamani is Rahul Bajaj’s brother-in-law. married two sisters and he had an illustrious career at City Bank. I think he joined City at 22. He interviewed with actually with uh Unilever with Tata Administrative Services but finally he chose to join City Bank at 22. In 15 years he became its CEO or India CEO. So that’s a youngest ever India CEO for at city. Uh then he moved to Singapore, the Philippines. I think he headed the private banking division uh in in the Philippines. Then at one point he was in he was in London where he apparently headed uh emerging markets operations for about 100 countries from London. Um then his mother fell ill so he and his wife had to relocate back to India. Uh and that’s when he became uh India city India’s head a second time. And then I think the early 2000s he retired and he was on the board of Bajage Auto as an independent director. And I read this in an interview he said I was looking forward to traveling the world now that I’ve retired but Rahul pulled me in and he he’s fate had other plans. Yeah. and uh I don’t know maybe he he’s now remembered more for the role he played in in sort of putting together the building blocks for Bajage finance than what he did at city. Um so he is known to be this really demanding guy to work with. I remember reading this uh tribute uh on Facebook he passed away the in 2020 um said that we would get mails from him at 3:00 a.m. Right. uh but obviously a very sharp guy understood how uh Indian consumers behave. So I had this research we said that internal reviews that he did as part of Bajage Finance would typically run for hours or 400 450 slides and these slides covered roughly 2,000 different types of metrics. Wow. So that’s the kind of like you know uh intense person that he was and he also happened to hire Adityapuri at city. Oh wow. Puri went on to become the first uh the founding CEO of HDFC bank in ‘94 and Alipuri spent 20 years at city. So there’s this thing right A players hire A players and A players find A players. So this is like some kind of a player network game going on right now 100%. And they interview Sanjie and uh Nanu Pamani interview about 30 candidates. And then finally he interviews Pamani interviews Rajiv Jen the one who was one of the first 10 employees of countrywide who in 1994 passed out of college and joined uh G money or countrywide finance and has spent the last 10 years trying to sell different types of loans around auto consumer lends credit cards etc and he’s now with AIG American International Group. Um so they uh Pamani interviews Rajiv Jen at the Taj Mahal Palace uh hotel in in in in Bombay. I’m guessing he’s in his early 30s at this point, right? Because he graduated college about 10 years or maybe about 32 33 so Rahul Baj is the final one to meet him and they all decide Rajiv Jan is the guy for the job. Obviously he’s had a ringside view to how you know shopping behavior has changed how people are more open to financing but you know at this point I know all everyone is looking at consumer durable financing but it’s not that big it’s really tiny we talked about how Bajage auto finance his loan book was about 2500 cr and 85% of that was auto and out of that 15% I think they uh Sanji Baj talked about personal computers financing personal computers in the early 2000s Okay, that was a you know it was big enough to be a segment within consumer durables. Right. Right. And yeah and when I met Sanjie Baj at his apartment gorgeous apartment in Bombay with a you know a C view uh he’s this really tall imposing guy with a deep voice. Um so as to why at that point it didn’t it it wouldn’t have made sense to bet on this segment right and he says something interesting. He said at that point it was much easier for uh banks to issue credit cards uh rather than give out 10 to 20,000 rupee loans to millions of people which is exactly the reason why the likes of city and countrywide decided that this market was not worth their while. They’re tiny tiny loans operationally heavy. Why why are credit cards easier? Because they’re easier to just distribute and I mean how many credit cards uh were people were banks issuing at that point? the market wasn’t or you rather give out corporate loans or credit card because the market was really tiny. I get that. So, so City Bank enters tries its hand at consumer loans and says this is not worth it. Let’s do credit cards. And there is this period of India’s history where City Bank is one of the most aggressive credit card issuing companies. I was at one time a loyal City Bank credit card user till at some point City Bank decides to sell that and exit that as well to access. Yes. Yeah. M and he said something interesting. He said their branch network bank’s branch network was not really meant for customers walking in, right? And if you want to build a business around consumer durables, you you’re not going to do it with more and more branches because that’s not how it works. You need to be where the sale is happening, where the customer is walking in, right? And banks are happy doing um you know housing loans and corporate lending. uh why you know like Sanjiv Bajad said you know why would you bother with like you know a thousand loans or 500 rupees each when you can give out one five lakh rupee loan right to to uh an urban consumer who’s looking to buy a home and 20067 is when we discussed this earlier chroma and reliance digital they get into this game and baj finance Sanjiv Bajaj Nanu pamani all these guys okay now this business is becoming serious enough for the country’s largest conglomerates to get in and obviously they would have gotten not with the idea of setting up one store right it would have been a countrywide plan for uh Reliance and uh Chroma Tata uh and Vijay sales itself has become a chain now it’s like 8 to 10 stores in Bombay and they begin expanding to Punea Surat and other cities and within 6 months of taking charge as CEO of Bajage Finance Rajiv Jan completely rejigs the leadership Deepak Podar the the original uh CEO Rahul Bajaj’s cousin the MIT grad he moves on Rajiv Baja Rajiv Jan is the new CEO he rejects the leadership team and he gets people from the organizations that he’s worked in like Goney AIG he gets Dwang Modi and Rakkesh but again these are all people who’ve done not corporate lending they’ve done consumer financing auto or durables or whatnot right and they know what it means to scale this business. So this Troy Ka Sanjie Nanu Pam Nani and Rajiv Jen along with these guys they put together the initial plan for Bajage Finance and remember this this Bajage Finance is still operate it’s still it’s called Bajage Auto Finance still and it’s operating out of the the the space where the finance team of Bajage auto uh works because that’s what that’s the team Sanjib Bajaj was heading at that point. This is I think as he put it it was a it was a shed uh at the Bajage auto plant in Akuri. So this is like the garage version of Google’s origin story. This is the shed version of Bajage Finance origin story and this is what 2007 seven. So they’re just they’re just a year from the global financial crisis coming to head in there. You can see it started kind of yeah but it came to head in

2008. Uh so every Tuesday morning Nanu Pamani who lives in Bombay at that point he drives to Punea he reaches the Bajage auto finance team office at around 8:00 a.m. and he’s already got the the presentation for the day all marked in red because he’s compared that presentation with the previous meetings presentation and whatever was promised then has not been achieved that’s all been marked in red and then they all a sudden do the maths to figure out what would make this business sustainable or you know at what point would you break even right so they decide that they need to go from doing about 8,000 loans consumer durable loans 8,000 to 9,000 a month to 20,000 basically sort of double the number of loans you do and apparently Sanjiva told me nanopani said I have no time for hobbies I give you guys one year either get to 20,000 or I’m shutting this business down right and he wasn’t messing around right so he had this target because he’s been told by Rahul Bajaj to guide his son though there is the comfort of being part of the Bajage group you know you have access to capital your credit rating is great. You can’t go wrong. I mean, you can’t expand and go wrong. So, he has

this is a fascinating um study in I think the incentives of everyone involved, right? And and the people who they are Namu Amnani is has had an illustrous career. Um you know, he’s sort of retired. He’s brought back by Rahul Bajaj. So he really I mean he’s like look either like you rightly said like you know I’m not interested in coming back after my retirement to run a small hobby business. So either you get big or I shut this down. That’s his this thing right. So he’s he’s the mentor. He’s the driving force. And then you have two other people who each of them have a point to prove. M so you have Sanjiv Bajage who’s been given this sort of the shed version of an internal captive business but now has to turn it into his own business because Bajage auto obviously is run by his brother Rahul uh Rajiv Bajaj right and then you have Rajiv Jen who’s just been brought in as a 30-some CEO of a business who has something to prove as well so you have this wonderful version of Namu Pamani who’s is a mentor who’s saying impress me or else I shut this down and you’ve got these two other people each of them have like you know I want to prove it to the world what is possible right so everything else like you know even if you forget about it just the intersection of what each these each of these people who they are and what they want itself is very rare this kind of an alignment it’s almost you see it like an alignment of stars it is usually the case that there’s only one person who’s new right now. You have these two people and so I mean it’s fascinating. No, I mean Nanup Pamani has obviously you know he’s seen uh City Bank uh grow over the year and he’s he’s had two stints of City Bank India Chief right and he has the big picture and Nanu Pamani has been you know working with all these companies countrywide and uh American Express and AIG. So he’s been on the at the forefront of the the start of the consumer durables revolution right and Sanji Vaj is the family guy right and uh he’s the one who sort of connects you know this business or Rajiv Jen with the rest of the group but like because like I said um Bajage Finance had the comfort of being part of Bajage group and I remember reading some credit rating report it was pretty solid because at that point Bajage auto finance was not being assessed on its own merit oh you’re part of Bajage group or your parent has so much cash then we don’t have any trouble uh giving you money right because NBFC’s at that point the primary source of capital was going to banks banks would give them money and they would lend that money to customers oh very clever so the banks won’t take the risky part of actually lending to customers they’ll just lend to the NBFCs and the the NBFCs bear the risk but the banks get like safer returns yeah and now I think a lot of NBFCs raise money through bonds. I mean the bond market is now fairly large. At that point it was very very shallow. You couldn’t really I mean it existed but you couldn’t really count on it if you wanted to raise uh large sums of money. So when I was doing the research um on my own on this trio like you rightly said right the thing that stood out is each the three of them brought three very distinct um advantages to Bajage Finance. Namu Pam Nani brought of course decades of operating within a sophisticated global bank like City Bank which was back then known for its risk management protocols. How it assesses like you know it’s always dealing in money right and the hardest the easiest thing for a badly bank to do is to lose money especially if you’re lending cuz it’s the easiest way to kind of lose business. So he brings that discipline like and and this is borne out by all these anecdotes of you know how detailed he is in his assessments and how many metrics he tracks. So there’s him then there’s Rajiv Jen who’s come after 10 years of really operational excellence in the sense that he’s learned how to build new products and scale them in India in sector after sector after sector. So he knows that and then there’s Sanjiv Bajaj who essentially like you said he comes with the Bajage family name and he and everything that’s associated with it right there is trust there is ethics there is responsibility right so if you sort of see I mean when I was kind of thinking about the three of them was almost like you know it’s it’s almost like Rajiv Jen is the accelerator right and if you look at Namu Pamani he’s like the steering ing and the brakes right like how much risk is too much what should we do what should we not do and Bajage essentially brings in the capital which is the fuel because it’s the Bajage family name that allows them to raise money because they’re not a bank they don’t have access to cheap deposits so I sort of saw them as this car which each of them playing different roles yeah I thought you were going to you know come up with a scooter analogy that would be a little forced So yeah, but very well put. So they have this target 20,000 loans basically doubling of the consumer durable loan portfolio uh within a year. Lo and behold, they hit the target, right? I want to say at this point the rest is history. But that rest is the most fascinating part of the story yet. There’s this great quote by Dwang Modi, one of the key hires that Rajiv Jan made right after joining Vijaj Finance and Dwang Modi now heads I mean he’s heads the consumer business. He goes on to be in that position for a decade. This quote is from a Harvard Business School case study. He says consumer durables was the only product category that could give us millions of customers without spending a dollar. we could build a fantastic franchise by riding on the efforts of retailers and consumer durables manufacturers to to attract customers to retail stores. Okay, the the point that we made earlier about how Sanjiv Baj feels that banks were not really the branches were not really meant for these customers, right? This is another version of that because one of the former one of the executives former executives that I spoke with who’s who were I mean who’s from Chroma he told me something very interesting he said every Chroma is a branch for Bajage Finance right so you’re not spending anything on acquiring the customer you’re there people are walking in and they want a loan you tell them I’m here to give you that loan right so this whole idea of turning a retail store into your branch is one of somebody else’s retail retail store into your customer acquisition channel. This is this is literally you’re inverting the game. You’re saying that it’s going to cost me a lot of money to set up my own branches and to acquire my own customers. What if someone else could do it for me? Well, you know what’s even better than what if I could get someone else to do it for me? What if I could get them to pay me Yeah. to acquire my customers. That’s what you’re referring to, right? Because all of these manufacturers, they end up paying like rightly said earlier, retailers, manufacturers, pay them. Pay them. I mean, it’s a brilliant business. If you can find it, get someone else to kind of build your business and pay you for it. Yeah, absolutely. So, the new Bajage Auto Finance is off to a promising start after the de merger, but it hasn’t yet elevated underwriting to an art. Underwriting is what you do when you assess a potential borrower. Uh whether that person is creditw worthy, you know, uh you know, how much can I actually give him? It’s basically assessing the risk of that person associated with how much money you want to lend that person. Yeah. And what what you should charge that person, right? Um and so you know, they haven’t really perfected it at this point, right? So their bad loans or rather the people who default on payments right that number goes from 2% to roughly 12 15% in a couple very high number yeah pretty big number and this is also the time of the financial crisis right and uh I get that 2008 20 2008 9 and and I have a feeling that also was a sort of factor in this right and I think there was they were a bit enthusiastic right at the start bad loans you know spike I can imagine because 2007 all of these people come together and Rajiv Jan is appointed and there is a new energy that we got to grow. Unfortunately, you’ve chosen at the exact wrong time because as you’re growing the global economy and the Indian economy is sort of crashing because of the financial crisis and as we know every time there’s a financial crisis people are unable to essentially there’ll be a lot of people who end up I mean not having a job, not being able to repay a loan etc. Yeah. So their rise of ambition coincides with a crash and their first crisis. And also I think customers don’t really have a reason to love Bajage Finance at this point and nor do ever a reason to love a company that just lends you money. But not if I mean there is if you uh if you want to buy a 70,000 rupee TV that you can’t afford and someone says here is a loan you can buy. Don’t worry about it. Right? We’ll we’ll talk about the payments later. Just buy it. We love it when they give you the loan but not afterwards. Um so I mean Rita I mean Bajage Finance is yet another company right but because of the crisis like you said the crisis was uh an awful thing for them but it’s also great because a lot of the the main players in consumer durables financing decide to call it quits. Whoever is left, we talked about a bunch exiting in the mid 20 in the mid 2000s and now whoever is left is also like oh I’m not doing this right. City for instance the company that Nanu Pamani headed twice in India they decide to exit the consumer durables financing business in 2009 and this was I think part of a global move. So you have this market again all to yourself right at this point Bajad should have just paid city some money saying thank you for all that you’ve done creating all these markets and finally leaving it for us to you did that beta test for us in 1986 thank you for giving us NUMani all of that yeah and in 2010 Baj auto finance is renamed Bajaj finance because it’s very clear that this company is not just going to be an auto financier so it becomes Bajage Finance In 2010 there was this crisis financial crisis that was brought upon like you know to to everyone and it sort of like you know led to many players withdrawing and one of the players that was left standing and was young and had the courage and the gumption to go on with Bajage Finance. There’s the exact same thing that happened to Amazon. Amazon went public if I’m not mistaken. Just a year before, no, just a few years before the com crash. It managed to raise money just before the com crash the of 2001 and the com crash essentially caused it vaporized money. A lot of the competitors like you know just said either shut down or they said we’re no longer. So for the longest time, Amazon, which had just capitalized itself right before the com crash by going public, had money and everyone else sort of crashed. So it it it had the time to build its business on stable ground. And interestingly, that’s exactly what happened with Bajach Finance as well. If I’m not mistaken, just around the same time was one when they did one of their first fundraising as well. If I’m not mistaken, I think they raised a a significant equity round um in 2011. Okay. As right about 750 crores. So similar situation, right? So you have this back then in 2001 you have Amazon young business you know I mean everything is vaporized. Well, what do we do? I guess we got to survive. We’ll build this the long run, right? And you have, you know, Bajage Finance which has raised money. everything else has crashed but it has its ambition and it desires to build. I found like that a fascinating parallel 100%. Sanjie Baj has said this before and he repeated it to me and I quote him as I keep joking uh and I keep saying that whenever I used to sell a pulser motorcycle which is one of Baj’s most popular motorcycles. You could start the motorcycle and the roar of the engine used to excite the potential customer. He didn’t look at the price and discount, but I could never get a roar out of a loan document or an insurance policy. So, how do you create that excitement? I told you no one’s excited to be meeting a loan company or taking a loan. Uh, but I think, you know, that’s a function of two things, right? You know, banks were never really interested in consumer durables financing and they become really wary at this point after the financial crisis. And the ones who actually created this market the likes of Countrywide City right they also and they’ve exited the segment and we need to understand how consumers financing is done at this point in 200910 right so you go to a store and you say I’m interested in this refrigerator it costs whatever 20,000 bucks and uh I need a loan for this right so the the the lender’s sort of a executive there says okay we’ll get back to you and that leaves is passed on to a a third party agency and that someone from that agency goes to your neighborhood the the the borrower’s neighborhood and you know asks neighbors about the guy oh where does he live this he owns this house or what how long has he been here where does he work how big is his family right it’s a version two of the vij sales playbook playing out and then he passes that information back to the bank and then the manager branch manager has his data then he lets the store know right this takes about 3 to 5 days and vaj finance like we don’t want to do this absolute worst thing you can tell a customer walking into your store to see and buy something is we’ll get back to you I don’t think there are worse words you could like you know pick up because it’s not going to happen right that once I mean the the objective of every saleserson in such stores is to be able to convince you and make that decision right now right they don’t want you to walk away without making the purchase absolutely yeah and Baj Finance doesn’t want to do this because it’s very expensive and they don’t have that kind of money to throw around and expensive because you need to somebody needs to go check and all of this even before deciding to give the person a loan so you’re spending all this money then there’s the collection part and if that person never takes a loan that money’s gone down the drain and of course if that person takes then there’s collection as well uh But thankfully for Vaj Finance there’s something called the credit score which is becoming popular at this point. The first um credit bureau that’s called the credit information bureau has been operational since 2000. So there are credit scores not for everyone. Uh apparently at that point anyone sort of uh at least four out of 10 customers in in major cities uh looking to buy appliances or phones already had a credit score. So why not use that and if you are not entirely comfortable with it you know add a little buffer on top of that and use that to decide whether or not you want to lend to this particular person. Where is this credit cost coming up from I mean these these people who have credit scores this is what bases their bank transactions credit card transactions. Yeah, that’s why you said four out of 10 customers in the major cities of the country, right? These are people who could have credit cards, certainly bank accounts. So once again, somebody has somebody else has done the work for you, which is a credit score. Yeah. And and the reason why banks were not really rely I mean were not using credit scores so much is that they already had a mechanism to to vet borrowers because they had they looked at those who deposited money with them right or that’s thing with banks right they’re the laziest because they get these cheap current account savings account deposits and in some senses you know everything that we’ve been discussing builds upon that because you have access to that cheap capital you become risk averse you become slow, you develop your own risk models etc. It just exps totaling about five lakhs with me. So you want a 50,000 rupee loan. Sure, why do I need to look at the credit score? But Bajage Finance doesn’t have that luxury. Nor does it want to uh spend on sending someone to the neighborhood where you know of the borrower. So just use the credit score. So at this point, Bajage Finance starts uh using Salesforce’s CRM, cloud-based CRM software, customer relationship management software, and they have their staff spread out across these retail stores around the country. Uh and they’re carrying laptops, right? But you don’t want them to uh make these calls about whether or not a person is creditw worthy based on whatever like assumptions they have. So they have a set of rules uh eligibility rules and how much say what’s the range is for uh these uh sort of loans in terms of interest and you put all of that on that uh software and you put it on every laptop that these sales executives have around the country and that makes it much easier for these people to give out these loans. So at this point the credit approval time has already come down from 3 to 5 days to 3 hours. Okay, that’s still a fairly long time uh when viewed from you know today’s time right it’s like oh I go to a store I’ve chosen the TV or it’s a phone and you tell me I have to wait 3 hours to take this home right but at that point it seems like a leap right the customer is not being turned away I’ll let you know come back in 3 days you can buy it just wait 3 hours we’ll let you know if you can get this loan or not right so a second former Chroma executives I spoke with me something very interesting. uh wherever there’s a credit score sure vaj finance relied on that but like I said only four out of 10 customers and that too in urban India urban India right so they had to find proxies or surrogates for this right they were not going to maybe this person uh deserves a loan uh how do we figure this out so they ask chroma uh did this person buy has this person bought uh a large appliance like TV or refrigerator from you in the past okay if he as obviously you delivered it to your to this person’s home. So you have his details, you know where he lives. So be willing to give him uh a phone for instance. But if this is not an existing customer, we’re not going to give him a loan for uh phone or a laptop because the person is walking out of the store with that. They don’t have to share that address with Chroma because they’re not getting it delivered. So the chances of fraud are very high with these portable uh electronics. So there only if the person has already bought from Chroma, they give them the loan. Interesting. And Chroma would normally I can imagine any business would say I’m not going to share this information with you except Chroma will want to share this information because basis that Bajage Finance might decide to offer a loan on a product that Chroma wants to sell. Right? So chroma is fine. I’ll give you this information if it helps me sell more products. Yeah. Yeah. And in smaller towns they actually Bajage Finance goes one step further. They even if someone wants if someone is buying a refrigerator and they want it delivered home to make sure that that is where they live or that’s their home. They ask for their electricity bill. Okay. So is it the same address? If it’s the same, sure you own this home. So we we have no trouble financing you for this particular product. And in the mid2010s, do you know how hard it is to get names changed on your bill? Don’t even get me started on it. It’s easy to get a passport in India, I tell you. Uh so in the 2010s, Chroma obviously has not just Chroma, every single uh large retailer has multiple uh financiers, right? uh there’ll be say HDFC and this Chrome obviously has Tata Capital because it’s part of uh the group and there is Bajage Finance. Tata Capital continued relying on the credit score. So their approval rate at that point according to this executive was less than 50%. Bajage Finance a coin toss yeah Bajage Finance because it was looking at these other things uh had an approval rate of 70%. Right. And credit score is I mean it’s really funny. I remember um going to HDFC 3 4 years ago for a home loan with my wife. Everything was done. We found the flat. Uh they said, “Okay, we’re going to give you this. This is the lowest. This is the lowest rate and you’re going to get that right.” We go there. Uh and then they say, “Sorry, your your we have to take your wife’s credit score and not yours because she earns more than you. And uh as per the on whoever’s whoever makes more money in in the joint application their credit score will be looked at and my credit score is very good because I have a credit card and I’ve had multiple I mean I’ve had an education loan. So there is a track record. She’s got a history of repaying loans. So my wife let me guess your wife had not taken many loans only one loan auto loan and she still doesn’t have a credit card. You know that’s absolutely if you haven’t borrowed in the past you can’t borrow now. So there is this there’s this very interesting apherism that someone had told me once which is essentially it’s very commonly known as well which is really the best time to take a loan is when you don’t need one cuz when you need a loan and if you haven’t taken a loan then nobody’s going to give you a loan or they’re going to give you at a very high rate. But when you don’t need one everyone wants to lend to you you should actually end up taking some of those loans. This is true for individuals. This is true for businesses. Yeah, which is why like I typically buy white goods only on EMI plans because I ensure that there is some frequent loans on my uh and they actually told us don’t worry about this. I said I’m going to walk I’m going to another lender. They said don’t worry um you repay your uh loan for 4 months your wife will have a credit history her credit score will go up then you come back to us and give us 2,000 bucks and processing fee. Yeah. Ask for the rate to be lowered. And that’s what happened. 4 months later, our credit score went up and we pay 2,000 bucks for the interest rate to be brought down to the lowest. Really, really funny world. It worked. Yeah. Interesting. Do you know what your credit score is though? Uh I don’t know what I mean. I don’t want to talk. Do you track it? No. No, no, I don’t. The last time I checked was You keep getting these emails from Cibil saying that something has happened to your Because I get them. It’s like almost every week or two they’ll send you this weird sort of passive aggressive mail saying that your credit score has changed and I’m like and if you log into their site they’ll never show you what it was before they’re like this is what it is right now it’s changed has it gone up has it gone down for that you have to subscribe and pay I’m not doing that by 2011 Bajage Finance has become considerably big in consumer durables in fact consumer durables to actually uh that category goes past vehicles to become its largest business. You know it has a loan book of around 10,000 cr and roughly 25% of that comes from consumer durables and it’s just been what like 4 years

2017. That’s a remarkable pivot, right? You said that what 80 85%

was auto and four years this sort of like you know make it consumer durable. Incredible. And a lot of this sort of this transition or jump comes from the increasing popularity of 0% EMI or no cost EMI or yeah I mean that’s what um that’s what really catapults Bajage Finance into the sort of uh the minds of people because no cost has been around since the ’90s. We discussed K value CUX K value at OBJ sales but now is the time it becomes really popular and I mean no one cares who was first with it right who was the first company to come up with a smartphone it doesn’t matter really right or at an app store it wasn’t Apple in either cases but Apple was the one that sort of popularized and scaled it 0% EMI is is I think for most Indians just associated with Bajage finally 0% EMI, no cost EMI. These are words that every Indian is familiar with, especially in urban areas. Whatever you want to buy, you’re going to first see if it’s available on 0% EMI, right? In fact, you don’t even have to see whether it’s available. The offers that are pushed to you first are almost always the 0% offer, right? The system conspires to make sure that that’s what you see first. But is it really 0%. It’s not but it is also it’s not because yes everyone we’re Indians right so I mean most of the times we intuitively understand that yes there is processing charges like you know so nobody is going to argue with that person saying I’m buying this TV I’m buying this fridge you’re charging me 200 rupees it’s not really 2 0% right is it that guy would also be like I don’t think you’re buying from me today so let’s let’s take an example right a 50,000 Samsung phone for instance and if you want to buy that phone on no cost EMI uh for 6 months or 12 months right um and the the charges that the interest on that loan let’s say 2,000 rupees right so Bajage Finance is the finance year here and you’re buying it at Chroma Bajage Finance gives Chroma 48,000 rupees okay and you get that loan you you buy that product on no cost EMI and you’re charged a few hundred rupees 200 300 rupees right uh as processing fee and that’s that 50,000 rupees is divided into six installments or 12 installments whatever plan you choose so Bajad Finance gets 50,000 rupees from you plus the processing fee right and it’s it’s already deducted 2,000 bucks uh from the payment it made uh to Chroma and this 2,000 rupees is invariably split between Chroma and Samsung it could be divided 50/50 70 30 80 20 right so the reason between you mean they are the ones who are bearing the cost right bajage finance is not why would the financeier do it right but Chroma and Samsung are more than happy to do this because the customer who’s told they can buy it right now even though they don’t have 50,000 rupees is way more likely to just make the purchase right then right than someone who’s told, “Oh, sorry, you have to pay 2,000 bucks or 2500 bucks in interest.” Can I I mean, in the simplest terms, what really happens is a customer walks into a store. Imagine this slightly differently. A customer walks into a store, he or she sees a Bajage finance salesperson standing there. He goes to the Bajage salesperson and says, “Here’s 200 rupees.” Yeah. Then there is the Chroma sales salesperson standing there. He walks to the salesperson and he says here’s 1,000 rupees and there’s a Samsung salesperson standing there. He walks to the Bajage finance person and says here’s my 1,000 rupees and the Bajage finance person is just standing there and saying fine I’ve collected your money. Fine I’ve collected your money. Fine I’ve collected your money and the customer every every month and give right and the customer walks out with a phone everyone is happy. Yeah. Think about how beautiful this is. Everyone comes to Bajage Finance, pays them and everyone is happy. It’s incredible. I can’t I can’t imagine a world without EMI finance. Not that I’ve bought a lot of things on no cost EMI, but sometimes it makes sense for you to do that even if you have 50,000 bucks to spare. Yeah. Cuz time value of money, right? Why would you I mean the the the calculation which is going on your mind is would I not earn more by keeping my money? I’m I’m being told that I’ll get a cash back if I buy on no cost D E D E D E D E D E D E D E D E D E D E DMI and not if I pay the entire thing up front. So even but you know when that cash back comes when you pay the last EMI. That’s right. So the cash backs are usually aligned to they ensure that if you’ve taken a 3 month EMI or a 6 month EMI after the payment of the final um EMI is when you get that. But it’s okay because to the average consumer, I don’t mind. As long as I’m getting it, it’s money. Yeah. Have you bought anything from zero? Yeah. Yeah. Yeah. Yeah. For the same reason like you get a cash back. They are usually the best offers. So typically I mean these days if you go on any site whether it’s a chroma site reliance digital or anywhere else and you check the price out and these days there is there are various prices if you have this card this price if you have this card even on the Apple India site for instance right and the best prices are usually if you take it on a 3 month or a 6 month or a 12 month so in some way the entire system is trying to steer you and push you into taking that 3 month 6 month EMI loan. Yeah. I think the other point that I also want to mention which for a lot of people outside India especially in other like western countries is like why on earth is a manufacturer or a retailer paying this interest right because what’s really going on is they want more of their products to sell y and instead of spending on marketing or advertising they’re saying I’ll just redirect some of that money and pay finance for it which which will essentially enable more customers to buy it because they’re buying it on loan. Correct. Right. Last thing which I just noticed, you notice Bajanch Finance started out as a captive lender. Its purpose was we need to be able to lend money so that people can buy our scooters. Yeah. And you see what it’s become now other companies are giving it money to sell their own products. So it’s a very interesting thing where it started out hey we need more people to buy our products so let’s charging other people to sell their products right it’s fascinating and you know at this point obviously no cost is popular um and someone who’s already borrowed from Bajage Finance comes back to buy another product okay so uh Bajage Finance okay give me some time let me see if you’re eligible for this right so the customer start asking I’ve already borrowed from you and I’ve uh paid on time. You have all my details. Why do I need to wait for another 3 hours uh to get a second loan from you, right? Made a lot of sense. So then Bajage Finance, should we give them credit card? Should can we issue credit cards to them? But then uh no NBFCs or non they’re not a bank. Yeah, they’re not only banks can issue credit cards, right? Uh so they do the the non-bank financial company. Now it’s making more sense, right? There are things that only banks are allowed to do. So what is the next best thing? You know, we’ll give them what’s called the EMI card. EMI obviously as we understand it is equated monthly installments. For them, it’s existing member identification card. I did not know this. I always thought EMI card was like EMI because it’s 0% EMI. So obviously now now who the hell would essentially come up with two different forms of EMI and add it like this EMI is that EMI and that EMI I mean that’s what you take it to mean fine but for us it’s existing member identification for us by us I mean Bajage Finance right that’s how they look at it and they say okay I get it now you know where I remember this it’s one of the stories done at the ken by Arundati on Bajage finance and I remember reading it and at the correction which said We are sorry it’s not an equated monthly installment card. Now I remember I was also wondering why was Baj just angry that we expanded EMI into equated but now you tell me something else. Uh so what they do is they issue these EMI cards. So you’re Bajage Finance can’t uh issue a credit card. Okay we’ll issue EMI cards. So in one fell swoop. What what’s how does it how does an EMI card work? So what they do is they uh pre-approve u loans for 2 to 40 products for all the eligible customers. Okay, I don’t know how many cards they issue at that point but suddenly thousands of Bajage Finance customers have this card. So they walk into a store, they can use this card. So what they do at the same time is they go to these point of sale uh manufacturers or operators like you know Pine Labs and ATS you know so these swipe machines. Yeah. Yeah. and you they tell them okay you already process say Visa Mastercard American Express right why don’t you calibrate your machines for uh our EMI card as well right so someone goes and taps the card within a couple of minutes you get to know whether or not you’re eligible so so but it’s only for a so it’s a purchase for anything pretty much operates like a credit card there’s no difference right and it’s your it’s pre-approved so you go and there are certain products which you’re eligible for and you tap it and you get to know within a few minutes. So the processing time has gone from 3 to 5 days to 3 hours to now 3 minutes. This is a total game changer, right? People are walking. I mean later this card just becomes like an application or whatever, right? Earlier it was a physical card. You use this, you go to a store and you know immediately that you have uh you you you are eligible for credit and Nisha told me something very interesting. He said Bajage Finance’s share of total financing at Vijay Sales has never gone below 50%. and they have multiple they have four or five uh lenders at their stores and he said not once has Bajage told me not to get another lender right and you made an Apple reference and he made one too he said they’re like Apple they know how good their product is so they don’t care if there are 10 others 2007 we talked about their loan book being about uh 2500 cr right and it’s now at 17,500 cr like it’s up like 7x to use that phrase they’re growing like weed. Yeah. Yeah. But as far as Bajage Finance is concerned, consumer durables is surely not the only thing consumers are coming to them for. What else are they coming for? There are obviously you know many more things that consumers wouldn’t mind financing for right and this is where uh something very interesting um in Bajage Finance’s strategy becomes important which is what they call break to grow. So what they did was you know consumers obviously was big but within that phones were sort of breaking out. We talked about how you know um you know more and more people were buying premium phones. So they say okay why should this be part of consumer durables or apply let this be a separate category. So you break that into a separate vertical in order to grow it and they do the same with furniture fitness equipment and luxury watches. They call it lifestyle finance. So they keep breaking these large categories into smaller smaller categories in order to grow them. So there is a separate team responsible for that right and you try and figure out how how else can we promote this category right which retailers or brands should we reach out to right so there’s a lot more focus on that particular category and they even did this for grocery in 2015 or 2016 wait groceries people are buying groceries on EMIs these were the days of uh big bazar uh future groups supermarket chain so they said okay let’s do uh you grocery on EMI and they had a partnership with Big Brother. It’s not about food hall. I understood food hall products being on EMI but not big and I I mean I’m not sure of this number but I I believe within a few months uh 200 to 250,000 people started using it and they if anything this only proves that if you give people the opportunity or the option to buy things on credit they will they will yeah and obviously no cost right. So, I’m not paying anything extra. So, why should I give you 2,000 bucks? You know what? This is my philosophy. I use my credit card everywhere. Literally everywhere, right? From the smallest of things to the biggest of things cuz why not? Yeah. Why should I have to pay cash or UPI or money from my bank account if a credit card will suffice everywhere? So, so I I kind of fully am with this. Yeah. And this was followed by fashion you know lifestyle financing grocery fashion and within years Bajage becomes an absolute data machine right and what it does is it keeps tabs on customers who have bought certain appliances and it knows how often a customer or how frequently someone replaces a TV or a washing machine. So what it does is you know it goes to Chroma or Vij sales and asks them here are 50,000 people who are soon going to be looking to replace the refrigerator because their refrigerators are 7 years old 8 years old. Okay do you want to roll out some offers for them. These guys are not tracking that data. Bajage finance goes and tells them here are the customers. I mean these are the there are 50,000 customers. Do you want to roll out an offer and obviously we will end up financing those. But of course the manufacturers also have that data and the retailers also have the data except it’s siloed. Yeah. Absolutely. And they’re not as disciplined as Baj Finance. Exactly. And also what one of the two former Chroma executives told me is very interesting. He said Chroma’s relationship with the customer ends with the sale. Right. Any message SMS that Chroma sends the customer after that is treated as spam. I can vouch for that cuz once I’ve bought your product, I don’t want to give you feedback. I’m not interested in what else you have to say to me. So it’s absolutely spam. But messages from Bajage Finance are slightly different, especially those messages which acknowledge your payment, monthly payment. So when you get that message saying payment received or payment made or whatever, u you’re going to click on you’re going to look at that message, right? And there they actually have offers for other products. That’s where they promote other products. Oh, you know what? This is like the equivalent of when you order a meal on Swiggy or Zumato and it says your meal is on the way. You know it’s important and you know where it is. So that’s when they get you say, “Do you want to see these other some version of that?” Yeah. So I’m going to look at this message, right? And if the link or whatever promo promotional message that’s in the message is interesting enough, I’m going to probably stay on the message, right? And this is the difference between how customers view Chroma or V sales and how they view Bajage Finance. Such an inversion if you really think about it because logically if I just asked you if I just asked someone on the street saying that who do you think a customer would have a relationship with? Yeah. They’d assume it’s with the brand cuz you bought something from Samsung or they’d think it’s with the retailer because I keep going back to Chroma etc. But no, it’s actually with Bajage Finance. Yeah, the company from which you took a loan to buy the product. But this is not a relationship that customers want to have. I called it. Remember who wakes up and says, I want to have a relationship with the company that lends me money. They’re forced into this relationship, right? But so consumers financing clearly is Baj’s hook product, right? But it needs to find u other loans to sell these borrowers. I mean they’re already giving them you know grocery and fashion and furniture on credit. So but it needs to move from 20,000 rupee loans to two lak rupee loans to 20 lakh rupee loans because you already have this customer. Now what other kinds of loans can you sell them? H interesting. Again do you see that evolution? It’s like first we got to find people who will buy products. Then it’s like we got to find retailers and brands where they are. Now we found the customers and we’ve got to figure out what more to lend them. It’s almost like that they’re sort of iterating one after the other, one after the other. It’s almost like they’re a flywheel. Yeah. And also they take a customer from one particular retailer and take them to another retailer, right? And then to another retailer and probably the customer will come back to the same retailers, right? starts at Vijay Sales, goes to Big Bazar, then goes to Shopper Stop, comes back to Vijay Sales for another appliance. I’ve done that. Have you ever done that? Which is essentially go to a store, look around and see, are you buying now? No, I’ll have a talk with my wife and come back and then you do that and the look on the salesman’s face or the saleserson’s face when you say, I’ll come back later after having sure you’re never coming. But but that that is one thing. But here I’m saying I’m taking them to different kinds of retailer. They acquire the customer. Chroma is their sort of every Chroma store is their branch. They get the customer from there. Then they take the customer to shopper stop, right? And then to Big Bazaar or wherever, right? And then when they want another appliance, hopefully they’ll come back to Chroma. So it’s interesting because I see these two sort of like, you know, opposing trends, one coming down, one going up. The one coming down is the speed at which like you know or the duration or the frequency how much time it takes for Bajage Finance to actually give out a loan. It comes down from 3 to 5 days to 72 hours or like less actually it’s the same uh to maybe what like 3 hours. Yeah. And then 3 minutes and then 3 minutes. Right. The interesting part here is speed is actually a competitive advantage. It’s a huge competitive advantage which just keeps spinning. I talked about the flywheel because what happens is when you walk into a store, the store that can approve your loan in 3 minutes is the store you’re probably buying it from. Y right. So if you’re at Vijay sales and you want to buy a TV and that loan gets approved in 3 minutes, it’s a win for Vijay sales. Yeah. Right. If it’s a win for Vijay sales, it’s obviously a win for let’s say Samsung. And Samsung and Vijay sales know now that I sold it via Bajach Finance. So they are likely to work more with Bajage Finance, right? And of course the customer knows that I was able to get this so quickly. So this mode the faster you get, the harder it is for someone else to catch up with you because everyone wants to work the consumer wants to walk with work with the fastest player. The brands want to, the retailers want to. So speed isn’t just can we disperse a loan faster. It is like can we make our ourselves untouchable to any other competitor because which other competitor can work as fast as us. Yeah. The counter force to this like you know as this is coming down the one which is going up is the size of the loan itself. Right. to go back to the earliest days when the market was so small that people were taking whatever like a few thousand rupees worth of loans to now they’re buying what like you know TV smartphones I mean Bajar finance wants that to go up yeah so that’s what I mean so they want it to go from 20,000 to two lakh three lakh 5 lakh 20 lakh right Apple is helping there a bit yeah but even outside of consumer durables right so they start uh giving out personal loans right these are loans you can take for whatever purpose. These are unsecured which means this is risky, right? Doesn’t this change things? Cuz up till now all of the loans that they’re sort of giving are in some senses riding on top of something else, right? Like you know there is a product, there is a brand, there is a retailer, I know something about this person walked into a store. But you do trust the customer enough. You know the customer is creditw worthy. Oh, so this is these are only for repeat customers. So if I’ve bought a TV Yeah. and I just want 20,000 rupees or 50,000 rupees as just cash. Yeah. Yeah, you get that. So, they get into personal loans. They set up a housing finance company. Uh yeah, that’s now we’re talking like a tens of lakhs of rupees or cres of rupees, right? And that’s secured. Every lender wants to have a big housing finance portfolio because you have it’s the most it’s the sort of the the the the ideal loan because it ties down the customer for like 20 years and there is collateral. It’s not like TV or refrigerator. Usually the collateral appreciates or stays in time unlike a TV appreciates right it appreciates. So you have that and they give out loans against shares. If you have shares in a particular company and it’s worth say 100 rupees, you want a loan for like 60 rupees, you get that and a bunch of different kinds of loans. They also start giving out loans to you know small and medium enterprises and it aggressively cross-ells. How many of its customers it cross-ells to is a metric that it tracks obsessively and even discloses to investors. So I had a look at their you know latest presentation which was for the quarter October December quarter they say they have 110 million customers and 71 million cross-ell customers right so 70 75% of your customers you’re cross-selling to your existing customers that’s really impressive right wow and and to think that most of those customers you acquired because someone else paid you to acquire them. That’s absolutely amazing, right? Because someone else paid you to acquire those customers and now you’re able to cross-ell and upsell to those customers. Yeah, it’s a brilliant model. And in the 2010s, you know, a lot of us were familiar with these calls from Bajage Finance. We even had a story, Arundati’s story. I think the header was why you can’t ignore Bajage Finance’s do you want a loan call, right? So the story talked about its sort of call centers. I mean not its own call centers but you know the partner that it worked with how they would aggressively call and there were these memes about Bajage finances calls. So one of the memes was you know if you became prime minister for a day what would you ban or what would you do right and the top result is you know stop bajal finances calls right became really aggressive I mean it’s it’s a proper marketing company I I remember this you know I mean I remember Arundati’s story and I remember uh this very interesting um sentence from it which was if I’m not mistaken said by a peer anime pier and he add that the conversion for these calls, right, if they’re making thousands, tens of thousands, hundreds of thousands of these calls is usually 1%. Yeah. Which means if you make a 100 calls, one out of them, but that person said, look, it doesn’t matter even if it’s.1%. Bajach Finance is the kind of company that gives its 100%. Yeah. So that’s a company. So that that that line was a very instructive line like it doesn’t matter. It’s just a relentless efficient machine. it’ll throw itself up at 100% at any problem that it sees and generate the maximum efficiency out of it. Absolutely. whatever it takes to uh close always be closing. uh you know I’m just looking at you know their latest presentation uh and they have a slide called product suite right I’m just going to read out uh from this the kinds of loans that they have obviously there’s consumer durable there is life care financing which is for skin care spa treatments hair transplants for instance right very soon maybe ompic absolutely we were discussing this you know this is just right up their alley there’s used car financing uh medical equipment equipment, auto leasing, industrial equipment financing. Would it be would it be fair if I just invert this question instead of listing the categories? What if I asked you the opposite of that, which is is there anything that they will not lend you money for? No, I don’t think so. So, it’s just become a company that started by being a captive lender, lending money to buy Bajad scooters. Yeah. Two. Does it still lend for Bajad scooters? Maybe that’s motorcycles. Yeah, maybe that’s the one category which is the one thing that will not lend you. So, it has become the exact inverse of what it started out. What an incredible transformation. Are you aware of the ship of Thesius? Uh, you know, it’s Yeah. I mean it’s like this very famous Greek parable of a ship which used to travel between you know two islands and and of course I won’t go too much into it but because it used to keep travel over the traveling carrying Greeks to the temple and each time it would go obviously like over the years there was wear and tear you know one of the ores would break like you know so they would replace with another ore then the sail would spoil so then they’d replace that sail and then one plank and then another plank think over many many many years every single piece of the ship was replaced. Is it even? So, so yes, the ship that remained was it still even the ship of Thesius? Yeah. So, it’s like at this point is what Bajage Finance is? Was it even the original Bajage Finance? I guess that’s that’s pretty much their intention because when they were it’s an incredible transformation. I I’m giving credit to them. Yeah. Vehicle Finance here. They were really tiny, right? And there were many other companies, captive companies of automakers who were into financing vehicles, right? How do you break out and become a lender that has the scale that matches that of a bank? At this point, they are a bank in all but name. And in 2013 they do get the opportunity to I mean I wouldn’t say like uh maybe like you know there is a they spot an opportunity to become a bank because RBI invites applications for new banking licenses a bunch of uh well-known industrial houses Aditya applies for one Bajacher does which is Baj Finance’s parent applies for one too then the Sriram capital but unfort I mean unfortunately for them the RBI only gives out two licenses. one goes to IDFC which is an infrastructure financier and the other goes to Bundan uh from Kolkata which started out as an NGO and then became a micro finance lender right um but you know does it really matter that it hasn’t become a bank I don’t think so because it continues to be exceptional at recovering the loans that it gives out in 2007 uh four out of 10 borrowers 100 borrowers actually default aled uh in 2026 a it’s less than one and if you look at other NBFC’s and you look at their average it’s two out of 100 borrowers so this one is twice as good as other NBFCs when it comes to recovering these loans so they have massive scale they’re really good at figuring out who should uh who they should give out loans to and they’re great at recover collection as well they have a huge collection workforce as well I mean I’m remembering again from Arundati story. I think there are two parts. So there’s um unintentional defaults are typically handled yes by a call center. Okay. So you don’t need to send someone because sending someone you know in the real world is more expensive. Right. So if it’s an unintentional thing and their systems can figure out then the followup with you is done by someone from a call center making a call with you. But if it’s they detect it as an intentional default, then it’s like a person who’s going to come and recover. They have an army of people to do that. Yeah. And looking at these numbers, you know, in hindsight, it’s maybe a good thing that they didn’t get the license because, you know, becoming a a bank would have changed what makes Bajage Finance Bajage Finance, right? The origin of this story is that Bajage Finance started out because banks were too lazy. Correct. Because they were sitting on these casa deposits. Correct. So maybe you’re right. I mean if you don’t want to end up that which you hate but I think it’s not just that uh because much of what Bajage Finance is and what its culture is flows from the top right and it helps to have an owner with serious skin in the game. The promoter of a new bank uh as per you know the reserve bank’s rules will have to eventually reduce their stake to 26%. I think it can be it has to be 40% for a few years but within 15 years I guess it has to be down to 26%. So that would have happened with Bajage Finance 2 had it become a bank hypothetical but what would that have done to Bajage Finance and how it operates? So what what is what is the Bajage family’s current shareholding in the company? Yeah, the group owns about 60% of Bajage Fins which owns another 50 52% of Bajage Finance, right? It’s certainly more than 26%, right? And this has played a huge role in what Bajage Finance is today, right? I mean we talked about how the troka palamani comes with the city bank expertise and uh Rajiv Jen with all the consumer durables fan and uh and Sanjiv Bajage is from the family right so he sort of set the tone for how the company should scale what the culture should be so if your stake is reduced to 26% would you be able to control the culture you’re I mean you’re a majority shareholder but you own just a quarter of the Right? So then it becomes then you have three or two or three owners who owe nearly as much like someone owns 5% 7% right 3%. So they all have uh they all have a say in how the company is run right. So would it have been the same Bajage Finance? I don’t think so. What about but but they did apply. They did apply. They did apply. They must have thought of this scenario. Yeah. But I think what we think of as the Bajage Finance culture, you know, we we have that we we’re talking about that because of the success Bajage Finance has had and much of that happened in the say in the second half of the 2010. Oh, you mean after this license was denied. So, in some senses, it’s a second birth again. Yeah. If they got I think it would have been a very different company. I’m sure it would have continued to be very big, but would it have been as agile? Uh interesting. This is like I mean I love seeing the evolution of companies through constraints that they face, right? I mean, Bajach Finance evolution itself is born in constraints, right? Like you know, whether it’s a captive lender, nobody’s buying our products. we need to. So that’s the constraint that they’re trying to overcome. And then of course we talked about the part where like consumer durables lending is big but it’s not profitable enough interesting for banks and most international guys. So they’ve all left correct fine let’s do it. So in some sense it’s a constraint. It’s not less an opportunity and once again here they want to be a bank but they can’t. By the way, again I see the return of licenses here, right? We had a lot of licenses early on in the conversation and here again there is a license that this time they didn’t get which is a bank license which imposes a constraint on them. It’s a no. And I think this looks like an organization that thrives when it can’t do some things and there is a constraint which is imposed on it and it tries to figure out its way around it. Absolutely. And so they’ve had stable ownership, the same management, the same leadership team for a while and that has allowed them to build these lasting relationships with retailers. Vijay sales Nesh Gupta calls Bajage Finance a machine with a heart. Not exactly how you would expect uh an aggressive lender like Bajage Finance to be described, a machine with a heart. And you know Bajage Finance I was told treats its dealers like royalty. There is some annual event called Sambad where dealers are brought to Bombay or other big cities, right? I think apparently earlier they were put up with the JW Marriott in Bombay, right? And a lot of companies, brands do this, right? Retailers uh do this. Uh but for uh you know for uh Asian PES absolutely I was thinking of that. Um and this is what they do with their partners outside and there’s also something they do for their employees. They have an annual offsite for their leadership team. It’s called Ruminate. I found a post uh I think it was from the official handle on LinkedIn and uh this former executive told me about it you know about this happening uh in Kanal or somewhere right and it’s usually like a an overnight camp or a trek and Rajiv Jan is very much with them right he’s doing all of these activities with them and one day before uh they leave uh they book the banquet hall of the hotel and they all sit on the floor And this is his words, they tear the company apart. Okay. And uh it’s like the the version of they’re all red teaming the their own they’re trying to find what flaws in the company. And and I’m reminded of a phrase that you used a little bit before but in a different context which is break to grow. Yeah. This is another version of break to grow. Look for weaknesses. Correct. And plug them or like you know do something else with them. Yeah. And they said whatever said in that room stays in that room. Right? I mean obviously if there is a fundamental flaw in their business obviously they’re going to fix it but you’re free to say whatever you want. This is a rare culture. I cannot imagine even startups you know being so open about like you know disrupting themselves or inviting you know super critical feedback and obviously this is for a Indian familyowned business which is now in its like fifth generation of like you know ownership it is almost unimaginable in any other company of its ilk. Yeah, it’s very rare. And they also have this thing called long range strategy planning. I’m sure a lot of companies do this and they actually uh put this in their earnings presentations. So they have their targets. This these are the targets for our uh you know as part of our you know long-term long range strategy plan and what they do is they during I think this they reveal their long range plans. Yeah. It’s a sign of a confident. Remember earlier you had said that they don’t have any issues with any other companies working with the retailers. Again, it’s a sign of a confident company. And if you’re saying that they don’t have any issues displaying their long range plans because I’m sure they’re thinking that look, I mean here are our plans. If you want to copy them, go ahead, be our guest, but only we They’re also holding themselves accountable uh to investors to analysts they’re telling them these are our targets 5 years down the line we’re going to hit these numbers it’s there it’s it’s incredible and during this this happens in November December they apparently uh look at great companies from around the world mostly non- finance companies Amazon and Netflix and they try to understand uh they try to figure out what they can sort of uh take from how these companies have succeeded and I was told about this you know they talked about Netflix’s um what is that feature called you know your view time being synced across devices right uh and they were like okay with this how can we as a lender you you know use this to uh look at how we can improve our customer experience and I was told the one of the only times they talked about a financial company was when they discussed and financial which is an associate company of Alibaba uh uh Jackmar’s company in China. Right. To the point about that you made about um on like the Netflix point about continuity across devices etc. I remember reading this bit about when they were designing their I think super app. They were trying to do exactly this which is you might start interacting with us at a physical store and then continue that interaction in the app and then take that interaction back to this thing. So there’ll be seamlessness because at the back end um we talked earlier about like the Salesforce databases. There are all these they’re all synced and what they’re trying to do is to make sure they the consumer gets a single unified experience regardless of whether they’re offline or whether they’re online whether on a website whether using the Bajage app etc. So that’s where that Netflix example must have gone into fix. Yeah. So all these you know offsites and long range uh strategy meetings sitting on the floor sitting on the floor right uh these are not just discussions right you can actually see these things playing out within the company and Sanjiv Baj gave me a very interesting example which is also referred to in the Harvard case study so apparently Rajiv Jan wanted to review the costs of loans against property right basically you sort of pledge your property and get a loan right for whatever purpose And the cost, no, this is not a home loan. No, it’s not a home loan. You already have sort of like a property backed personal loan. Yeah. Sort of thing. Yeah. And uh in the mid2010s, I think the cost of a 1 cr uh the cost of underwriting a 1 cr uh loan against property was roughly 45,000 rupees, right? And at that point, the cost of processing a 25,000 rupee consumer durables loan was 1,200 rupees. So apparently Rajiv Jan said what can we learn from each other by we him and these two teams right and apparently the the person who was heading uh loans against property he said okay we’ll cut cost by 10%. And Rajiv Jan told him don’t talk like someone from a multinational company let’s cut it by 50%. He said no how’s it possible? So Pin said, “Okay, I’m going to sit with you every Saturday and we’re going to go over every single item in the underwriting process and how much it costs and we’re going to see what is redundant, what can be taken out.” And he does that with this guy Saturday after Saturday, right? And then finally in 12 to 18 months, they don’t cut it by just 50% by almost 80%. it goes down to 8,000 rupees from 45,000 rupees to 8,000 rupees right and then looking at this the consumer durables guy guys are like okay should we also look at our own costs they’ve cut it to 8,000 bucks should we look at and they review their own cost and they bring their cost down from 1,200 rupees to 800 rupees right at this point they’re doing what roughly about uh 2,000 loans against property a month. So 2,000 loans and you’ve saved pretty what 37,000 bucks per loan. So that turns out to be like 7.4 cr in savings every month. And you look at the consumer durables guys, it’s gone from 800,200 to 800. So 400 rupees saved and they’re doing about 200,000 loans a month. So that’s 8 crores saved every month. So it’s this is an incredible culture because again I say this that this sort of like a radical focus on cutting costs and becoming more efficient is very hard for most companies to do. It is especially hard for companies that are growing very fast. Yeah. Because most companies cannot do. So it’s it’s the equivalent of like you know if you’re trying to spend all your energy on we’re entering new categories, we are selling larger loans. We’re expanding, adding more stores, we’re building an app. So in some senses, the the focus of your company is on growth. Growth. Such companies usually find it very hard to also focus on cutting costs, right? And and similarly, there are companies that are very efficient at keeping their costs in check, but they don’t grow very fast because they’re very efficient, right? So here’s an example of a company that is somehow managing to do both which is with the same level of zeal grow at incredible rates but at the same time do this right and it doesn’t want to accept the status quo in anything right so when Rajiv Jen sits with this guy Saturday after Saturday they look at all the costs they see that there are two valuation experts two lawyers and multiple people at different steps of the process right and they’re We have technology for all of a lot of these things. This is the the equivalent of a bank sending someone to the borrower’s neighborhood. Why are we doing this when we already have the tech to you know sort of speed things up? Let’s cut all of this out. Yeah. And and credit to Rajiv Jen because one of the reasons why such things are hard to pull off is because it was possible because you have the CEO sitting down with you. Yeah. So in some in one shot that the two of them are reviewing cost together. CEO says we have two people here. Why do we need this one person? Get rid of that one person. That’s the decision made then and there. Y right. So you have analysis, execution, decision all combined at the same time. And interestingly when this happens what do you think the people who work in that same office or their peers are thinking? their their cut. Exactly. The next time when Rajiv tells me that we need to cut cost, I’m not going to tell him 10%. In fact, I’m not going to wait for him to ask me to cut cost. So, culturally, this sort of transmits to all other people, which kind of, you know, strengthens that culture of, oh, this is important enough for the CEO to spend Saturday after Saturday after Saturday, then I guess I might as well spend time on. Yeah. And this agility is what comes in really handy during the fintech boom of the 2010s. So we’re now in the 2010s in the this is the age of India’s fintech revolution, right? You remember the start of this phase? It’s my favorite decade. I mean the 2010s to 2020s early 2020s were an incredible time for overall startup activity in India and especially in fintech. In fact if you look at this like in this decade India went from being a country where banking still didn’t reach many people. There was a lot of branch banking, paper banking. Identity was an unsolved problem. Payments were an unsolved problem too. But at the end of it, it became completely different, right? We saw the emergence of companies like PTM which just you know became this powerful behemoth which which revolutionized digital payments. you saw the emergence of pay and Google pay which rode on and became like you know I mean but they all start in payments right in payments right then you’ve got razor pay which essentially made it incredibly easy for all sorts of businesses large and small to accept digital payments I mean in fact the ken itself started by working with razor paint 2016 right so so you had all of this and then you had this during this period there was incredible like tens of billions of dollars of venture capital that was flowing into India. I think over 2,000 different fintech startups were like funded during this period. By the end of this, by the 2020s or so, I think India was processing more realtime uh digital payments daily than the US, UK and China combined. Yeah. Right. So this decade slightly more than maybe out of a decade and a half 12 to 13 year period was probably the golden age of fintech. This is the era in which Bajage finance now suddenly finds itself thrust into and there was also policy bazar. Yes. Policy bazar as well. Yeah. because they I mean Bajage Finance has two insurance ventures and suddenly the game changes for all insurers because now you know you someone can go to policy bazar and look at all the apps compare them right and then that becomes a huge sort of lead generation tool for all insurers. Absolutely. And everything goes paperless. Yeah. You no longer no one’s sending physical documents to your place. Nobody’s doing physical verifications. Everything can be done digitally. The reason why the 2010s to let’s say early 2020s is such a vital period is because a lot India did an incredible amount of heavy lifting to fix a lot of structural problems that existed like you know which and I’ll explain right uh before this period and you know if you want to have a robust financial services ecosystem in any country you need to be able to solve for identity, correct? That a person is who they claim they are, which is the reason why you don’t have to go to their home to figure out are they really getting it delivered there. You need to be able to pay solve for payments. You have to be able to send and receive payments seamlessly. And third, you have to be able to solve for data which is all these reams of data that are being exchanged between retailers, brands, loan agents, banks, etc. There has to be a way for that data to be shared. Mhm. right legally. So India started doing that and it did it very incredibly during this decade. It started in 2010 which is when the first Aadhaar card was issued or the Aadhaar number was issued right in just 6 years it hit 1 billion um Aadhaar numbers issued right as world’s largest biometric identity program. 2010 is when PTM is founded by Vijay Shaker Sharma around the same time as Aadhaar. Yes, literally the same year PTM is founded in that year. Right. 2010 is also when Zerodha is founded. Oh, by Nitan Kamat and Nikl, right? Uh so like I said this is an actionfilled uh decade. 2012 EKYC is launched. What is EKYC? It rides on top of Aadhaar. And now if you want to do a loan right you can do a it’s a eky so that thing that the vijay sales founder was doing of sending people to your neighbor to find out who they are you don’t have to do that anymore it can be done digitally that’s what pred the rise of Jio for instance because now when a customer walks into your store to get a mobile connection or anything you can instantly verify they are who they claim they are right u 2014 is when razor pays launched launched Right. Uh 2015 is when e-ign is launched. E-sign means now not only do I know that your sitha ramen you can actually digitally sign a document and I can hold that legally against you. That’s when diger is launched which means now you can keep your official government documents identification in diger which other businesses can then refer to. 2015 is when PTM popularizes QR codes. Oh, right. QR codes would go on later to revolutionarize payments including for Bajage Finance where you can see QR code standies outside many shops. You just scan your phone uh this QR code with your phone and it automatically like you know opens the app or takes you to No, I can’t even imagine a world without QR codes. Absolutely. The story of QR codes is fascinating. It was invented in 1994 in Japan. Oh, I don’t know. By this person called Masahirohara. I hope I’m pronouncing that right. He works at Denzo Wave. It’s a company which is a subsidiary of Toyota. If you look at prior to the arrival of QR codes, how do you scan? You must have seen this. How do you scan when you walk into a warehouse or like a store and somebody I didn’t walk into a warehouse in the ’90s. You surely walked into a store. When you walk into a store, when you give something to check out, what that’s right, barcode, a barcode is what’s called a one-dimensional code, right? Because it’s only got lines of varying thickness in just one dimension, right? So this exists and but it’s cumbersome and you have to scan again and again and again. So what u Denzo at Denzo Masahiro does is sorry my bad Masahirohara does is he creates sort of this two-dimensional barcode so to speak which is what a QR code really is right so and guess what he’s inspired by he’s inspired by the world’s oldest board game you know what that is no it’s called go oh It was invented in China. It’s about 2500 years old. I mean, at its simplest, it’s a 19 into 19 grid of black and white squares. You must have seen it with pieces on it. Never played that game, but even I’ve never played. And it’s considered one of the most a it’s long-standing, which means it has staying power. It is also considered one of the games where you know humans still had an advantage viz computers for the longest time right so he’s inspired by that and he creates the QR code and the QR code is obviously like you know I mean it’s it’s a two-dimensional it’s a square and it has um squares of black or white in varying levels of thickness. Oh yeah squares I mean I’ve never taken a close look at uh a QR code. I mean I scan it every day but that’s right. Um and and I think the most interesting thing which we really must thank um Denzo wave and Toyota and Masahiro for is they make the patent freely available. You can imagine an alternate scenario where they patent it and it doesn’t. Instead, they make it freely available, which means anyone is free to adopt it. Wow. Now, that’s great. This is 1994, right? Still, it doesn’t take off because what good is a code if you don’t have things to scan it with, right? Smartphones still haven’t taken off. So, what was the original device? The the original device is of course scanners because remember they’re designing it for industrial use, not for consumer use. Got it. But over time since the patent is I mean allows for anyone to freely use it. it starts dispersing into any kind of use cases where you need the ability to scan something embed a lot more information compared to a barcode you can embed much more information into a QR code right that’s one of its benefits uh by 2010 it starts to enter India if I’m not mistaken the midday newspaper is one of the earliest ones to use QR codes what do they use QR codes for this is not the kind of early adopter one who you had in mind. See that’s the thing about technology. You never know who starts adopting it and in what space. What does midday use it for? If you’re reading a newspaper and there is a particular article and there is additional photography or multimedia or video associated with it, you can scan that QR code and be taken to exactly the URL for that page and watch the additional multimedia. Interesting. From there it makes its way into again since there is Japan connection it makes its way into let’s say cars being sold by let’s say um you know a Toyota or others etc because now how what’s the easiest way have I mean uh to get a car brochure you run an ad okay and then there is a QR code you scan it and it shows you additional information etc newspaper stories have them then newspaper ads have them that’s right and then it makes it way interesting into juice packs. So if you have a juice pack, people start embedding QR codes into it so you could figure out where this juices, the oranges in that juice came from because it sort of becomes like this universal thing where I want to give more information about this very specific thing that you’re holding. Maybe it’s a newspaper article. Maybe it’s an ad for a car. Maybe it’s a pack of juice and you want to figure out what are its contents, where were these things sourced from. You can now embed a QR code and people can scan it with their earlier versions of the smartphones. Right from there, the QR code is invented in 1994 where in 2010, India start to see early diffusion, but it’s still not widely adopted. When does it get widely adopted? It gets widely adopted in 2015 when PTM decides to have QR codes on its standies for people to accept payments 20 years later. That’s right. Right. So now that really supercharges it because up till now the use cases are all they’re not really transactional. They’re like, do you want additional information about this article? Sure, maybe, maybe not. I’ve already bought this pack of juice. Do I really want to know where the oranges came from? Etc. Sure, maybe, maybe not. But now there is this standandy on a merchant’s um desk and you want to pay the merchant. So the QR code is now directly integrated into a transaction. Right? So that’s when it really takes off, starts to take off in India. And I think if I’m not mistaken, 2022 is when Bajage Finance integrates QR codes into its own fairly formidable tech stack. So if you walk into a store, uh you now I mean earlier you had these Baj Finance executives and in some senses the executives had to find you. So I mean imagine a flow where you walk into a Vij sales or a chroma and you’ve done that we’ve all done that many times the moment you walk inside people are like the sales people are sizing you up which desk are you going how may I help you and there is information interchange happening and then before you know somebody will figure out and come to you but what if you didn’t need to do that what if the customer could tell you that I’m interested in a loan right imagine a scenario where a customer walks in and says hi I’m Rohin and I’m interested in a loan. Of course, nobody would do that in real life, but now if you’ve got a Tandy with a QR code, a customer comes in and the customer is like, hm, I would like to probably get a larger TV on loan. Let me scan this. So, they scan that. As they scan that, they’re taken to the Bajage Finance website or app and instantly their information, their number is transmitted into the Bajage Finance ecosystem, which buzzes to life. uh have you ever transacted with them before? If not, they already have data about you etc. And the people in the store can instantly come to know Sidar Raman has walked into the store and has scanned this. Up till this point um Bajage Finance has worked with Salesforce and a bunch of partners to create this like you know 3inut loan application system integrating about 40 databases. With the introduction of QR codes, they add another 20 days databases into that and they supercharge that, right? Um, basically customers can now confidently just walk into a vehicle showroom. In fact, forget a chroma sales. Now, imagine the flow how it changes. You’re walking into a scooter store, dealer store, or a bike store and what if you could like normally people walk in, they look at and say, can I get a loan for that? Mhm. But now because you have this tandee outside and there is a 3minut delay, you could actually walk in with a pre-approved loan. Yeah. Because the customer has scanned the code and got a pre-approved loan. So even as they set foot into the whether or not they’re eligible, they know they know that they can buy it on a loan. M. So, the customer has already been pre-sold the loan before and I think it all traces back to Masahiro Har at Denzo Wave deciding to invent the QR code based on a 2500y old Chinese game and decides to make it freely available. And here we are in 2022. Fascinating. 2016 is of course demonetization, right? We demonetize the Did you run to an ATM immediately after or did you have enough cash? But that probably reveals my privilege rather than anything else. Do you have enough cash stashed at home? I have like remember I told you that they do all my purchases with credit cards. Literally, if you open my wallet right now, you’ll not find a single currency note in there. It was like that even. So, I was fashionably demonetized even before demonetization. So, I went to because my wife called me. I I don’t know what I was doing. I was She said, “Go to the ATM immediately.” We had one ATM in the neighborhood. Go there and withdraw 20,000 or 25,000 bucks. Back in the days when you could withdraw that much in a single transaction. No, I did four transactions. That’s the worst. cuz this guy standing next in front of you is like and then he’s putting it and then again he’s like dude yeah and I think I I was hoping that the ATM wouldn’t run out of money by the time the next guy walked up to it but thankfully that problem uh coming back 2016 demonetization and the launch of UPI which enables instant realtime almost no cost uh payments 2017 PTM goes on to raise a billion dollars from Soft Bank in a venture funding round. 2019 UPI crosses 1 billion monthly transactions. Phone pay and Google Google pay are by now of course household names and we talk as easily as Indians about I’ll phone pay you money or are you going to Google pay money as though it was always the case right by 2021 there is something new called the account aggregative framework which means now there are these new entities that act as middlemen between banks lenders retailers etc and if I take a loan I just give you access to my bank account through this framework. Right. Right. Uh Razer Pay’s valuation hit 7.5 billion. We’re in 2021. This is a company that started in 2014. Right. So this is just an incredible decade where the foundational layer, the plumbing layer, etc. is fixed for identity, payments, data. And then of course the global venture capital starts pouring in and there’s a fintech revolution and all these 2000 plus fintexs. It’s an incredible time to be an entrepreneur. As it turns out, even the Ken was founded in 2016. And I wonder what Rajiv Jen and Sanjie Bajage and the rest of their team were uh thinking about as they saw all of this sort of playing out. You know, uh FinTechs, you know, I don’t think this term was very popular then. They seen these guys raise hundreds of millions of dollars. So, you are a traditional lender relative to them, right? Next to banks, you’re pretty uh innovative and new, but relative to FinTech, you are fairly you’re a conventional lender, right? I wonder what they wanted to do at that point because they don’t immediately launch uh say alternatives or rivals to these platforms, right? I mean, I have a list here. They launched their rival to uh Amazon and Flipkart. It’s called Bajage Mall, which is an e-commerce platform in 2015, right? This is the time obviously people have gone from Chroma and Reliance Digital to Flipkart and Amazon and then they launched Bajage Markets which is a policy bazar competitor where you can compare insurance policies in 2018 and then a discount broker a rival to Zerodha called Bajage broking in 2019 right and and then they obviously launched a mutual fund much later in 2023 so they didn’t really do this immediately it was not like a knee-jerk response do these things, right? I wonder what made them do this. They they didn’t want to be left behind because these are not very large businesses relative to Bajage Finance’s core lending operation. Uh so I wonder what the sort of the economic rationale was for them to do this. It’s a great question. What exactly is this organization called Bajage Finance doing while all of this action is happening around it? Even though Bajad finance is huge by any metric, it’s dwarfed by the sheer scale of capital and innovation that’s happening around it, right? I mean, Aadhaar is a billion plus users, EKYC, it’s like 2,000 plus FinTech, there’s like tens and hundreds of billions of dollars. Like I mean if you look at PTM which raised a billion dollars now Bajage Finance is not like if you look at it as an aggregate it is by no way a match for all the action that’s taking place around it. And remember each of these fintexs is trying to disrupt and create a new. Why do you say why do you say it’s not a match as in the collective scale of innovation and disruption that’s taking around it any individual company it can still but the thing is when you’re operating in such a hyper competitive market with so much of capital flowing in right everyone is trying to like you know win correct right so that’s the environment that they’re in as it turns out where are they in all of this of course they’re not sitting still I think the management team and a bunch of other leaders went to Silicon Valley. They start meeting with some of the leading companies in the US. This is from the Harvard case study that I’m quoting um from and they meet companies like Microsoft, Amazon, Salesforce, but also 15 different fintech startups from the US. Today with the benefit of hindsight we can easily argue there was no point of meeting those fintech startups in the US because the world’s most innovative fintech startups were actually in India. True but to Bajage Finance’s credit they were obviously studying the ones that were in India and they were also going to the US. The way I sort of see it is that Bajage Finance looks at all of these companies, these, you know, startups, nimble startups with huge valuations hitting unicorn valuations and it sees what they’re doing, right? And I think I kind of capture it from what’s called the three eye framework, which if I’m not mistaken, Rajiv Jen, um, you know, talks about a lot within the company. What are the three eyes? Innovate, invent, and the most important one, imitate. Imitate. It’s very rare for a company or a CEO to be able to say, “One of our strategy pillars is imitate.” And boy, imitate they do well. Yeah. So, they observe these startups and they essentially pick the best from each startup. What are some of those? For example, what is the single thing that most financial uh startups try to build around themselves? Payments. It’s an ecosystem. Okay. Right. And Bajage Finance starts to build an ecosystem where if you take the first loan, then it’s easier to get the second loan, right? It’s easier to use the app. It’s easier to do so many things. It starts to build a digital ecosystem around its dealers, its customers, its products, etc. I mean, not saying that they discovered that from startups in the 2010s, etc., but that’s what the startups are trying to do. They’re trying to create an ecosystem. Well, Bajage Finance is creating its own ecosystem. What else are they trying to do? They’re trying to build a super app. Every company back then was looking at China and saying all these Chinese companies uh have super apps. How do we build super apps? Well, Bajage Finance is building its own super app. What else are they doing? They have a fidget strategy. One of the most ridiculous phrases ever in business strategies is physic physical plus digital which is physical stores plus digital apps and services. Well, Bajanch has a physical strategy. Right? Back then everyone was all in on digital. Today we know that actually a physical plus digital strategy is the one that actually is working right now in India across a lot of sectors. It’s almost unavoidable. Yes. Right. The aggregator model what in the financial services space what are a lot of startups trying to do including policy bazar including today phone pay virtually any credit etc they’re trying to become aggregators you can get loans you can get insurance policy etc what does finance do exactly that they become an aggregator so if you look at for me it is like during this decade when any other company could have been sidetracked or aed by the scale of this startup and disruptive innovation that’s happening around it. Inside Bajage Finance stays focused, looks at all of these guys and say innovate, invent, imitate and they just go about doing it clinically. So literally any advantage that any of the other digitally native startups would have over it, we work faster, we have a better app, we have an ecosystem. any of that it replicates in this decade. And the most interesting part or I think you know and this goes back to the nature of the company is that yes all of these startups that have raises incredible amounts of capital are incredibly innovative but they are all raised on venture capital and the game that they’re playing at this stage is still largely valuation. Yeah. Right. Most of them are not profitable. Right. and they will not be profitable for years to come. Some still are not profitable. Yeah. Right. And that sort of it’s also how we as journalists or most journalists in the country uh reported these developments, right? It was always like every time there was a fund raise, it was a valuation game. How big how much money did you raise and how much was the valuation and how soon can you raise the next round and the next valuation? Nobody was talking about how how much profits do you make because frankly nobody profits right and I think this part was just very interesting right like you know I have two very interesting quotes in this firstly and there’s this I quote from this business today article uh which captured this this period and it says while fintech firms were building a lending model on top of payments Jen at Bajage Finance was doing the reverse which is he was essentially adding payments onto a lending model, right? And if you look at the contrast between them and all these companies that are quote unquote disruptors who are focused on valuations but not profits, what’s happening at Bajage Finance? Again, let me just read out a quote uh from Sanjiv Baj from that time. Our focus is on profit share, not market share. It doesn’t really matter what the top line is. Our aim is to be a large part of the bottom line in the segments that we’re in. And I think this is the difference between an organization where 50 60% is owned by a family and that family intends this business to be profitable and around for decades to come versus a lot of startups who are also looking at how do I raise the next round? how do I get acquired or 10 years 15 down years down the line maybe I’ll IPO and I think this focus on profits and you know sustainable growth while also replicating all the innovation it’s incredible how they do it keep costs low keep growing copying etc but during this magical decade when so many things could have gone wrong right Baj Finance actually survives it and comes out even stronger I don’t anyone could have seen this coming. How quickly they adapted to what was happening around them. So Rowan, I’d say Bajage Finance has weathered the fintech storm quite well. Wouldn’t you? better than well because no other like you know can you imagine any other scenario where a former captive lender hugely majority owned by a five generation old family group that has been around for what about a decade and a half right being able to suddenly learn how to compete with billions of dollars of venture capital and disrupt startups all around it and not just emerge successful at the end of it but essentially like you know even stronger there are very few examples globally yeah this was a beast that they hadn’t dealt with at all still it didn’t matter in the largest it was almost like a species of beast right because you had this new thing called fintech startups which are just raising hundreds of millions of dollars of venture capital and using those to fund losses you know bajach finance is used to dealing with what I’d call logical beasts, right? Beasts that chase profit pools, beasts that, you know, try to take away market share from it. Here’s this new class of beasts that doesn’t want profits, right? That is just like I’m going to burn money to take away your market share. It’s a very hard thing to deal with this category of bees, especially for you. You track large Indian conglomerates, right? Think about it. How many Indian conglomerates, the Tata conglomerate, the Reliance conglomerate, etc. have been able to or want to fight this new generation of nonprofit seeking beasts. They want to, but I wouldn’t say they’ve been very successful. Correct. Yeah. Another storm they actually breeze through was the NBFC crisis of 2018 19. And you mentioned ILFS. Yes. You remember ILFS? We we said we discussed this organization that was started in 1989. Yeah. Right. And then what happened is and if you remember also 1984 was when Satyam started and Satyam essentially collapsed. ILF has bailed that out. Yeah. And then here comes 2018 and ILFS collapses. Right. By now ILFS is this gargantuan lending organization. You talked about a nested doll structure for uh Bajage Finance. Well, Bajage Finance’s nested doll or Bajage’s nested doll is not a match for ILFS structure. ILFS has a maze of 348 companies connected to it. When ILFS sort of goes down, it has 91,000 cr in debt. Yeah. Across this maze of companies, right? So at the at the I mean I think we need to talk about how it goes down, right? Yes. And that is really the interesting part because ILFS was started as an organization to fund longerterm projects and infrastructure. It’s in the name infrastructure leasing and financial services. Exactly. Right. So bridges, buildings, ports, etc. and stuff like that. So if you really look at it, it’s lending money for longerterm projects. But the way it was raising money was through shorter term debt. Yeah. Right. 90 days, 180 days. Exactly. So imagine you’re funding like the construction of a bridge which may have a stated deadline of 5 years but this is India that deadline could become 10 years or 15 years and you’re constantly raising money for 180 days or 360 days obviously it’s not in line so you have to keep rotating right so there is this what’s called a you know the mismatch between you’re raising short-term debt and you’re using it to fund long-term debt through this maze of companies. Yeah. As long as your uh borrowers are paying back on time, this is not really a problem, right? And what happens here is in the early 2010s, there was an infrastructure boom in India. A lot of these companies borrowed, you know, thousands of crores. Do you know the one of the companies that was connected to Satyam’s downfall, Mateas Infra, right? So, Satyam also was a web of companies connected to infrastructure companies. Correct. And couple of the companies that ILF has actually bought out from Satyam were infrastructure companies including MAS infra. Yeah. And and obviously you know so some of these infrastructure projects go south they can’t pay back and these guys can’t pay back their bond holders. Yes. And there’s a collapse and it’s this is there’s a term for it. It’s called asset liability mismatch. Yeah. Right. Yeah. So you have these assets which are really like longerterm assets on which you’ve given loans and you’ve got your liabilities which are really shorter term because people are lending you money for much shorter term. They don’t really care about when that bridge is getting completed. They’re like I lend you money for 180 days or 360 days or 90 days. I need it back with interest at the end of it. So you have this asset liability mismatch which triggers a collapse. Yeah. And there’s a domino effect of sorts, right? Uh there is panic in NBFC’s as a whole. There is Dwan Housing Finance Limited. Yes. Which is a housing finance company. It’s in the name. Uh they have a similar problem. Uh they default on their loans and there are arrests made of executives at ILFS, Dwan Housing and uh Yes Bank which used to lend to these companies right NBFCs. We talked about it earlier. NBFCs borrow from banks and from bonds. I mean they raise money through bonds. So Yes Bank used to lend to Jet Airways um ILFS DHF all companies that collapsed. So then Yes Bank had to be rescued. Yeah. Right. So I think State Bank acquired a 49% stake and turned it around. It took five six years. It was a mess. Yeah. It was pretty scary because if you remember back then suddenly like if you were a Yes Bank uh customer and I happened to be one, right? So there was suddenly like you know I mean there was almost like a run right could you get your money out before they imposed limits because you know it’s like one of those things. So this was this web of interconnected like you know banks lenders etc and stock market uh all collapsing in real time the stocks of companies like Bajage Finance, India Bulls Finance, L&T Finance also crashing. Yeah. Yeah. But Bajage Finance the reason I said it sort of breeze through the storm it’s one of the largest NBFCs right there is uh panic in this segment NB Bajage Finance should also suffer ideally right but what sort of insulates Bajage Finance from the mess that’s that’s sort of evident right now or at that point is that Bajage Finance doesn’t lend mostly to you know a long-term infrastructure projects. It had an infrastructure play but it very strategically wound it down by just in time. Yeah. Right. Once again it looks like Bajar Finance seems to have done a lot of things just before they went south for others. I think it speaks to the discipline of this company that they always look at where things are going north or south and they’re able to kind of do things ahead of others and they I think 15% of their funding at that point came from deposits, right? And roughly 30% from banks and the rest from bonds, right? So they had a very diversified sort of uh mix of uh funding sources. So you’re not really dependent only on short-term like 180day uh bonds, right? I have a quote for you from this time. Thank God I did not treat ALM asset liability mismatch as an an extraure to my business model. Rajiv Jan said this. Yes, Rajiv Jan said this around exactly this time. This is the time when everything is crashing. Okay. Um stocks are down. Everybody’s doing a run on these like you know any kind of lending companies anything with infrastructure related to it. Everyone’s borrowing costs go up correct because it becomes more expensive. Obviously if you have to lend to um any kind of a lending company on NBFC they’re going to want more returns right so lending costs go up 100 basis points right uh in the middle of all of this this is Rajiv Jan saying that thank god I didn’t treat ALM as an an extraure to my business model yeah and this crisis was followed very soon by co in 2020 right then one battle after another yeah one battle after another and the reserve bank says there’s going to a moratorum on all interest payments on loan repayments for 6 months. First it was 3 months was extended to another 3 months right uh but this also didn’t affect Bajage Finance so much right and I think Bajage Finance at that point nudged its borrowers it told them listen sure you don’t have to pay for 6 months but if you can we encourage you to stick with your repayments because the interest is not going to be waved it’s just been postponed okay because there was a lot of confusion at that point right people were saying oh does this mean that uh this these EMIs have been waved for me right lenders had to come out and say Bajage Finance nudged its borrowers to repay if they could right which is why their NPS didn’t really shoot up at that point right all this they tackled the NBFC crisis they tackled the COVID mayhem the battles after the other yeah so if you actually look at that period 2018 is the NBFC crisis triggered by ILFS collapse and then you talked about Yes Bank and all of that they weathered that 2019 19 they raise if I’m not mistaken about $1.2 billion in fresh capital again just in time for what’s coming. Yes. So they kind of stock up on money in 2019. So if you look at if you zoom out and look back right now you’re like 2018 is the NBFC crisis and 2020 is the mother of all crisis between these two which is pandemic. The only year in the middle where you could have actually done something they do something they raised $1.2 billion in capital which actually gives them the cushion and the buffer as they hit 2020 because your borrowers are not paying you for 6 months that doesn’t mean Bajage Finance can’t repay its own lenders right banks or bond holders so where does that capital come from you need that buffer right I’m sure this came in handy whatever it is 2019 in fact you know I mean all the research says that when um stock investors were looking at companies they looked very favorably at Bajage during this time because they saw a company which is not just disciplined but which actually has enough cash to get through this period. If you remember that period of the pandemic everyone was in a survival mode. It didn’t matter how large a company you were. Everyone was like, who’s going to emerge out of this alive, right? Because suddenly everything went down to kind of zero, right? And you’ve got this organization, you got salaries to pay, you’ve got loans to repay to your lenders, etc. If you didn’t have enough buffers with you, people took a very dim view of you, right? But not Baj Finance in this case again. And then came the next battle. Uh I mean it didn’t look like a battle then. Reliance looks at Bajage finance and its growth like oh they’ve done this this is too yeah this this story has run too long for Reliance to not look at this and say this seems like an opportunity right like you know it had to come so what uh Bajage auto did in 2007 right take the financial services business out of Bajage auto and create Bajage Fins uh and then Bajage Finance under Right. Reliance does the same thing except it’s not triggered by a family contract. This is just an opportunistic spend. Yeah. And because you see that another company, another group has done this. So obviously you’re much bigger. You have a lot more capital. So why not do it right? But they do something really really ingenious. This is going to get a little technical but Reliance whenever they enter a sector at scale they always do something ingenious. And this is uh you know what they do is we’ll have to go back to 2002. Uh there was another company called Reliance Petroleum which was a subsidiary of Reliance and that was listed too. And Reliance decides to merge this company with itself. Right? So when you merge a company with yourself what you do is you issue your own shares to the owners of the company that’s being merged which is Reliance Petroleum. Right? So, Reliance Petroleum gets shares of uh I mean the shareholders, minority shareholders, individuals get shares in Reliance Industries, but Reliance Industries also owns a stake in Reliance Petroleum. So, it gets shares in Reliance. So, Reliance gets to own shares in Reliance and this is called treasury shares. Okay. If you tell someone who’s not wellversed in the world of finance, they’ll be like, are you joking? Yeah. How is this possible? Think Reliance is like the the passmaster. We’ve talked about nesting doll structures etc. I think Reliance is the absolute passmaster of it’s nesting dolls of nesting doll structure. No other companies also use this but not to this extent right so they park these shares in a trust and that’s worth that’s about 12% of Reliance. So over the years Reliance Reliance sells about 6%. And at the time of the de merger Reliance still has a 6% stake in Reliance. Okay. And they transfer that to this entity which is being spun out which becomes geo financial services. It doesn’t have much of a business. It’s got revenue of about 800 cr. Okay. I think there’s some securities trading business. It’s it’s it’s nothing. But then it demerges and lists with a 6% stake in Reliance Industries which is huge. That’s worth a trillion rupees or one lakh cr. And then suddenly this is the like out of thin air like a 1,600 pound gorilla emerges out of the mist. Yeah. And you know this is this is as good as it gets for a new uh lender because you come with a net worth that’s huge which means you can actually go and borrow lots of money which allows you to lend more right so this geo financial services is exactly like bajachins it’s a holding company under that you have an NBFC which is called geoc there’s payments there is uh insurance so because there is a sister company called geo telecom which has a massive distribution which you can sort of take advantage of. So you know and Alian’s Baj’s original partners in insurance they end the joint ventures with Bajage and they join hands with Reliance. Oh so Bajage Finance no longer my best friend. Reliance my best friend. Um for a reinsurance venture reinsurance is nothing but insurance for insurers. But they are uh I think on their way to launching a general insurance and life insurance venture and they get Black Rockck the world’s largest asset manager to uh launch a mutual fund with them and a wealth management business with them right so they have big players and they have lots of money and they get KV Kamut uh the one who made ICICI one of the country’s largest banks right to head geo financial services so when Nano Pamani and Rajiv Jen and um you know sort of put the building blocks together for Bajage Finance. They got people from City and G and uh you know uh um American Express. So Kamat did something similar. So he went looking for people who worked with him at ICICI and I would have assumed that he would have tried to poach a bunch of people from Bajage Finance. Uh yeah these are people that work I guess I mean we’ve talked about how you know people have stuck around at Bajage Finance for a long time so probably they didn’t want to leave I don’t know that’s credit in whenever people aren’t willing to leave an organization um in spite of being poor that’s actually a great thing it’s very rare so they have all these big partners lots of money but to be fair I mean it’s early days but they haven’t really had much of an impact um you know I think people this whole narrative of reliance gets into something uh it’s going to completely shake up that space. I think that has sort of worn thin in recent years. Uh and this is a very good example of that. It’s like this you know I see that that that narrative right is getting to a sector. Oh my god it’s disruption. Everyone run for cover. Yeah. It’s like this it’s like this I think collective Kool-Aid that everyone so the narrative always travels ahead of. So if you can imagine this as a war scenario, it’s like uh you know I mean there’s this war going on, there’s like nothing, no news and then one guy on a horse is coming and saying Reliance is coming, Reliance is coming and like you know you’re like oh my god let’s expect for this and the thing is sometimes it’s true Reliance is actually coming if you look at telecom and various other sectors but sometimes it’s like it’s been a year since that guy came where is Reliance really right? So I think this is probably we don’t know. I mean maybe the armies are just behind the mountains and the mist and it’s actually coming. Yeah. But I mean it’s aum assets under management is just 10,000 cr and baj finances is 5 lakh cr when it started it was 2500 cr. So that’s like 200x in what in just 19 years right? So there’s also AEL which had a payments bank now they’ve got an NBFC license you know and they apparently going to pump in 20,000 cr if I’m not mistaken has a partnership with Bajage Finance. Ah yeah Bajage Finance distributes loans through the AEL thanks app. Yeah but I think is one of several partners for Bajage Finance. So now Etle is also in the game but I think to I mean I know some sometimes people tend to um get a little sort of excited and say oh these new players coming in are they going to sort of uh you know strike at the heart of uh what Bajage Finance is known for I think that’s a little premature you know and I don’t think they have to worry about competitors yet but you know there have been some regulatory concerns as well which are a lot more serious than these competitors in 2023 uh for a few months uh RBI told Bazad Finance not to issue its Insta EMI and ecom cards right why apparently there’s this sort of RBI come out with this policy or regulation where you have to disclose all the charges and the repayment schedule all the details of the loan to uh the borrowers or rather the the card holders right and the RBI said that Bajage Finance hadn’t done that right though this was shortlived this was about I think four five months and it revoked the ban RBI uh raps go, this was a wrap on the knuckle. Knuckle. Yeah, I mean when you’re running this fast, I mean there are bound and this large. Yeah, there are bound to be uh missteps, right? And I think they fixed it in a few months and they could go back to issuing these cards, right? So yeah, I mean competitors are certainly not a problem. Regulation every now and then I think you’re going to have these minor issues I think. But I think there is if at all there is a problem for Bajage, it’s something else and that’s within the company. What’s that? So the problem Bajage Finance has within has got nothing to do with its numbers which look great. It has 115 million customers right now and it wants to take that almost double that to 200 to 220 million by 2030 in just four years. Right? I talked about we talked about long rate strategy. Right? So that’s part of the these are some of the targets uh in its current long-term uh strategy plan. Right? Um and uh it has a long way to go in terms of uh how much how many more customers it can tap and how many how many more loans it can actually give out. For instance, India’s retail credit to GDP ratio which in 2000 was 7% is now 18 19%. That’s still considerably lower than what you see in other countries. Right. You mentioned about 35% in the rest of Southeast Asia etc. Right. Yeah. Then in 2000 I guess it’s gone up uh from there. More importantly uh and this is from Bajage’s own presentation. It says Bajage Finance accounts for 12.5% of all the loans given out in the country. The number of loans given out but only 2.8% of the total retail aum which means you’re giving out a lot of loans but the value of loans is not very high. Right. That’s very interesting because it started out as a consumer smaller ticket loans. Exactly. Right. which means it has a lot more scope to tap the existing customers for higher value loans. So to use a a simple analogy, you could sell like a,000 smartphones but somebody else would give a single home loan and it’s one loan versus thousand loans. Exactly. But as assets under management, the home loan as a single asset is worth much more than all those 10 phones. Exactly. Right. which is why I mean they they they had the foresight to launch a housing finance company in the late 2000s which went public uh in 2024 in a blockbuster IPO and they need to do more and more of that right so the problem is certainly not with its financials uh I think they’re going to be able to hit their targets it’s to do with people right Nanu Pamani one of the architects of the Bajad finance success story dies in 2020 he doesn’t have an executive role at this point. I think he’s vice chair of Bajage Finance and I think he’s just an independent director. Rahul Bajaj dies in 2022 and he doesn’t have an executive role either. And the person who sort of made all of this happen, Rajiv Jan, he quits as MD and he becomes vice in 2025 and uh he becomes vice chair of Bajage Finance. So it’s like an incredible run, right? 1994 to 2025. Yeah. Yeah. 30 years and about 18 years with Badage Finance, right? And the company appoints Anup Saha who’s been with Bajage Finance for about 7 years as the next MD. But interestingly in 4 months he quits. So the succession plan comes apart. Do we know why? No. I tried looking for the reasons for that but I couldn’t find any. He obviously like all resignations this one said for personal reasons. So Rajiv Jan comes back as MD. So he’s vice chair and MD and his term is now until March 2028. So in less than two years his term is going to end and I’m sure they want to find a successor by then. I’m yes but I’m also assuming the kind of um rigorous and disciplined organization that Bajage Finance is uh this succession would have been planned for at least what 3 4 5 years absolutely absolutely right you said he’s been with the company for 7 years I bet at least for the last 3 years they had been preparing and prepping him for the role cuz if this is a company that is thinking about how the business will run 3 to 5 years ahead and community to shareholder ers, you can obviously assume that it will do the same for who is going to be the next CEO. Correct? So, I mean, this is a pretty big miss cuz if you prep such a hyperdisciplined, well-run organization, if it did not handle that succession well, it means something went wrong, right? We don’t know what the reasons are, but obviously it wasn’t that oh, he wasn’t ready because they must have prepared for it for years. Yeah. Yeah. So there’s something called keyman risk right in business you know I mean people outside of business don’t really are not very familiar with this term insurers are very familiar with this yeah so it’s basically you know the threat to a company when the founder or CEO quits or dies so what happens to the company right and this is a serious schem risk for bajach finance because he is one of the greatest CEOs just looking going by shareholder returns in India in the 21st century and he’s the only CEO the company has known since the de merger right almost like inception right like because it was a different company before that so what happens to the company and what happens to its culture which made Bajage Finance what it is today with Rajiv Jen going possibly in 2028 what is its culture so we spent a while talking about the agility within Bajage Finance these off sites where they look at uh what they’re doing wrong and how to fix that and how Rajiv Jan himself sits with his team every Saturday to bring down costs right from 45,000 to 8,000 bucks right but there’s a lot more to what it what it’s like to work at Bajage Finance right again this podcast uh where Sukharji talks about Bajage Finance right there are some very interesting sort of really has done a lot of work around these long-term successful organizations and sort of trying to figure out what makes them successful Right. Uh and he says obviously you know uh they have a 65hour work week which is not all that surprising because all banks uh have that and apparently people clock in at about 6:45 a.m. Okay. And obviously it’s from everyone from Rajiv J Rajiv Jan to uh the the you know the young graduate who’s joined the company and it’s the most of the employees are actually 80 to 90% of the workforce u gets a variable incentive everyone in every month it’s actually low on fixed and high on variable. So it’s mostly performance linked. So you’re eligible for an incentive every month, right? And I believe these incentives are automated. There is no manager deciding whether or not you get it. There are some targets uh set at the start of the year. You hit those targets every month, you get your incentive, right? So I can’t imagine an organization where people want to be which is low on fixed. when you tell someone hey you’re going to get 10 rupees instead of whatever 50 rupees now you show me what you’ve got you can end up making a 100 rupees yeah I mean this is I mean in most of the conversations around salaries or hiring people want to know what’s my fixed salary and people always want to maximize their fixed salary right um it’s incredibly rare so this this culture where you talk about where there are some organizations where this concept exists this concept if you kind of zoom out a little bit. It’s called the eat what you kill culture. Okay, which is essentially what you make each month is a percentage of what you bring in or what you enable to bring in. So it’s like eat what you kill, right? There are organizations or like you know industries where it exists. For example, it exists in investment banking and finance where you know the more money you make the more for the organization the more money you make. It exists in law where if you’re a partner or working in a firm and the more amount you bill yeah the more amount you get. So the usual correl or in high commission sales let’s say you’re selling real estate right or you’re selling really expensive stuff yachts cars etc. It’s easy for your organization to say you sold this you brought this revenue a percentage of this is yours. But it is extremely rare in large organizations because the larger you get the harder it becomes for someone to say you work in a call center what percentage of the company’s business can I attribute to you and can I give to you a it becomes harder and harder to kind of connect those two together and second people are like I just work in a call center just give me a fixed salary. So if 80 to 90% of Bajage Finances employees are happy working for a low fixed salary and a high incentive salary, that’s an incredible thing. In fact, even MBAs who join the company work for or start working for relatively lower salaries than what their colleagues will get. But what they make up for that is in the very first few years they go visit dealers tail tail around with a bunch of existing employees and they’re very quickly given charge of a city or a business etc. So it’s early responsibilities and rewards that come and of course then if they’re free to kind of decide how much they make. So it’s not just you know the rank and file but even MBAs etc that they hire follow this um you know will work for lower fixed pay it’s a very rare thing and also I think the average sort of tenure of uh of an employee there is 6 years which is not short um in 2027 right and for an organization like this which is considered extremely hardact where you can imagine that if you know I mean you can imagine working for this organization where you come in every day, every week and you’re like, where are my targets? Am I meeting them? Where a 10% cut is not enough. Yes. To start at 50%. That’s right. Right. For most people, this would be an incredibly hard organization. It’s too taxing. It’s too much. I can’t do this, etc. Right. Yet, you said the average tenure is. So they somehow seem to have hit this magic zone where it’s an incredibly driven numberdriven organization where it’s low fixed salaries but you make a percent division and the people who survive there kind of over time appreciate it and like it and they stick on there. So it’s like this really great um sync that they found between a culture and the people who kind of uh live and breathe it each day. This is an organization which actually thrives on discomfort right from its very origin to entering spaces where nobody else wanted to enter because messy business right yeah there is regulation there is like there’s always something happening right you can’t do this there’s no money here you know you make 100 calls 1% converts doesn’t matter we’ll still do it right it’s you know we talked we talked about sitting on floors during off sites what is it Why is it done? Like you know I mean one of the things is when people do offsites why are offsites typically done away from office so that you’re not comfortable with your surroundings and it forces you to think differently. Why do they make you sit down on floors? Because when you sit down on floors suddenly there are no hierarchies and everyone is slightly uncomfortable. We talked about this organization saying anyone can criticize the company tear it down. That is an acceptance of discomfort that better be let’s be discomfort I mean uncomfortable with ourselves and all of this stuff around targets incentives etc right it is not a business as usual organization it is an organization that has turned discomfort into something that it thrives in right what is its culture um you know the at the very beginning when Nanu Pamani and Rajiv Jan and Sanjie Baj came together as a troa. One of the things that Rajiv uh Jen brought in from you know was what’s loosely called the G money culture right like countrywide finance right which is G had this thing of uh empowering independent business units to operate by themselves. So the thing that Bajanch finance also does is you know through that break to grow strategy etc. It starts out as a single line lender but today how many categories does it operate in? 40 50 Yeah. It has 50 product segments. Right. Right. So it’s broken down into these numerous organizations and each of which is empowered to almost operate as an independent organization. So you remember that very first conversation where we said where Nanu Pamani said that look I’m not here to run this as a hobby business. If this doesn’t hit its targets in one year we’re shutting it down. that still persists except at the level of a company it’s gone down to each of these 50 or within. So if there is some particular business which is doing let’s say around you know some lending around tractors in let’s say you know tier 2 tier three towns and that business isn’t meeting its numbers it’s virtually Nanu Pamani saying that either you meet these numbers or I’m shutting this business down. So it’s like a kind of fractalization of that same strategy. Second thing it’s very nimble. Every we’ve every few years it comes across some kind of crisis and for some reason it seems to have anticipated and moved you know ahead of others. It has incredible discipline and relentlessness right um it doesn’t matter whether the conversion from 100 phone calls is 1% or.1%. They’ll still hit it with 100%. Right? And this entire thing of breaking apart a large organization into smaller smaller smaller units. Now if you connect all of this together, it takes me to an analogy which is very commonly used. I don’t like it that much but I think it’s inevitable which is that of a an army. And you know you can actually visualize this is how armies operate, right? They’re turned into smaller units. They’re incredibly disciplined and relentless. they’re allowed like you know when a unit operates it operates independently etc. It has ownership within it. The concept from there which I kind of jumped to is this very interesting um you know it’s from this book and also this note by Ben Horowitz uh Ben Horowitz is the co-founder of Anderson Harowitz Anderson Horowitz or A6Z which is the world’s largest venture capital firm. Is it the largest? Yes it is. has $46 billion of assets under management and Ben Horowitz was also the former CEO of um a cloud company which he co-ounded with Mark Anderson which was sold to HP. So Ben Horowitz talks about wartime versus peace time for organizations and I’m just going to read out like you know a bit from his uh note and of course we’ll link to it in the show notes as well. Peace time in business means those times when a company has a large advantage versus the competition in its core market and its market is growing. That sounds like Bajage Finance, right? In times of peace, the company can focus on expanding the market and reinforcing the company’s strengths. In wartime, a company is fending off an imminent existential threat. M such a threat can come from a wide range of sources including competition, dramatic macroeconomic change, market change, supply chain uh change and so forth. That also sounds like that’s also finance. In peace time, leaders must maximize and broaden the current opportunity. As a result, peace time leaders employ techniques to encourage broad-based creativity and contribution across a diverse possible set of objectives. In wartime by contrast the company typically has a single bullet in the chamber and must at all cost hit that target. The company’s survival in wartime depends on strict adherence and alignment to its mission. So this so you is Bajage Finance a company which even in peace time operates like a wartime company? That’s a great question and I’m going to answer that and you’re probably not going to like my answer but this is not the only reference I could find to the concept of war and armies right so one of the things that Rajiv Jen pioneered like you know I don’t think he invented it but he has a three-ey framework right which is innovate in imitate is the concept of war rooms a war room is where you bring together key talent leadership etc and they are given a focus on some particular thing and they just work to kind of optimize that, right? Uh so he’s over time he believes in this concept of setting up war rooms whenever there is a crisis or an opportunity. So as a result of which I mean Bajanch finance has redefined itself most NBFCs typically were focusing on relationship based lending and I have a good relationship with my customer etc. Instead, Bajage Finance has refocused itself as a technology correct company. Right. Sure. There is a relationship. One of the first to do that. Absolutely. Yeah. And the war rooms that it sets up every now and then allow them to either spot leaks where something is inefficient like the example that we discussed earlier of, you know, I mean, this is the processing fee for a home loan. Why is it so high? Yeah. or slowing growth down to specific zip codes or product lines almost instantly because there is a war room which is looking at what’s going on and they’re able to go out and either fix it or take advantage of it even before competitors have realized it. Hence that uh comment about how asset liability mismatch is is not an annex item or the thing about raising conveniently raising $1.2 2 billion just before the pandemic, right? Um there are examples that I found of when this war room actually helped uh most like for example 2016 demonetization suddenly the world’s gone to the dogs and well Baj Finance is just like I guess we’re going to figure out how to do everything digitally and they become ace at it or 2020 pandemic oh how do we do how do we succeed in this? So these are all examples where they used war rooms to their advantage. I want to now recast an earlier analogy where I compared this organization to a car and when I said that you know the accelerator is Rajiv Jan and the fuel is Sanjiv Bajaj and the steering and the brakes are Namu Pam Nani too. Well, this is this is an army actually, right? like you know and the general is Rajiv Jan and the the strategist was Nanu Pam Nani and you know I I I use the word like you know very consciously but not literally which is the king in some senses is Sanjiv Baj right because they own um this army literally I’m going to ask you a bunch of questions now this is I’ve talked about wartime and peaceime organizations that actually reminds me of this very interesting uh quote from the Harvard case study I mean you talked about different scenarios where they had to set up a he had to set up a war room right apparently postco when co hit his top 100 leaders and told them after co the aggregate economy will shrink hence we too will be smaller but we’re not organized for that smaller size so I want you to imagine having a billion dollars of capital and tell me how you would run your business or function differently Right. This it turns out they did raise a billion dollars of capital as well. So this was both hypothetical question but resources as well but it shows foresight because if you remember that period most organizations were thinking how do we just make it through this correct right and this is an organization saying what would you do if you had a billion dollars? So it’s actually doing the reverse of what many other organizations are thinking, right? I’m going to ask you a bunch of question. Now this is like Q&A times, right? Like you’ve been speaking for most of this conversation. Now let me ask you I’m going to ask you a question and you have to tell me which one and I’m going to ask you questions about wartime multiple choice multiple choice questions. Yeah. Right. So no it’s like does this sound like a wartime CEO or a peace time CEO? And these questions are all about Rajiv J. Right. Peacetime CEOs know that proper protocol leads to winning. Mhm. Wartime CEOs violate protocol in order to win. Which one is Rajiv Chan? Uh I think protocol is a little tricky here because you’re talking about a lender and you have rules and whatever. No right or wrong answer. Just what whatever comes to your mind. Do you think he le he he he he insists that proper protocols lead to winning or do you think he violates protocols in order to win? Uh okay I will just qualify this by saying protocol here doesn’t mean rules but the accepted norm of doing you can never take out a journalist from you right but I think he is the latter the what what I’m CEO do you think he is the guy who lead thinks that proper protocols are essential to winning or do you think he’s the guy who says protocols aren’t important as long as we win I think it’s the latter okay cool that’s one now peace time CEOs know what to do with a big advantage age. Wartime CEOs are just paranoid. Again, latter. Okay. Peace time CEOs think of the competition as other ships in a big ocean that may never engage. Wartime CEOs think the competition is sneaking into their house and trying to kidnap their children. Again, letter. I think now I think I know what my answer is going to be. No, I I I I don’t think you peaceime CEOs aim to expand the market. Wartime CEOs aim to win the market. Latter. Really? So you you don’t think that Bajage Finance is trying to expand the market? You think they’re just trying to win the market? Why do you say that? They never talk so much about market share. They’re always entering new categories. Why do you think that they’re not trying to expand the market? I think the the very fact that they actually want to be, you know, they get into consumer eurobos, they were not the largest, right? But within 3 years they become the largest player. I think I read somewhere that they they they they actually finance 30% of electronics and 15% of smartphones in the country. But do you think it’s an organization that chases market share? If you remember there was this quote from Sanjiv Bajage also which said we are only looking at profit. We don’t care what the market share is as long as we are profitable in each segment. So I think for me personally their market share in each category is a consequence of what they do. This is also this is also the same company that says we want to get to 220 million customers in 2030 from 115 right now in that conversation do they say anywhere what others are do you remember that part about vij sales where vij sales said they don’t really care who else enters does not look like an organization that is obsessed with market share or with competitors it’s just that we want to be growing we want to be entering never mind let me give you another question peace times work to minimize conflict wartime CEOs heighten the contradictions. Uh again it’s the second one and I mean I’m thinking of the whole cost cutting example right what do we learn from each other right so this like put them in a place of discomfort so that they come out better and this last one I’m I’d be really interested in your answer like right peaceime CEOs set big hairy audacious goals wartime CEOs too busy fighting the enemy to read management books written by consultants who have never managed a full stand this The former. This is the former. Yeah. So the point that I’m trying to make is that Rajiv Jen seems to be both a peaceime CEO and a wartime CEO. Bajage Finance seems to be both a wartime company and a peaceime company. It is both. Yeah. So that question that you’d asked me earlier about which one it is, you know, it this this is very rare. So when I look at this company, it’s it’s like you’ve created this army. Mhm. It grows. It self-replicates. Break and grow. It attacks. It defends. It doesn’t get comfortable. It is extremely disciplined. This army doesn’t seek to find competitors. It seeks new territories. It doesn’t matter whether those territories are occupied or whether they’re unexplored. It’s just constantly out there. But here’s the thing. Armies always need purpose. Right? Sometimes leaders provide the purpose which is the general provides a purpose, right? Or the king provides a purpose, right? Sometimes the environment provides a purpose. It’s a competitor, it’s a rival, its regulations, etc. But armies do require purpose, right? Devoid of purpose, armies very soon kind of like, you know, begin to lose their sense of why are we really here, right? which actually took me back to Ben Horovit’s uh note about wartime and peaceime CEOs and is it possible that there could be CEOs who are both wartime and peace time ones and he says that most people end up playing one or the other role in there. He himself talks about this fact that when he was CEO for about 7 months he was playing the peacetime CEO role and I think for about six years he was playing the wartime CEO role regardless of what the the external environment is right not like yeah so for example um you know I I’ll go back to some of the examples right now Google is in wartime mode right because the AI threat etc so right but before AI came into the scene Google was in loosely a peacetime mode, right? It had like dramatic market share in all segments. It’s trying to figure out how do we improve our search etc. It’s focusing on efficiency. A lot of criticism about Google was or has it gone too lazy? Correct. Right. Um Steve Jobs when he came back to Apple the second time, Apple was a few weeks away from bankruptcy. That was wartime mode for Steve Jobs, right? So at differing points in the organization, if if it’s got back to the wall, then it’s the organization is in war time. If it’s winning, if it’s got a great market share, if it’s just growing at 50 100% yearonear, it’s in peace time, right? But there are CEOs who who are are very rare. and he says yes it is possible that one CEO can play both wartime CEO and peace time CEO it’s very hard mastering both wartime and peaceime skills means understanding the many rules of management and knowing when to follow them and when to violate them is it is it in simple terms being paranoid when everyone says there’s no need for you to be paranoid yes that’s one of the things paranoia uh I mean it’s interesting that you use the word paran paranoid because Ben Horovitz does refer back to the book from where he picks us up which is Andy Grove of Intel. Okay, who wrote only the paranoid survive, right? So it’s Andy Grove who actually talks about what being wartime CEO at Intel meant. And ironically the point where he says that wartime CEO um wartime moment for Intel was when it had to exit the memory business because of the entry of Japanese companies. M well I mean it’s another like it exited the memory business but it was slow to spot Nvidia’s um approach into the GPU business and as a result of which it became almost irrelevant till Trump had to step in to save Intel but that’s another story altogether. Paranoia is one of the things that define um wartime CEOs and organizations. But to come back to this it does look like Rajiv Jen is both a wartime CEO M and a peace time CEO. So if you look at this army, he’s able to constantly guide it into newer territories. But as they stop to rest for the night, it’s almost like we need to be able to make swords 50% faster. We need to be able to run our horses 27% faster. I said earlier that it’s very rare for an organization to be able to both attack and defend, grow and efficiency at the same time, but Rajiv Jan seems to have done that. As a result of which Bajanch Finance today is an organization which is both a wartime organization and a peace time organization that’s incredibly rare, right? How much more territory can it conquer, right? It is at 110 million. It wants to get to 200 million. Maybe it’ll continue growing. It’s self-replicating. It breaks and divides 50 categories, becomes 100 categories, etc. All of that it’s possible. Can it ever be truly a peaceime organization? No, I don’t know. Right. Uh but here’s the thing about armies. Armies maintain their edge by constantly fighting. We’ve talked about constraints in the past and how constraints it didn’t get a bank license so it figured out how to kind of operate around it etc. Right? So this organization thrives on challenges and fights. Right? And Rajiv Jan was the general that kind of directed it. With Nanu Pamani gone as the strategist and Rajiv Jan at some point going you’re left with this hyper capable army which has to constantly fight. I’m sure it can right because inherently this has now become part of its culture. Yeah. But it still requires a general a great general to lead it. Right. because there is that stability which is provided by the Bajage family holdings and Sanjie Bajage which is great because the army still belongs to the same king. Yeah. I I’ll I’ll sort of end this by another analogy which is I compared this to the ship of Thesius talking about ships armies he’s talking about America or or Bajage finance. That’s right. This is now the army of Thesius. Right. This started out you’ve built this formidable army. You’ve taken away the strategist Nanu Pamani passed away. At some point Rajiv Jan will step back from being MD. Yeah. And there is only Sanji Baj. Is that army still the army that was created or is it like a new army which will find its own purpose? It’ll create its own leaders. It’ll find its own territories and it doesn’t need competitors. Right? So it’s a formidable army but I still feel it needs to be guided by a great general. Is this possibly Bajage Finance intermission moment? Yeah, absolutely. Uh, you know, we talked about the keyman risk, right? And this reminds me of another person we discussed briefly a while ago, Adityauri of HDFC Bank. Yeah. Very similar trajectory to uh Rajiv Jan spent a while at City Bank and joined HDFC when HDFC floated HDFC Bank in ‘94. Sorry, City Bank. Yeah. So once again HDFC also has to thank City Bank. I mean India has to thank City Bank. And we discussed right Nanu Pamani hired Adityapuri. That’s right. At City Bank. So joins HDFC Bank um as its founding CEO uh leads it until what 2020 so 94 to 2020 right and I remember this piece that the economist had after he quit and it called him the world’s best banker. Right. That’s a really really Yeah. Coming from the economist. Yeah. and and they have they’re stingy with their praise. They have names like you know Jamie Diamond and CEOs of banks from China much larger banks right and just based on shareholder returns and what HDFC managed to achieve in 26 years at that point when he retired HDFC was worth more than City Bank okay $90 billion so it called him the world’s best banker so at that point everyone was like people couldn’t imagine HDFC without HTFC bank without step into such shoes of the tapuri right HDFC has become even bigger because HDFC the mortgage lender has merged with HDFC bank right it’s now what I think it’s the second uh most valuable company in the country after Reliance so I think and HDFC has been grappling with a bunch of issues right we had the chairman of HDFC uh putting out a letter I mean he resigned and put out a letter he said he’s got ethical differences with the company right uh and FT reported that there was a power struggle between him and the new CEO uh the one who succeeded Adapuri. So it’s not easy right as we discussed Bajage Finance um will hit those targets that it has right by 2030 there’s no reason why it won’t but Rajiv Jan is going to be gone most certainly by 2028 and I feel the years after Rajiv Jan will be somewhat similar to what’s happening with HTFC right now it’ll become bigger and bigger right but it’s not going to be a very smooth transition for the company because it’s never so smooth when you have a CEO like Rajiv Chan or Adityuri. You know the the thing about great transitions is that the best transitions are the ones where nothing seems to have changed, nothing broke. Mhm. M you know most people view these transitions and I think the trap that a lot of incoming CEOs also it’s it’s the weight of expectations because you come into this you step into these giant shoes and everyone internally employees stakeholders board everyone is like oh you’re stepping into these shoes let’s see what you can do whether you can even do better and you know it’s only human to kind of feel the weight of those expectations that you’re like I’ve got to prove myself. I’ve got to do it even better than the last person. But truly the best CEOs and the best CEO transitions are those who come in and who are like my job is to make sure that the focus doesn’t shift to me. The company continues to run as well. And I think a great example of that has been Tim Cook. Yeah. At Apple. Yeah. after Steve Jobs uh stepped back and passed away. Tim Cook Tim Cook is no long nowhere remotely as charismatic um as Steve Jobs but Apple has continued to grow and grow and grow. So it’s a great transition. Yeah. Because he didn’t have to prove himself. The company grew. So it’s I think I think all all that the company needs to grow bigger and bigger is already in place, right? But there are moments say something like the NBFC crisis were to happen again right you need someone to be making those calls which will set Bajage Finance apart from all other NBFCs right you can say you have all the technology in the world there is AI of course right underwriting is sort of brand customers but you still need that person to say hey I want you to cut cost by 50% and not 10% % right I don’t want you to accept the status quo right there is always a status quo right maybe 10 years down the line vaj finance will be used to uh working the way it has and another you know company could come and say why should it be this why can’t I do something else right why can’t I underwrite in a different way altogether right why can’t the cost be 60% lower than what bajach finance is spending right so how do you see that coming how do you ensure that you keep doing that yourself so that you know someone else doesn’t force you to do it, right? That’s where I think I’m sure I maybe they will find a CEO who who does that, right? But it’ll be interesting to see. I mean, I want to have this conversation 5 years down the line to see if a lot of our arguments hold up at that point. to go back to your war analogy right you said Rajiv Jan is this general who’s built this impressive army u that can deal with any situation that’s in sort of wartime even in peace time right so now the question is you know when he steps down does the army need the same kind of general as Rajiv Jen I don’t think so the army needs a general but Rajiv Jan has built the army in such a way that the new general doesn’t need to rebuild build it. I think the army will continue fighting the way it has for the past 20 years and he I mean when he steps down or if he steps down in 2028 when his term ends he will have been there for 21 years and his track record is certainly one of the best uh in in the last I think 50 years or so just going by shareholder returns. So the new general will just have to make sure that the army doesn’t disintegrate which I don’t see happening for a company with Bajage finances discipline which was also put in place by Rajiv Jen right although sitting on the floor cutting cost right all of that will continue happening I don’t see any reason why that shouldn’t happen right if a company if this company could see the fintech boom coming and imitate right if the company could prepare for CO without even realizing that there was going to be a pandemic with a war chest. Right? If the company could quickly fix issues with its cards and get past any regulatory problems, I’m sure this company can see whatever else comes in its way. I think 20 years down the line, I see two more guys sitting and having a similar conversation about what makes Bajage Finance. Could be us. It could be us. It could be someone else. But I think that conversation will be along similar lines. Eat like a dam in the cut. Thank you.