Bajaj Fin may rejig mgmt to abide by RBIÃ¢â‚¬â„¢s banking norms

Nov 29, 2013, 09.42 PM IST

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Bajaj Fin may rejig mgmt to abide by RBI's banking norms

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Bajaj Fin may rejig mgmt to abide by RBI's banking norms

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Just a day after the Tatas opted out of the race for a banking licence, its Pune-based rival business family Bajaj reiterated its commitment and intent on converting from a non-banking financial company into a full-fledged bank.

Also read: Birlas bullish on banking foray; look for minority partners

In an exclusive interview with CNBC-TV18, Rajiv Bajaj, director, Bajaj Auto said its finance arm - Bajaj Finance - may undertake an organisational restructuring to ensure that there is no 'conflict of interest'.

Bajaj said that the firm was in a dilemma since currently the auto division of the finance company finances 30 percent of Bajaj Auto's total domestic sales. This could get impacted if the NBFC becomes a full-fledged bank raising questions of a possible 'conflict of interest' .

The MD of Bajaj Auto said that it is engaging experts to ensure that while the new bank complies with the requirements at the same time lending to Bajaj Auto is not impacted.

"Auto Finance division of Bajaj Auto is managed by me through my colleague who too is a Bajaj Auto employee. If Bajaj Finance becomes a bank then to avoid any 'conflict of interest' we may have to relinquish our roles in managing the auto division," Bajaj told CNBC-TV18.

He also voiced concerns at a time when Bajaj's competitors are becoming aggressive in auto lending the company could ill-afford to hamper two-wheeler and three-wheeler lending for Bajaj Auto.

"Shareholders of Bajaj Auto could be concerned as financing is critical to combat competion and the slowing economy and is the lifeblood of sales. We are seeing our competitiors strengthen their financing arms. We need to find out the optimum middle ground," he added.

A senior executive in the banking industry told CNBC-TV18 that auto companies wanting to convert into full-fledged banks could face this dilemma.

Currently Bajaj Group is the only NBFC that has shown interest in converting into a bank, which has a sizeable auto business. In fact Bajaj Auto is the 'golden goose' for the entire Bajaj Group.

Other groups with auto businesses like the Tatas and Mahindras have already opted out of the race for winning a banking license. Maruti Suzuki and Hero MotoCorp have already said they have no ambition to becoming banks.

Tatas and Mahindras have cited the stringent condition of meeting CRR and SLR requirement from the first day of becoming a bank. "After prolonged deliberations and detailed analysis, Tata Sons has therefore decided to withdraw its application dated July 1, 2013, from the current round of licensing," Tata Sons had said in a statement on Thursday.

Bajaj Auto stock price

On November 29, 2013, Bajaj Auto closed at Rs 1974.75, up Rs 23.75, or 1.22 percent. The 52-week high of the share was Rs 2228.95 and the 52-week low was Rs 1657.50.

The company's trailing 12-month (TTM) EPS was at Rs 109.18 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 18.09. The latest book value of the company is Rs 273.08 per share. At current value, the price-to-book value of the company is 7.23.

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