A quick announcement ahead of the episode,
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and founders collaboration.
And if there's one thing that you learn
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from studying founders,
just existing in the business community,
it's that relationships run the world.
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There will be limited main stage talks,
and instead we're gonna have a lot of smaller breakouts,
panels, and significant time
for one-on-one conversations.
All of the details can be found in the show notes,
where there will be a link,
where you can go directly to join Colossus.com slash events.
And I'll leave you with this.
I attended David's event in March of this year, 2024.
And just yesterday, I was looking at my phone
considering this upcoming conference.
And I noticed there were four different people
that I spoke to yesterday
that I had met for the first time at David's conference.
And since then, we've continued to talk,
continue to foster relationships,
and who knows where these relationships might go over time.
When you gather these groups of people
in the right type of environment,
that's where relationships come,
and very interesting things arise.
So please make sure to check out the link in the show notes,
or again, join Colossus.com slash events for more information.
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Welcome back to Business breakdowns.
Today we are covering India's largest
non-banking financial company, Bajaj Finance.
Today, Bajaj has a market cap over $50 billion,
which can largely be attributed to
the significant growth over the past two decades.
To break down Bajaj, I'm joined by Sara B.
Mirkaji, the founder and CIO
of Marcellus Investment Managers.
Now, Sara B. previously joined us for a breakdown
on Titan and returned to dive into this
specialized lender.
One of the headline numbers that immediately
caught my attention from Bajaj
is that the loan book compounded 40% from 2009 to 2022.
But we won't just judge that book value by its cover here.
We needed to dive into what Bajaj is actually
capturing in the lending economy.
And Sara gets us into the unique dynamics
with India's lending system, how Bajaj embedded itself
into the consumer durables purchasing funnel,
and how this business has performed in various cycles.
Regardless of how you interpret the loan book,
it is fascinating to see how Bajaj has become
this extension of manufacturer's sales forces.
And there's a lot to learn here, particularly,
going into a new geography outside of the US
to see how the lending system works.
Now, please enjoy this breakdown, Bajaj.
Bajaj.
All right, Sara.
Thank you for coming back for round two of business breakdowns.
I am excited to go back to India to cover a business there.
The fans of business breakdowns in India
are loud and vocal and always excited when we cover a name
in India.
Today, we'll be covering Bajaj finance,
a company that I knew very little about.
I'm guessing many in our audience will also
be unfamiliar with Bajaj or BFL, as I'll likely refer to it,
throughout the conversation.
So maybe we can just start extremely high level set
to scene for the company.
What do they do?
What do they sell?
Any metrics around it to give a sense of the size
of this business would be a great place to start.
Firstly, thank you for inviting me back.
Last year, I did my first business breakdown.
There was a lot of fun.
So looking forward to this one.
Bajaj finance, BFL, as you called it.
This is India's largest retail lending NBFC.
So NBFC stands for non-bank financial company.
Basically, this is our shadow lending sector.
So BFL is India's largest retail lending NBFC.
Majority, nearly 60% of India's consumable loans
are made by this one company.
And as we'll discuss over the course of the session,
the comparative advantages really are around very low cost
of funds, a uniquely intense work culture
and state of the art technology.
But before we get there, just to contextualize BFL,
I'll give you three dimensions to think about this.
In the Indian economy, credit outstanding
grows at around 11%.
Over the last decade, Bajaj finances
grown its loan book at thrice as fast, sustainably thrice
as fast as the broader lending sector in India.
The second way to contextualize it
is just to think about the lending sector in India, banks
lend around $2 trillion in India, non-bank sector
lends around $250 billion.
Bajaj finances loan book is $40 billion.
So roughly one in five non-bank loans in India,
one in five non-bank loans.
And what is the world's fifth largest economy
is made by this lender.
And the final way to contextualize Bajaj
is just to look at the compounding.
So over the last 16 years, this company
has compounded share prices 1,000x.
That's underpinned by 30% loan book
cargar, 50% pat cargar.
So 50% pat cargar versus 16 years,
I think that's roughly 650x pat compounding over 16 years.
So we're looking at an extraordinary lender,
which has achieved exponential growth.
And what is one of the world's fastest growing economies?
And to separate what would be a bank loan
or the customer base for traditional bank loan
versus someone who would use BFL for that non-traditional loan
or non-bank loan, can you just describe the differences
in terms of the customer base is there
or who they would be targeting?
So what Bajaj did very well.
And I think a lot of the credit for this
goes to my erstwhile neighbor, who's the CEO of Bajaj
finance, Rajiv Jan is really the transformational figure
for Bajaj in the last 16 years.
So the area that Rajiv and the owner group at Bajaj
finance identified was aspirational Indians.
Indians who want to upgrade their lifestyle,
but for whatever reason can't get a loan from a bank
or can't get a credit card from a bank.
And the core customer acquisition engine
is to give working capital loans or consumer durable loans
to these upper middle class or middle class
aspirational Indians.
Bajaj finance does this through 100,000 consumer durable
stores.
I would say in excess of 10,000 auto showrooms,
it's app, which has been downloaded by over 15 million Indians.
And just to put it in simple terms,
I reckon there are at least 200,000 venues in India
where you can get a Bajaj finance loan.
And the lending product itself is unique.
And then this is really the innovation that made
Bajaj finance a giant compounding engine.
The main state product is called a no cost AMI.
So AMI stands for equal monthly installments.
And this is a consumer trying to buy a TV or a air conditioner
or a fridge.
And he rocks up at the local consumer durable store.
And let's think about a consumer who wants to buy a fridge.
The fridge costs $1,200.
Bajaj says, no problem.
You don't have to pay up front for the fridge.
We will lend you the money.
And guess what?
You don't have to pay any interest on this.
This was a mind blowing innovation.
In fact, even when I heard it from my first while labor,
the now CEO, I could barely believe it.
I first heard about this first 13 years ago.
I thought there's a catch.
How can you make money?
I'll quickly explain how this $1,200 fridge loan
where the customer doesn't pay any interest makes money.
Effectively, the manufacturer of the fridge
assumes Samsung here.
Bajaj will pay Samsung not $1,200.
Bajaj will pay Samsung $1,200 less 5%.
So in this case, $1,140, that 5% is the marketing discount
that Samsung is basically giving away to Bajaj.
The customer will pay a small upfront fixed fee.
And even though the customer is paying $100 times 12,
I'm just reaping the $1,200, that 5% marketing fee
that Samsung has paid Bajaj results in a 20% plus IRR
for Bajaj.
So it's a win-win for everybody.
Samsung shifts its fridges quicker.
The customer gets to buy the fridge without any payment upfront
and zero cost financing.
The retailer couldn't be happier.
The stuff is flying off the shelves.
And Bajaj acquires a middle class, upper middle class
aspirational consumer with a low risk product
on a small ticket loan.
This is the customer acquisition engine.
Nobody else has been able to do consumer durable lending
on this scale.
This is really what Bajaj has come to be identified with.
And in that example, can you talk about the timeline
for obvious collection is coming from the consumer
in monthly installments?
When does that transaction between the manufacturer
of the refrigerator and Bajaj take place?
So right up front.
So the moment the consumer presses the buy button,
Bajaj is transferring $114 to Samsung's bank account.
And the $60 is effectively a marketing incentive
that Samsung has effectively given up to Bajaj.
So if you think about it, Samsung is paid right up front.
Bajaj is getting paid over 12 months.
But because it's a small ticket loan
and the whole process is highly automated.
There's barely any human intervention,
even the loan underwriting decision is highly automated.
Bajaj's marginal cost of collecting out
is actually quite low.
And if you ask me the big insight that Rajiv Jain,
the CEO had 15, 16 years ago, is that aspirational Indians
will not default on this fridge loan
because this is a gateway for them to other goodies.
If you mess up on this loan, your credit score gets ruined.
And as it is getting a credit card from a bank,
Bajaj finance is giving you a gateway to further loans.
And indeed cross selling and upselling to the customer.
The typical customer gets upsold
and crossed all six products.
Cost of acquiring a customer is low
because they're coming to the consumer durable loans.
But even more interestingly, a repeat customer
costs Bajaj one tenth of a new customer
in terms of operating costs.
And the credit cost in terms of credit risk,
the repeat customer credit risk is one third
that of a new customer.
So cross selling and upselling, that engine.
Again, I don't think anybody has built it
quite as efficient here as Bajaj has done.
There certainly seems to be some benefits to scale here.
And I think with a credit related business
that often takes time, you've referenced Rajiv's importance
to this business, but maybe we can go back.
I know this started prior to Rajiv.
Tell us a little bit about the origination story,
the founding story, and some of the key players
that have played a role in the business
as it's grown into what it is today.
So other than Rajiv, there are three other key characters
in the drama.
So the late Rahul Bajaj, he was the founder of the group.
Bajaj auto, the group that Rahul Bajaj really drove
through the 70s, 80s, 90s was India's largest
two-wheeler manufacturing group.
Rahul Bajaj is really a JP Morgan Esk figure
in Indian industry.
He was a member of parliament.
He championed India's development through the 70s, 80s, 90s
and he's really a pivotal figure for Bajaj finance.
The second important person after Rahul Bajaj
and the family have been eager to look at it.
It's Sanjeev Bajaj.
Sanjeev is Rahul's son.
Sanjeev now is the chairman of Bajaj Finnsa.
Bajaj Finnsa is the largest shareholder of BFL.
So Bajaj Finnsa owns I think 51% of BFL.
And Sanjeev really is the owner, man representing
the ownership interest today.
Rajiv Jan reports into Sanjeev Bajaj.
And the third figure is very interesting, man.
His name is Nanu Pamanani.
Unfortunately, passed away a few years ago.
The late Nanu Pamanani is a relative of the Bajaj family.
He was a star in city bank in the 80s and 90s.
Drummer has it that had he agreed to move to New York.
He would have ended up running city bank.
But hey, we in India were fortunate.
He didn't go to New York.
Instead, he moved to Pune, and he became a mentor
to Sanjeev Bajaj, the current owner,
and Rajiv Jan, the current CEO.
So he's the Machiavellian strategist
who helped Bajaj come up with this business model.
So these are the key figures.
The origin story, Matt, is in 1986.
So just to paint the picture of 1986,
India was in secondary school then.
The country was dirt poor,
but there were two things that were doing well in India
in the mid 80s.
Everybody seemed to want to buy a two-wheeler.
Bajaj was the market leader,
and everybody wanted to borrow some money
because we didn't have the much money in the 80s.
We were really poor economy.
India was dominated by government-owned banks in the 80s.
The government-owned banks for,
guess what, lending to the government.
And the only other people they would lend to
is whoever else the government wanted to carry favor with,
such as, say, farmers,
because farmers are a big vote bank.
The government-owned banks were not interested
in financing two-wheeler's,
and Citibank was one of the few foreign lenders.
Citibank was one of the few foreign lenders
operating in India in the 1980s.
They obviously saw an opportunity.
So they reached out to Bajaj auto,
Bajaj auto being the parent company,
and they said, were if we finance some of your two-wheeler's,
the Bajaj auto guys said, that's a great idea.
And these guys spread out across Pune.
Pune is the city 150 kilometers southeast of Mumbai.
And the Bajaj auto teams spread out
in the factories and warehouses of Pune,
saying, Citibank is happy to give you an auto loan,
to buy a two-wheeler, would you like some of this?
Now, surprisingly, when they went to the Tata Motors
Officers' Mess,
Officers' Mess is placed with officers relaxed in the afternoon.
The Tata Motors Officers were all very clever engineers.
They did the math and said,
hang on, this interest rate is looking a little steep to us.
We don't think we're interested in this.
Thankfully, somebody in Bajaj auto had the brain
we have to say, forget the officers.
Let's go to the factory.
Let's go to the workers' canteen in Tata Motors'
a Pune plant.
And that's where the workers took to the Bajaj auto scooter
finance by Citigroup.
In fact, the response was so enthusiastic.
The Tata Motors allowed the Bajaj auto team
to come for three consecutive days to finance these loans.
And I think in three days they sold 2000.
They sold 2000 scooters on auto finance from Citigroup.
And thus, the beta testing was done.
Subsequent year,
Bajaj auto finance was created.
Unwritically, Citigroup had done a beta test
forward, has become another
most successful lender in the bank.
So that was the inception story.
87 is when the company begins.
Did Citigroup maintain any economic interest
or any type of partnership with Pajaj into the future?
Not that I know of.
Remember, the other Citigroup bank link is Nanupamnani.
The late Nanupamnani,
who was a big wheel in city.
And I think their Asian operations
ends up joining Bajaj in 2007 as a mentor.
But in between the origin in 87
and Nanu joining Bajaj in 2007 as I think the vice chairman
in that interim 20 years,
Bajaj auto finance took off.
I think Citigroup had his parallel lending business.
Citigroup and continued doing consumer, durable
and two wheel of finance on its own team.
Ironically, until the Lehman Brothers crash in 2008,
at which point Citigroup doing all of this stuff in India.
And that Lehman Brothers crash,
Bajaj auto finance also suffered.
I remember I just arrived in India at that juncture
and I remember on performing assets for Bajaj
went from 2% in 2007 to 12% in 2009.
So 6x jump in NPAs,
liquidity had dried up across the world
including in India,
defaults rose and NPAs went 6x.
And the return on equity
which used to be a healthy 25% in 2007
fell as low as 1% by 2009.
I think ROE was down to 1.
So this is the pivotal point.
So 87 to 2007 is uninterrupted growth.
Then Lehman Brothers disrupts the story.
Nanu arrives at the request of the Patriarch
to basically mentor the new CEO and the Patriarch son.
And then this Troyka,
this Troyka really constructs the business model
that we know Bajaj finance
between the consumer, durable business model,
the zero cost AMI business model.
And in that regard,
I think Lehman Brothers was a blessing
and disguise had Lehman not happened.
Had Bajaj's profitability not got crushed
in those two years,
I don't think the reinvented Bajaj finance
would have been born with quite the vigor
that we see in the firm today.
There's a few things that I wanted to hit on there.
One of the things that stands out about the key members
of this story is that they seem to have this family relation.
And I'm curious if that's common in India
to see so many of the key players end up being family related
in these businesses,
or if that feels somewhat unique to PFL.
So family run conglomerates still dominate
their industrial landscape in India.
Broadly speaking,
you have two family run conglomerates in India.
One is the Tata's or the Mahindras.
There is a founding family,
but there are very few active family members left
in leadership roles.
So in the Mahindra empire, for example,
none of the founding family members are active participants
in the business and actually even in the Tata family,
we are empowering one or two members,
nobody's an active part of the colossal empire
to the Tata's run.
And the second type of Indian conglomerate
is like the Bajaj conglomerate,
where the family members are very active.
They are making critical capital allocation calls,
reliance industries is also very similar.
Family members are active.
So we really have both the Indian,
the origins of this go back to the fact
that we were a very capital poor country.
Until 20 years ago,
capital was scarce.
And therefore, if a business happened to have some profits,
recycling those profits to build out a conglomerate
was the best he was a capital.
Raising capital from the broader financial system
was a cumbersome and high cost of fair
and thus the rise of the Indian conglomerate.
The cost of capital advantage,
I think for many US listeners coming from a 15 year period
with very easy access to money,
it is lost and we've seen conglomerates certainly
fade in terms of the relevance
versus where they were many years ago.
But I think that story certainly brings true
when we look at history.
The other thing that I was curious about
is you mentioned they took this
what was intense downturn
and it turned into a great opportunity for them
to pivot or evolve the business model.
Just looking back at that period of time,
it seems like the type of event
that could have easily brought them down
in terms of their exposure.
Did they require any type of bailout, rescue funding
or was it run with some type of appropriate
leverage levels on the overall business
which allowed them to escape?
So there was an equity raise,
I remember six or seven months after Lehman Van Bust,
there was an equity raise,
there wasn't any government bailout.
What I think saved them from a financial standpoint was
not only are they an NBFC,
they're a very rare type of NBFC,
they're a deposit taking NBFC.
That means like a bank,
they can approach the public for time deposits.
Now the Bajaj family has a very good reputation.
Notably they've never defaulted.
So because the family's reputation is so stellar,
Bajaj finance limited BFL was able to raise
debt finance in the wholesale market
and in the retail market,
courtesy the holding company stellar reputation.
Without that, I think raising debt finance post Lehman
would have been I think close to impossible.
I remember 2009 raising debt finance in India was tough.
So there was an equity raise,
but there was no further bailout required.
And to this day,
the fact that Bajaj finance limited has a deposit
taking license and the Bajaj name
gives them the lowest cost of funds
of any NBFC in India.
They basically get money at 7.5%,
to Americans that might sound like a very high rate,
but just remember the Indian Ten-year bond yield is 7%.
So this company is raising money at 100 Bips over the sovereign,
and that money is then the engine
for all the clever lending that they do.
And I think we talked a bit about
what their customer base looks like today.
Getting into what is ultimately required
with these businesses,
which is how they actually go about underwriting
a little bit of the go-to-market, which you've described.
But can you talk through that model,
which seems to have really differentiated
from competitors and given them this advantage relative
to anybody else in the space?
So let me begin by focusing on what I think
is their true comparative advantage.
Effectively, Matt,
this is a tech company in the guise of a lender.
The reason I say that is,
so I arrived in India in 2008,
but that time I realized that Rajiv Jain owns
a condo next to where I live in Mumbai.
And at that time, they were like any other lender.
BFL then used to rely on credit bureau data.
Our largest credit bureau is called Sibyl.
This is the Indian equivalent of Equifax.
So BFL used to rely on credit bureau data.
Somewhere around 2010-11,
they hit upon a construct where they would use
sample sizes of 10,000 customers
to experiment with different underwriting models.
So let me give you an example to explain how this works.
India has around 1.2 million doctors.
So 2010-11, 12, I won't be able to tell you exactly which here,
but somewhere in that era,
Bajaj finance experimented with roughly 10,000 doctors.
They lent to 10,000 doctors.
Doctors typically in India need working capital loans
to grow their practice.
And Bajaj finance started stratifying
these 10,000 doctors into 600 buckets.
And the buckets could be based on things like,
has the doctor gone to a leading med school
such as the All India Institute of Medical Sciences?
Or did he just go to the med school down the road
where he gave a donation to the principal to get a place?
Secondly, the doctor, an oncologist,
or is he a general physician?
Is the doctor's clinic
is it in a very affluent part of town
like Malawar Hill in Mumbai,
or is it in the back of beyond?
So if the doctor's an oncologist
from the top med school
and has a clinic in the best part of town,
then Bajaj said,
let's give him a loan at a super low cost.
And vice versa,
if it's a doctor which looks a little ropy,
this construct gave them two benefits.
Over time, they played around and experimented
and nailed down the metrics
for driving an ideal doctor loan.
But what it also did was,
the lower quality doctors, the higher risk doctors,
were weeded out of the portfolio.
They found that they could get cheaper lending elsewhere
and the book cleansed itself,
the book almost self corrected
away from high risk doctors.
Now, these data points,
I gave you three data points,
the med school,
vacation and the doctor's area of specialization.
Today, Bajaj's finance
uses 1000 data points on each customer
to make the lending decision.
This is all automated.
Rather than a million doctors,
they have 200 million Indians in their database.
So we just do the math on that,
200 million Indians,
times 1000 data points,
Bajaj finances database has 200 billion data points inside it.
This data lake is getting churned every day.
And especially when we get to festive season in India,
our equivalent to Christmas is the valley.
The data lake almost explodes.
As a result, sales force,
which is the analytics and CRM provided to Bajaj,
we hear that sales force has a separate database
entirely for Bajaj finance.
And from what we understand,
this is the only lender in the world
that sales force treats in this manner.
This really is the heart of the Bajaj finance
comparative advantage.
To run this data lake,
they hire dozens of graduates from India's top engineering
colleges,
which is the Indian Institute of Technology,
computer scientist, electrical engineers,
data scientist.
It's a vast team.
I think the headquarters building alone,
they have 1000 data scientists and electrical engineers
working on this vast data lake.
So this is the first comparative advantage.
It'll be really, really difficult for someone else
to build this because you got 200 million Indians,
thousands of data points,
and years of experience of how to mine that data.
The second aspect was very hard for others
to replicate as the culture.
So I found out about this around seven years ago,
I first invested in the stock
and I've gone to meet Rajeev,
my first fine labor, now the CEO,
to understand how the company was doing,
and his office executive assistant called me to say
that the meeting will be at seven o'clock.
So I said 7 p.m, she's a no 7 a.m.
And I was little taken aback,
but then I realized that that's when everybody
starts work in Bajaj.
In fact, they start working Bajaj finance
at quarter to seven every day.
It's a 65 hour work week.
Everybody is told it's a 65 hour work week,
and if you can't deal with that, please move on.
So the motto is do more, earn more,
and this aspect that it's a driven culture,
everybody from the CEO down to the youngest graduate
will do a 65 hour work week.
I suspect actually they do far more,
65 is the message that we get.
Now alongside this, every month employees
are eligible for a bonus.
So 90% of the workforce gets a variable incentive every month.
These incentives are again coded.
This is a highly metracized reward system.
And at the end of every month,
there's an auto credit of your month's bonus basis,
your performance that month,
and that was already agreed with you at the beginning of the year.
Now you'd think that this ruthless performance oriented culture
will result in high-entrition,
where you'd be surprised.
Atrition is actually 15%.
The typical employee works here for six years.
Part of the reason is they earn way more
than what they would at a competing lender.
And the final bit of the culture bit,
and this is very unique to India,
firms like Danahar, G and its pom,
probably had this in America,
but what they have done and unique to India is,
every year, there's a five day,
long-range planning process.
From what we understand, they go away to a mountain resort.
They hike and climb mountains and in between,
they strategize about the next five years,
and they'll look at globally successful companies
like Microsoft or Netflix or Amazon,
and they'll say, what can we learn?
How can we strategize?
That five year LRP is then the spine
that gets updated every year.
I haven't seen any other Indian firm, plan as strategically.
Those LRP's then give you the metrics
on which the incentive payouts are done,
and the thing is the long-range plan gets drilled out,
the most junior, most employee through the incentive construct
with kicks in every month.
And the final piece is geographical reach.
I already mentioned that 100,000 consumable stores,
tens of thousands of auto showrooms,
52 million app downloads already.
If you are a new consumable durables player,
LG, Samsung, Sony, you want to make it big in India,
you have to pick up the phone I'm called BFL,
because this is your plug and play
into the Indian customer ecosystem.
But it's not just scale, the typical BFL loan
is given in 90 seconds.
So I live in a reasonably affluent part of Mumbai.
If I go to the local consumable durable store,
there'll be BFL's lending desk
and some of India's largest banks and non-mags.
Everybody else barring BFL will take a couple of hours
for that consumable loan.
BFL is 90 seconds.
The reason for that matters.
They've already credit assessed the customer
long before the customer walked into the store.
Now, you as a new entrant into the Indian market
will say, I want reach.
I also want most people to get the loan.
Otherwise, how will my product sell?
I don't want the customer to have to hang around.
I don't want a higher rejection rate.
It's very difficult for anybody else
to provide that plug and play.
And thus, you create a virtuous cycle.
All the players who want to sell their goods in India
come to Bajaj Finance, Bajaj Finance,
finances more and more customers, more and more data,
more analytics, better informed algos, lower credit costs,
and thus, the virtuous cycle spins away.
There are so many great details in that.
Differentiation and what goes into it,
I have to mention we are recording this at 8.30 PM
India time on a Friday.
So you've taken something from their culture
and certainly applied it to yourself,
which I appreciate.
One of the earlier points you made
was on the cleansing of the portfolio.
And just to get a sense of how this works with underwriting,
is it a binary decision where it is a yes or a no,
or does it extend beyond that in terms of the rate playing
a role on the back end if there's the liquid payments?
How much variance is there in the underwriting process?
It's not a binary decision.
They are basically risk pricing.
And it matters if you think about it,
they're risk pricing across three different dimensions.
As you rightly picked up for a given customer,
so go back to the doctor.
The star oncologist in affluence of a Mumbai
will probably get the lowest rate,
but the GP in the Boondocks will still get a rate,
albeit a higher one.
So there's differentiation across a specific set of customers,
but there's two other differentiation.
The way Bajaj runs the businesses,
there are 40 different lending heads.
So 40 different products.
Each lending had basically runs a mini company.
So he'll have his net interest income, his fee income,
ROE, ROE, the whole line yards.
The most successful, the divisional CUS,
the more capital she will get from the corporate center.
So the corporate center is saying,
hey, I will give you more money if you can show me growth
at a really good ROE, and I'm also tracking a risk metrics,
by the way.
Secondly, each CEO can discriminate across customers.
And thirdly, within a specific product.
So for example, within home loans,
the CEO can say, I reckon this is not a good time
to be giving home loans below $20,000 ticket size.
Let's ramp up on home loans above $100,000 ticket size.
So there's differentiation within a specific segment
of customers, there's differentiation
across different parts of the business,
and there's differentiation across sub-segments
of a specific industry such as home loans.
The ability to allocate capital on the fly
in a giant economy at high per speed.
Remember, the book is growing every two and a half years,
the book is doubling.
So the ability to put all of this on an industrial scale
is, again, a critical scale.
And effectively, they're making millions
of capital allocation decisions every year.
And by and large, those capital allocation decisions
are working out.
And in terms of managing that risk,
are they able to work with the manufacturers
at all to assume some level of that risk
where rather than getting 5% discount to the list price,
they might get 6%, or 4%, something along those lines
where there's an adjustment, or is it all being managed
on their own books?
So at the store level, I'm not so sure whether there is
a variable discounting policy with the manufacturers.
But what we do know is in their online proposition,
they've got something called the Bajaj Mall.
It's an online store.
You can buy adurables, auto, all-manor electronics.
And one of the things we can see there
is roughly on one on three products.
And one in three products sold on the Bajaj Mall,
you can get prices lower than Amazon or Flipkart.
And we did some work to figure out how this is working out.
And what we figured out by talking
to some of the auto companies whose products
are being sold on Bajaj Mall is, Bajaj's algos
tell their lending heads, for example,
how many 600 CC mountain bikes will be sold in the next 30 days.
So they will go to the manufacturer of that 600 CC mountain bike
and say, listen, we're going to sell 20,000 of these.
Can you give us a lower price than is available at any show
room in the country?
And can you also ensure that the price is lower
than what you offered anybody else, Flipkart Amazon, whoever?
And as a result of that, as a result of them
being able to predict, Bajaj is predicting
how many people will buy high end phones and cars and bikes.
They're using the algos to negotiate a bulk discount.
And as a result of which, they're online mall, the Bajaj Mall,
has dreamy products available at discounted prices.
So that's where we've seen the discount kick in.
I'm not so sure at the store level,
they've got variable discounting going on with the manufacturers.
Very interesting point, though, and the way
that they can play around with the scale advantages
that they have.
And ultimately, seems to be an extension of the sales force
of these manufacturers in many ways.
And in a very, very impressive fashion
in terms of how they can drive a lot of that,
on the culture point and the willingness for the workers
to put in this time, you mentioned the monthly bonus payments.
Is that unique to this business?
Is that fairly common in India to see something?
I think in the US, we see quarterly,
in quite a few sales positions,
but monthly is very unique.
I think many parts of the Indian financial ecosystem
will have a monthly bonus culture.
What's unique is the mectricization.
And the fact that human intervention
is not driving the monthly bonus payment
that it's algo is driving the whole thing.
So the stock-roaking sector, for example, in our country,
many parts of the banking ecosystem, the credit card
industry, there will be monthly bonus payments unquestionably.
But most cases, there is human intervention.
I think what Bajaj has done and quite deliberately so,
is made it very transparent and thus made
it obvious to people that if you're an ambitious young
professional who wants to rise in the financial services
world and you want to get rich reasonably quickly,
this is the employer of choice.
So whenever I go to their office, the average age of employees
will be south of 30, hungry young people.
And when we're trampled around India
at when we've gone to smaller towns in India,
the town head will be typically a 28, 29-year-old,
three or four years out of college,
hungry young man or woman, pushing himself hard
to make sure that those incentives
click in into his monthly pay.
On the geographical reach and the expansion within India,
I think one of the takeaways from our series
return on India and just what you described earlier,
population, it's basically 20% of Vickalob.
It's not homogenous.
You have different areas, different cultures within those areas,
different demographics, particularly on the wage side
of things.
As they've expanded, have they hit any bumps in the road
as they've gone into more and more of the geography?
How has that expansion gone?
And there have been any hiccups along the way.
So look, I think I'm sure there have been geographical hiccups.
I think for reasons of political sensitivity,
they probably don't make those public.
So for example, the eastern side of India is lower income
and lower growth than the west and the south.
In fact, the south of India is almost twice as rich
as the rest of the country.
And therefore, as you can imagine,
west and south, Vajaj has had far more traction.
Some of the poorer eastern states,
I reckon their footprint is weaker.
Where I think they've been able to,
and this is both a forward looking point,
and I think a point about the last three, four years,
where I think they've got a real tailwind behind them
is the rise of mobile data in India.
So 2016 is when geo launched,
it's incredibly cheap mobile data plans.
Basically, the cost of mobile data in America
is 40x, what it is in India.
So we in India get incredibly cheap mobile data.
And Vajaj Finance realized that as mobile data gets cheap,
Indians will take to their mobile phones.
So around three years ago, I think
as a height of the pandemic,
they push themselves really hard to launch their app
at the height of the pandemic.
And that resulted in 50 million plus downloads.
Interestingly, they didn't spend a single dollar
on marketing that.
Without marketing that, 50 million downloads.
And the Vajaj mall and the app into place,
that not only has lending, it also has the mall.
I think they also have stock broken on top of it.
India is adding the roughly 10 million
to 20 million new stock looking customers
in the Indian market every year.
So you're seeing the creation of an online
financial services giant in the space of three years.
And not only is it stock broken,
not only is it the Vajaj mall, not only is it lending,
but it's also a payment app.
Their Vajaj Pay app has been very successful.
Decade or so ago, the government launched a variety
of initiatives which have resulted in something
called the unified payment interface.
Basically, half of Indian GDP now works on Indians paying each
other using their phones using UPI.
But to access UPI, we've got to go through a app.
So Google, for example, has very successful app.
But Vajaj Pay has also scaled.
My reckoning is the largest fintech player
has effectively become Vajaj finance
and they've done so really quietly
without any burn on marketing at all.
The 50 million app downloads, we have Tinder in the US
for much different reasons.
But I think you could tie all of these things
to various needs of people that gets ingrained in us.
One last point on the things you described
and you've touched on it a few times,
the importance of the physical presence in stores
and pairing that against that app presence,
which I think you pointed to and particularly during the pandemic,
why it was so important.
As you look into the future, I don't know
if you have a sense of what percentage of businesses now
done through the app or online versus in store on site.
But any sense of what that looks like as a split
and then just your general sense of where you expect
those to trend over time.
I think starting with the in store presence,
both with the local consumer durables store near my house
and in general across India,
I've seen that the in store Vajaj finance guy or girl
basically does two things really well.
Firstly, they will urge you to upsize your products.
So you're buying a 32 inch TV, Y a 32 inch TV.
Surely you look like a person who could do
with a 42 inch TV.
And again, that's a win-win for the retailer and for the OEM.
And the second thing is once they've realized
that you've bought as big a TV as you possibly wanted to,
they will start the process of cross selling
the Vajaj finance product.
So Matt, I see you've taken a TV loan.
Do you know we have an extremely attractive
offer for car loans?
Here is our app.
You might want to look at the car loan offers on that.
So the in store customer acquisition
is both driving up the ticket size of that loan
and then beginning the upsell journey for further loans.
The amount of share that the Vajaj finance desk
in a store will have will be somewhere around 78.000.
And I live in an affluent part of Mumbai
where you think people won't need a loan to buy a fridge.
But I go to the local durable store,
they tell me that 90% of consumer durables
are bought using credit.
And out of that credit,
peace 80% is Vajaj finance.
And therefore you get numerous opportunities
to upsell and cross sell to affluent people.
Coming on to the online versus offline peace,
online is instead a meaningful part of the book.
The online peace is still, I think, business development
where they're building out their key assets.
If you heart back to the 2008, 9, 10, 11 era,
they basically tried and played and experimented
for four years before they had the accelerator.
So 2008, I remember I was describing the 10,000 doctors
and how they experimented.
I reckon there's a heck of a lot of experimenting going on.
The reason I suspect that is,
over the last year, the amount of automated calls
that I get from Vajaj finance
and the automated messages have stepped up.
And I keep reading these messages
and as an investor I'm very interested
because the messages are formats, chains,
the ticket sizes, chains, the interest rates change.
So I reckon there's a whole bunch of tech work going on
on using the app, using the payment app and the mall
to figure out how best to optimize.
And again, that's a sign of what I think
is a very successful company.
No decisions made in a rush, experiment with small ticket sizes,
small amounts of money at stake.
Once you're completely sure that you've got it nailed,
that's when the cannonball, that's when the ramp up will come.
Makes a lot of sense, transitioning a bit
to the financial model with banks or with lenders,
it can always be tricky to paint the picture
relative to traditional operating companies.
How do you frame the business, particularly,
from a financial model standpoint?
So the flow through of numbers is reasonably straightforward
and it's been very stable for the last 15 years.
So roughly, let's start with the $40 billion.
That's the loans outstanding, that's the asset base.
And I'm going to express everything
as a percentage of this $40 billion.
So net interest margin is 10%.
Nobody else in India makes a 10% name.
And you're operating on a colossal scale, 10% name,
then 2% fee income.
Remember the zero cost EMI?
There's a fee involved.
The 2% fee income kicks in there.
So you're making roughly 12% from the customer.
Knock off 4% for OpEx, 1.5% for provisions.
Again, nobody of this scale in India
has as low a provisioning cost.
So you've knocked off 4% OpEx, 1.5% provisions
are left with 5.5% of PVT.
That translates into pat of 4.5%.
You level that pat 5x.
You get to an ROE of 22%.
This 5x leverage amongst the big lenders in India,
this company operates the lowest leverage
and here generates the highest ROE.
So 4.5% pat resulting in 22% ROE.
If you multiply that 4.5% pat with the $40 billion
loan book, you get to the current profitability,
which is a shade under $2 billion.
That flow through of numbers I gave you
at 10% name, 2% fee income, 5.5% pat.
Nobody in India operates on this scale with those numbers.
These are unbelievable numbers.
Beyond the other aspects we've discussed,
which underpins this company's success,
there's a few other things.
This is a very lean operation.
There's no marketing cost.
There's no big spend advertising.
Customer acquisition costs are low.
And just to give you a sense of how lean these people are,
I remember, around seven or eight years ago,
they had a consumer discretionary finance loan agreement
that used to be 10 pages.
They applied their mind to it and figured out
how to get it down to three pages.
That detail across millions of loans helps save cost.
So low acquisition cost, low marketing cost,
high interest rates, high names,
and an extremely profitable business with a dew pond,
which no other lender in India has been able to match.
One of the things that when you were first describing
the business, I expected to happen,
was you had these customers that maybe didn't qualify
for traditional credit.
But what I expected is at some point in the future,
they would graduate and maybe move out of being a BFL customer
into being a traditional credit card customer.
What you just described there,
in terms of your neighborhood,
at the amount of loans that are still done through Pajaj,
it doesn't seem to be the case.
Is that something just thinking about the churn
or the maturity of the customer base
and whether they actually transfer out of BFL?
Can you describe whether it is surprising
in the sense that they do retain many customers
or if that is one of the dynamics that takes place
and they have to basically replace those customers
in the future?
So I'm sure there's an upgrading of customers
that is happening, but the final is also feeding
in millions of new customers.
And my reckoning is that somewhere around five to 10%
of the book is balance transferring out
and a larger number is coming in.
Now, there's a very clever thing
that the Pajaj management started doing 12, 13 years ago
to manage this.
Remember I mentioned the 40 business heads that they have.
The businesses are broadly segmented into two groups.
The scale builders, businesses which are scale builders.
So for example, housing finances, scale builder,
a scale building business will have relatively low ROEs.
The risk is low.
It's supposed to be a low risk, low ROE business,
but it allows Pajaj to build colossal scale.
And then there are profit maximizers, businesses
which are higher risk, but will generate juicy ROE
and thus keep the ROE high.
So what Pajaj does is basically combine the scale
builder than the profit maximizers, 50, 50.
Now just to help explain why this is relevant.
If you know that in housing finance and home loans,
there is a natural tendency for customers to refinance
under low rate loan.
But if you know that, you keep your home loan rates
very competitive, as it is Pajaj finance
has the lowest cost of funds in BFC sector in India.
Over and above that, you're effectively
able to cross subsidize your housing finance business.
For example, with a micro finance lending operation,
which is lending at 22 to 23%.
So you're minimizing your balance transfer out risk
by your low cost of funds, but also by having elsewhere
in the Bajaj finance empire, high ROE businesses
in niche sectors such as micro finance,
such as CV finance, and so on, so forth.
And every year what we see is they blend the two.
So from what we are seeing, they're planning
to bring two wheeler loans.
Two wheeler loans will be 20% ROE, high risk loan,
but alongside two wheeler loans, which are high risk,
they're bringing a new car finance, which will be lower ROE.
LigNUCA finance is a highly comparative market.
It'll probably be a 12% ROE business.
By constantly blending the high risk and the low risk,
they're able to make sure that the low risk customers
don't BT out any more than they absolutely have to.
The natural transition from everything in the financial model
is to the capital allocation.
And again, with finance businesses, capital allocation
is different.
A lot of that capital gets recycled into new loans.
How do they treat capital allocation, particularly
with the addition of thinking about shareholders,
leverage dynamics, anything else that comes into play
for this business?
So what we have seen over the last decade or so,
and it's also taken a little bit of time
to piece together exactly what they do.
Because as you can imagine, they don't want to share all their secrets
with third parties in the world outside.
This LRP process that they undergo every year,
somewhere in October, I think,
they go through the long range planning process,
and they hit upon these five year goals
that they want to attain.
Typically, from what we can see, Matt,
they're hitting their five year goals every three years.
Now, the five year goals tend to be around
traveling the business over five years.
But rather than traveling the business over five years,
we're ending up seeing that often, they're
able to double within three years.
And by the time they get to the five year mark,
it's well over-tripled.
Now, that piece of growth,
that piece of growth is sustainable because,
even though it's a $40 billion lending business,
credit, outstanding in India's $2.3 trillion,
and therefore it's a 1.5% market share.
What these guys seem to be targeting
is they want to get to 2% market share,
I think, in the next few years.
In order to do that, every year,
they are saying we will open some businesses
which are scale builders.
So I gave you the example that they seem
to be going through a process of opening
a new car finance business.
And alongside that, every year in the LRP,
they say we also open some businesses
which are profit maximizers,
the two-wheeler business example.
Another combination of scale builder and profit maximizer
that I think they're targeting is corporate loans,
corporate loans because their cost of funds is so low,
they can enter an area which has historically been
dominated by banks in our country.
Banks tend to have lower cost of funds
and naturally dominate corporate loans,
but Vajaj is exceptional.
So I think they're targeting corporate loans.
They seem to be aiming for a 10% return
on equity on corporate loans,
but just to make sure that that doesn't drag down
the overall RWE, the combining corporate loans
with microfinance at 25% RWE.
So this LRP process every year in October says,
here's the Mount Everest that we will climb
in the next five years,
given the aggression in the business
they seem to get there in three years.
And those strategic initiatives are around combining every year,
a bunch of new businesses around scale
and a bunch of new businesses around profit maximization,
headquarters runs that process.
So very similar to say a constellation software
or a Baksha, Baksha Hathaway,
where headquarters is doing capital allocation.
And at the ground level,
each of those CEOs is running after the metrics
and he's promised to deliver at the LRP.
With an initiative like corporate loans,
I certainly could understand where that to you
in a different playing field
from a reputational standpoint,
almost from a prestigious standpoint,
it seems to represent something different.
But I could also play devil's advocate and say,
this is gonna be lower return
and it moves you away from your major advantages in many ways.
So is this the right focus to have into the future?
What are your thoughts just in terms of something
along those lines and the positives and negatives
related to something like that?
So it's a valid point of race.
A decade or so ago when they entered home loans,
I was similarly concerned a little bit perplexed.
My point was, what advantage do you have relative
to the then dominant non-bank home loan provider, HTFC?
But we've seen in due course that they've built
one of the largest home loan books in India.
In fact, I think they're stuck now that they will IPO,
they will demurge their home loan business.
It's become so big.
So we've seen by large finance do this,
identify an area that they are targeting,
identify a leader, usually from within,
give the leader a capital budget,
not expect the leader to generate astonishingly high ROEs.
Their home loan ROE is significantly below
the overall ROE of the business at 22%.
So similarly with corporate loans provided,
their ROE targets are realistic and I'm pretty sure
they'll not try to do more than 10%.
Provided their ROE targets are realistic,
provided the Bajaj families clout
and reach into the boardrooms of the country
and provided this firm's ability to underwrite sensibly.
I think they're a good chance of building scale here.
Profitability is not something that'll come.
And in order to prevent profitability from incompromised,
they need that micro finance initiative to fire.
So we doubted for a long period of time,
till six years ago, basically,
I was a doubting Thomas and Bajaj finance,
saying how can he pull off so many different things
in parallel, but by decentralizing, decision making,
by pushing authority down the line,
by giving transparent incentives
to hardworking, bright professionals,
they've shown that you can build a lending conglomerate
that can be, if not all, things to all men,
there are lots of things to plenty of people.
And one of the important dynamics
it seems like in India, the private sector
and the public sector, do seem to have
a tight relationship just in terms of the initiatives
to drive growth and evolution of India as a whole.
And I can certainly see why BFL has played such a large role
in that and what they've done with their traditional strategy.
Can you talk about that relationship that they have
at the government level?
And also, you see, ever any risks as they transition
into a conglomerate lender, maybe moving into areas
where they're more competitive with existing solutions,
just anything along those lines as it relates
to positives or risks with the business.
So I think let's link this to the corporate lending point.
We haven't had a proper corporate lending cycle
in India, Matt, for now nearly eight or nine years.
The Indian corporate lending ecosystem
ran into a lot of credit and NP related issues
around 2014, 15, 16.
And it's only over the last two or three years
that the economy has pulled out of that mess.
So the government obviously is very keen,
that project finance, corporate lending,
get going, private sector capics gets growing.
And in that context, I think the powers that be in New Delhi
will be delighted to see,
Vajaj Finance also stepping into the corporate lending arena.
If not anything else, it'll spur the banks on
to do more in the corporate lending arena,
where I think both the most tricky interface
of Vajaj Finance with the authorities
and their most important regulatory interfaces
with the Reserve Bank of India.
So the RBI is our regulator, RBI is Vajaj Finance is a regulator,
and in RBI's case, they are very focused
not just on credit quality,
which for Vajaj Finance people is not an issue,
but they also focused on consumer interests.
And this is increasingly a, I think, a fragile area
for all lenders in India.
As the economy gets bigger,
as a rapidly growing lender like Vajaj Finance pushes the envelope,
there are inevitably areas of friction with the regulators.
So just to give an example, I think around six months ago,
six months ago, the Bank of India said
that they found a couple of digital products
where in Vajaj's key facts statement,
there were some gaps.
And the regulators norm in India is to put up
an announcement on its website saying,
we have hauled up XYZ lender for ABC reason.
And Vajaj Finance received that treatment six months ago.
It knocked off good 300, 400 bips of their EPS growth.
So the recent results, EPS growth was only 21%,
would have been easily 25%.
Had the regulator not hauled up Vajaj Finance
and made them stop lending on those digital products.
Fortunately for Vajaj, they've corrected the gaps
with the regulator identified.
And last week, I think lending has started
again for those digital products.
I think this is where the relationship will be delicate.
The Reserve Bank of India is saying,
we want lenders to treat customers fairly,
whether it's on digital products or on apps.
And there's a lot of great areas.
This economy is growing fast.
And anybody who's found wanting on consumer fairness
is getting hauled up by the regulator.
These are smart people at Vajaj.
I'm sure they'll not just fix the issue
that was raised by the RBI six months ago,
but more generally, figure out how to do tech related lending,
tech-based lending without falling on the wrong side
of the regulator.
I think that's the main regulatory interface.
I would say, worries us as an investor
with regards to Vajaj Finance.
When something is moving so fast,
it's hard to contain it.
And many times, it's after the fact
or it's a constant back and forth
and checks and balances system.
And I think just on that, what I can see the regulator
is deliberately focusing on the fast growing lenders.
Because the regulator is saying,
I've only got so much bandwidth.
If you're a big lender and growing fast,
I'm going to spend a lot of time looking at what you're doing.
And that's where I think the flashpoints
are potentially locker in the US to come.
Seems like a reasonable strategy as well
from a regulatory standpoint.
Focus your time on where there is the most impact.
I think you've outlined the growth pockets well
throughout the conversation.
But if you were to summarize,
in a five year, 10 year outlook in terms of
whether it's growth in certain business lines
or just general market opportunities,
how would you summarize those?
So let me just give you the overall growth number.
The Indian economy is growing at around 12%.
I reckon credit outstanding in the country
will grow at roughly 15% for the next decade or so.
Remember, Vajaj Finance's share is one and a half percent
of that credit by.
So I don't see why they shouldn't be able to grow
at close to 25%.
Lower than their long term norm of 30,
but I think 25% is a very respectable number.
I reckon they'll become 10X their size in 10 years.
Now, where will they find that growth?
There are still several chunky niches in Indian lending
where Vajaj has no presence as yet.
So for example, gold loan finance.
After China, we are the largest buyers of gold in the world.
Something like, I would say 10% of Indian families
is balance sheet will be gold.
Indian families probably own the best part
of a trillion dollars of gold.
And financing based on gold is a big industry.
Vajaj should get its fair share of that.
Similarly, tractor finance.
60% of the Indian population lives on the farm.
They need to make agriculture more productive,
to feed more mouths, tractor finance,
therefore, becomes a natural area of growth.
So in filling in these niches
where they historically haven't participated,
plus growing home loans and corporate loans
and considerable loan should give them 25% loan growth.
Alongside that, the digital lending piece kicks in.
We discussed, you raised the question
as to how meaningful is digital lending.
I don't think it's particularly meaningful so far.
But those app downloads are soon gonna push towards
the 100 million mark.
I'm pretty sure that goes to 100 million app downloads
in the next couple of years.
As that happens, I think the digital lending piece
takes off.
That again, becomes a spur to their growth.
And the last pieces that payment app
and the use of that payment app for data mining.
So roughly 25 million people use the Vajaj
finance payment app.
Now just imagine the ton of data
that Vajaj is getting.
And where is this guy going?
How much is he spending on hotels,
on e-commerce, on restaurants, clothes,
what sort of customer is it?
How can I profile them?
That's just a mine of data that will get transferred
into lending.
So this company's ability to take modern technology,
marry it with India's needs and generate loan growth
without high credit costs is the core engine.
And I think the next annual board well for this firm.
On the other side of the spectrum,
you talked about the regulatory risks.
Are there other risks that stand out to you
for this business?
I think the main risk that worries us
beyond the regulatory risk.
The main risk that worries us is Rajiv Jain.
And he's a Superman figure for Vajaj finance.
But he is 56 years old.
I think he works at 12 hour day, quite comfortably
at the moment.
He probably does a 70 hour week.
He's 56 years old.
I think three to five years hence, he will probably
move into a non-exec role.
They have identified the successor.
We've met him.
He's very capable.
He's been at Vajaj finance for a long period of time.
He speaks a lot like Rajiv.
I won't give his name away.
But the successor is in a way a Rajiv clone.
But I do worry about the success.
Because Rajiv is with an exceptional CEO.
And he'll be a hard act to follow.
The other aspect is, as you get bigger
and you start going into these niches,
such as, say, tractor finance and gold finance,
there is a risk that you go into areas
which are politically sensitive.
Gold finance can be as little as $300, $400.
And you're going into strutters of Indian society
where low-middle-class people are involved.
And we are a democracy.
And a natural way for politicians to cultivate publicity,
cultivate favor with voters is to say,
I now announce a lone waiver.
How long before Vajaj finance enters politically
tricky areas where powerful people will be incentivized
to announce lone waivers, I worry about that.
At the moment, those risks seem far away.
But for investors like us, the job
is to worry about risks that others can't see.
And Rajiv, Jen, Reserve Bank of India,
and the interplay of Vajaj finance
is burgeoning growth within India's lower income
strata is something that we're keeping a careful eye on.
This has been an incredible conversation
just in the sense that we've gotten a lot on BFF,
but also just the economic dynamics in India,
which is always great to learn about.
Both the macro and the micro.
You know we close these episodes out,
talking about the lessons that you can take away
from this business.
What would you point to in terms of lessons from Vajaj?
So let me do one financial lesson
in around money and how compounding works
and one non-financial lesson.
The compounding lesson that I learned,
literally learned this life watching this company
compound 1,000X over 16 years is,
if you're able to raise money at eight times price,
so Vajaj has raised money four times in the last decade
at eight times price to book,
sickly getting very cheap funding from your shareholders.
If you then take that money that you're getting,
you're getting cheap equity from shareholders
at an incredibly high valuation.
And you're reinvesting that a 22% ROE,
you're moving that flywheel really fast.
That virtuous cycle, raise money at very low cost of equity,
generate very high ROE in that
and keep spinning that wheel faster and faster.
I've read about a theoretically
in William Thondai's outsiders.
I see it in motion in Vajaj's finances.
And that's the real secret to the 32%
book value per share Cagar that this company's given
in the last decade.
On the non-financial lesson,
I remember meeting Sanji Vajaj six years ago,
you know you're sitting in his office
and I asked him why don't you do lots of other things,
other Indian conglomerates, do a range of things.
They get into real estate, they get in telecom,
they get into IT services, why don't you do that?
So Sanji said something which has stayed with me,
he said, there's only so many hours in a day
and I don't want to do dozens of different businesses
like the Tata's on the Mahindras do.
I want to focus on building scale and excellence
in a couple of areas where I think I can make a difference.
And he said, I focus on three things.
And three things that Sanji Vajaj focuses
on are disruptive innovation, excellence alongside scale
and long term sustained profitability.
And he said, I'll only enter those businesses
or where I can pull off those three things,
disruptive innovation, excellence alongside scale
and long term sustainable profitability.
And as my colleagues and I try to build Marcellus,
those three things keeps spinning through my head
that don't do anything where you can't hit those three
bullets straight off the bat.
And I know one of the reasons I think the business
has been so successful is while Rajiv has manned
the engine room and navigated by Rajiv Finance,
Sanji was provided the owners,
we call it in India, the promoters,
clarity of thought that look, this is what we're gonna do.
We're in it for the long haul
and we're not gonna spray a capital
about in 20 different directions.
I think that's a big learning for me.
Focus your time and attention on a few things
rather than do plenty of things.
Yes, I think I was alluding to the focus point
and you put it in great terms there,
great perspective there.
Both of those lessons are excellent.
Sorry, thank you so much for joining us,
appreciate you coming back for around two.
Thank you, Matt.
And if I do mind my saying so at the parting,
my employer, Marcellus has Rajiv Finance
and its portfolio.
I'm a client of Marcellus, so are my parents.
So my default, therefore,
all of us in the family have a beneficial interest
in Rajiv Finance.
Thank you so much for giving me an opportunity
to articulate that beneficial interest.
Absolutely, appreciate you adding
that additional disclaimer there.
Thank you very much.
Hope to have you back again for around three.
Thank you very much.
I hope you enjoyed that.
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