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With higher provisioning, Bajaj Finance is tackling the COVID challenge aggressively, but will it be enough?

With higher provisioning, Bajaj Finance is tackling the COVID challenge aggressively, but will it be enough?

As the pandemic forced everyone to work out of the confines of their homes, Bajaj Finance (BFL) chairman Sanjiv Bajaj cheekily told a TV anchor, “Clearly, the joyful moment is the amount of time that I have been able to spend at home. But I do not know if it is joyful for my wife and kids, or my father!” The soft-spoken 50-year-old was candid enough to admit that at times they did get fed up with each other. “But it has just made us open up,” mentioned Bajaj. This pragmatism has also reflected in the way Bajaj has been able to build the consumer finance business with a close-knit team. While Citi veteran Nanoo Pamnani, who helped Sanjiv build the financial services business post its demerger from Bajaj Auto, passed away this February, more than 75% of the management team has been around for about 7-18 years, which analysts believe partially explains the sustained business performance over the period.

Not surprising, foreign portfolio investors (FPIs) have been bullish on the stock as a proxy to India’s growing appetite for consumer financing. As of June 2020, FPIs held 21.24% compared with 7.26% held by domestic mutual funds. The stock has surged 8.5x over the past five years from 410 to 3,475 and that is after having retraced from an all-time high of 4,923 in February. Post the pandemic, the key question now is will Bajaj Finance continue to be an investor favorite?

With nearly 43 million borrowers and a loan book of 1.38 trillion, BFL has emerged as the poster boy of retail credit. So much so that analysts believe BFL is a Goliath that is too big to fail.

“One of the key reasons behind the strong growth in AUM (assets under management) is the expansion

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