New Delhi: Two- and three-wheeler maker Bajaj Auto Ltd said it is setting up a wholly-owned subsidiary, Bajaj Auto Consumer Finance Ltd, and has applied to the Reserve Bank of India for a non-banking financial company (NBFC) licence. This follows the automaker’s erstwhile captive finance company Bajaj Finance Ltd diversifying into financing two-wheeler purchases of non-Bajaj Auto brands.
In June 2022, Bajaj Finance began offering loans to all two-wheeler makers, in addition to Bajaj Auto, and is now focusing on growing its non-Bajaj Auto automobile financing activity.
Bajaj Auto’s application to the RBI is under consideration, said a senior executive at the Pune-based automaker.
“With over two-thirds of two-wheelers and over three-fourths of three-wheelers retailed in India being financed, this activity (auto financing) is the key to the automobile business. Penetration, geographic coverage and expanding financing options for the retail customers of Bajaj Auto Ltd and Chetak Technology Ltd are the keys to success in future,” Bajaj Auto said in its FY23 annual report.
“A wholly-owned captive financing company has been formed. This new subsidiary with a paid-up equity share capital of ₹30 crore has applied to the RBI for an NBFC license and is drawing up plans to set up a new organization, infrastructure and processes,” the company said.
“Once operational, Bajaj Auto will be positioned to offer an increased variety of financing options to its business partners and retail customers through this new NBFC,” it added.
Bajaj Finance, the most valuable company in the group was set up as a captive NBFC for Bajaj Auto in 1987 to finance its two- and three-wheelers. A decade later, it launched an initial public offering to list on the stock exchanges, expanding to consumer lending, SME lending, commercial lending, rural lending and deposits.
In its FY23 annual report, Bajaj Finance said its two-wheeler loans recorded the highest-ever asset quality trend. “Bajaj Finance remained the largest financier of Bajaj Auto two and three-wheelers in FY2023. During the year, it financed over 713,400 two-wheelers of Bajaj Auto which grew by 12% over previous year; and over 128,100 three-wheelers of Bajaj Auto which increased by 78% over the previous year. This constituted 40% and 44% of Bajaj Auto’s two and three-wheelers domestic sales respectively,” Bajaj Finance said.
“BFL commenced financing of all two-wheelers from June 2022, largely in two states covering approximately 350 locations and 2,300 dealers,” it said.
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Updated: 10 Jul 2023, 12:02 AM IST