INDEX Chapter 1 NAME Company history Origins Completion in 1990 End of licence raj New toola in 1990 Product

duct profile and performance Motorcycles Three wheelers Overall performance Financial analysis Strategic analysis 3 Mission vision and values Logo Swot Porter five forces model Managerial style 9 10 12 14 PAGE NO 3 4 4 5 6 financial 8

18 19 20 21 23 24 25 26

 Business streategy Other strategic issue Supply chain analysis Value chain Subsidiary Spare part division CORPORATE RESPONSIBILITY THE FUTURE RECOMMENDATIONS BIBLIOGRAPHY

27 28 30 31 SOCIAL 32 AND 36 41

5 6 7

CHAPTER ONE COMPANY HISTORY ORIGINS COMPETITION IN 1980 END OF LICENSE RAJ NEW TOOLS OF 1990S PRODUCT REVAMP IN 2000S

BAJAJ FINANCE HISRORY

Bajaj Auto Finance Ltd. (BAFL) was incorporated as a Private Limited Company on 25th March, 1987. It became a deemed Public Limited Company by virtue of Section 43(A) of the Companies Act, 1956 w.e.f., 20th October, 1987. Initially BAFL was promoted by erstwhile Bajaj Auto Limited and Bajaj Auto Holdings Limited. Bajaj Auto Limited is the largest manufacturer of two and three wheelers in the country and Bajaj Auto Holdings Limited is an investment company and is a wholly owned subsidiary company of Bajaj Holdings & Investment Limited. As per the Scheme of Demerger of erstwhile Bajaj Auto Limited, the shareholding of Bajaj Auto Limited in BAFL has been vested with Bajaj Finserv Limited. BAFL is an NBFC registered with RBI and authorised to accept public deposits. Consequent to the re-classification of NBFCs by RBI, BAFL has been re-classified as an Asset Finance Company (Deposit Taking). BAFL is engaged primarily in the business of financing of two wheelers, consumer durables, personal computers, personal loans etc.

BAFL made a Public Issue of Equity Shares in 1994 and its Equity Shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited. BAFL made a Preferential Issue of Equity Shares to the Promoters and a few foreign corporate bodies and also warrants to the Promoters in 2006. BAFL made a Rights Issue of Equity Shares and Non-Convertible Debentures with detachable warrants to the existing shareholders in 200607. The present Paid-up Capital of the Company is Rs.365,960,760/BAFL has its headquarters at Pune and has more than 50 branches spread across the country ABOUT BAJAJ FINANCE

Bajaj Auto Finance Limited was incorporated on March 25, 1987 as Bajaj Auto Finance Private Limited got converted into a public limited Company w.e.f. September 24, 1988 The company is registered with the RBI as a Non Banking Finance Company (NBFC) with effect from March 5, 1998

The Company primarily deals in the financing consumer durables, personal and small business loans, loan against property, loan against shares

The Company achieved its highest ever disbursals of Rs.26,313 million under its various financing schemes, during the year 2006-2007

Network of over 6,000 Bajaj Auto and consumer durable dealerships and over 50 branch offices throughout the country to handle all the requirements of our customers

Trust and loyalty of over 40 lakh satisfied customers across the country Highest Credit Rating of FAAA/Stable from CRISIL for Fixed Deposits P1+ rating from CRISIL for Short-Term Debt Programme AA+/Stable from CRISIL and LAA+ from ICRA for Long-Term Debt Programme

CERDIT RATINGS:

Highest Credit Rating of FAAA/Stable from CRISIL for Fixed Deposits P1+ rating from CRISIL for Short-Term Debt Programme AA+/Stable from CRISIL and LAA+ from ICRA for Long-Term Debt Programme

MANAGEMENT TEAM:

RAJEEV JAIN: CEO Rajeev JAIN is a Management graduate by profession and has 15 years of experience in consumer lending industry. He comes with an experience of managing diverse consumer lending business viz. auto loans, durable loans, personal loans and credit cards. In his previous assignments he has worked for over four years with GE and eight years with American Express. He Joins Bajaj Auto Finance Ltd from AIG, where He was Deputy CEO of its consumer finance business.

DEEPAK GUPTA (CHIEF HR)

Deepak has an overall experience of 19 years in Financial Services, ITES and Manufacturing industry. Deepak has strength in areas like Strategy & Structure, People Policies, Employee relations, Talent management, Employee engagement, Performance measurement practices, Compensation, Rewards and Training & Development. Deepak joins us from SREI Infrastructure finance, where he was Group Sr. Vice President and Head of Human Resources. He was responsible for organization development, and HR effectiveness across the employee eco cycle i.e. spanning across Talent attraction, Performance Management, Compensation, Rewards & variable pay, Policies, Employee services, Leadership development and Productivity. Prior to that, he worked with Company like CRISIL, ENAM Financial, CEAT Financial Services and Reliance Industries Limited. Deepak will be responsible for driving People strategy for the organization and in making Bajaj Finance an employer of Choice. He will also be responsible for the Administration function in the company

DEEPAK REDDY: HEAD OF PERSONAL AND SMALL BUSINESS LOANS

Deepak is a management graduate with over 14 years of experience in distributing Financial Services & Consumer Durables. He joins us from American Express, where he held various positions in its Personal Loans & Consumer Card businesses over the last 9 years. He was Director - Sales (Consumer Cards) in his previous assignment there. Prior to American Express, Deepak has worked with Standard Chartered in Auto Loans business and also with Onida distributing durables for the first four years of his career. DEVANG MODY: BUSINESS HEAD SALES FINANCE, CROSS SELL AND INSURANCE

Devang is a Chartered Accountant by education and has experience in consulting and financial services. He joins us from AIG, where he worked as Vice President Business Development & CRM, Consumer Finance Business. Prior to that, he worked with GE Money for over 8 years in various assignments in Six Sigma,
9

Sales Finance, Cross Sell and Personal Loans. Earlier, he has spent 5 years in consulting with firms like E&Y. Sales Finance is a strategic and high growth business for Bajaj Finance. Devang is responsible for profitably growing our leadership position in Sales finance.

PANKAJ THADANI: CHIEF FINANCIAL OFFICER

Pankaj joined BAFL in 2006 and has an experience of 24 years in financing, financial accounting, cost accounting, tax and systems. He is a Mathematics Graduate and is a Chartered Accountant by profession. He joined BAFL from an equity research company called Corporate Database. His previous assignments were with Bajaj Auto Limited, Eischer and Mico Bosch. RAKESH BHATT: CHIEF INFORMATION OFFICER

10

Rakesh has an overall experience of 16 years in finance & technology industry. He has played several leadership roles encompassing CIO responsibilities, IT product management and delivery. Rakesh joins us from AIG Consumer Finance (India) where he was Vice President and Head Technology. Prior to that, he worked with 3i Infotech Ltd for 5 years with assignments in IT product management and development, product marketing and pre-sales support. Earlier, he had worked for Reliance Industries and GE Money. VIVEK LIKHITE: CHIEF CREDIT AND OPERATIONS

Vivek joined BAFL in 2007. He is a Chartered Financial Analyst and holds a Cost Accountant degree from ICWAI. He has an experience of 20 years in strategic planning, process management, operations management, accounts, funds management, budgeting and MIS. He has worked with Larsen & Turbo Ltd for eight years. His last assignment was with TATA Motor Finance before joining BAFL.

11

GURUMEET KAUR: CHIEF RISK OFFICER

Gurmeet is a management graduate with over 16 years of experience in financial services and airline industry. She joins us from Future Money where she was the Chief Risk Officer and is credited for successful implementation of Risk policies and underwriting structure for Consumer Durables, Personal and Business loans and Loan against properties, implementation of state of art loan origination, repayment management and collections system. In her role as Chief Risk Officer at Bajaj Finance, Gurmeet is responsible for creating a proactive risk policy framework, strengthening our existing collections strategy, strengthening the existing loan origination platform, creating a world class data warehouse & analytics platform and reinforcing our fraud control strategy.

12

CODE OF CONDUCT: CODE OF CONDUCT FOR DIRECTORS AND MEMBERS OF SENIOR MANAGEMENT Preface This code of conduct shall apply to the Directors and members of the Senior Management of Bajaj Auto Finance Limited (referred to hereinafter as BAFL or the Company). For this code, members of the Senior Management (hereinafter referred to as `Senior Managers) shall mean those personnel of the Company, who are members of the core management team, but shall exclude the Managing / Whole-time Directors. Directors and Senior Managers shall observe the highest standards of ethical conduct and integrity and shall work to the best of their ability and judgement. Directors and Senior Managers shall be governed by the rules and regulations of the Company as are made applicable to them from time to time. Directors and Senior Managers shall affirm compliance with this code on an annual basis as at the end of each financial year.

13

Code of conduct : 1. Directors and Senior Managers shall ensure that they use the Companys assets, properties and services for official purposes only or as per the terms of appointment. 2. Directors and Senior Managers shall not receive directly or indirectly any benefit from the Companys business associates, which is intended or can be perceived as being given to gain favour for dealing with the Company. 3. Directors and Senior Managers shall ensure the security of all confidential information available to them in the course of their duties. 4. No Director or Senior Manager, other than the designated spokespersons shall engage with any member of press and media in matters concerning the Company. In such cases, they should direct the request to the designated spokespersons. 5. Directors and Senior Managers shall not engage in any material business relationship or activity, which conflicts with their duties towards the Company. 6. Senior Managers shall not, without the prior approval of the Managing Director of the Company, accept employment or a position of responsibility with any organisation for remuneration or otherwise. In case of Whole-time Directors, such prior approval must be obtained from the Board of Directors of the Company. 7. Directors and Senior Managers shall declare information about their relatives (spouse, children and parents) employed in the Company.

14

PRODUCTS: BUSINESS LOANS CONSUMER DURABLE LOANS IT PRODUCT LOANS LOAN AGAINST PROPERTY LOAN AGAINST SHARES TWO WHEELER LOANS INSURANCE SERVICES

15

Business Loans Features Our Business Loans are unsecured loan which can be availed for your business use without providing security or guarantors. Business Loans could be taken for your business expansion, consolidating liability, repaying existing loans or any other immediate business requirement. Bajaj Finance Business loans are offered from Rs.3 lacs to Rs.30 lacs which can be repaid in 12 - 36 monthly installments. Bajaj Finance Business Loans comes with the following unique features: 1. Free Personal Accident Insurance of up to Rs 5 lacs 2. Prompt Repayment Benefits 3. No Foreclosure Charges Benefits Only Bajaj Finance Business Loans comes with the following exclusive benefits: 1. Free Personal Accident Insurance of up to Rs 5 lacs - In case of untoward incident you would be covered with a personal accident insurance up to Rs 5 lacs. 2. Prompt Repayment Benefit - You get refund of 50% of the processing fee charged if you clear all your monthly installment on time. 3. Nil Foreclosure Charges -If you want to repay your loan, please go ahead, we do not charge any foreclosure charges if the loan is closed after repaying

16

6 monthly installments. Eligibility

Entities Partnerships, Private limited and closely held limited companies.

Documents Professionals Application form 1 Photograph Identity Details Residence Details Signature verification from Bank Degree Certificate & Certificate of Practice Repayment Track record Income Details No* IT Returns & Balance Sheet & P/L Account statement for the last 2 years Bank Account For the last 6 months Yes IT Returns & Balance Sheet & P/L Account statement for the last 2 years For the last 6 months Yes No Yes Yes Yes Yes Yes Yes Businessmen Yes Yes Yes Yes

17

Statements Processing Fees 2% of the loan amount Prepayment Charges

6% of the principal outstanding amount if the loan is closed within 6 months 5% of the principal outstanding amount if the loan is closed after 6 months

EMI bounce charges Rs 500 for every bounce Penal Interest 2.15% p.m Consumer Durable Loans Features Bajaj Finance, the sole organized financier in the market offering Consumer Durable loans offers you Dreams on EMI, with 0% finance options also available. CD loans are EMI loans for Consumer Durable items like Washing Machines, Refrigerators, Color TV's, LCD's etc. These CD loans come at a very reasonable price, with a very simple process. You can just walk into one of our Dealer partner showrooms and avail of this facility for the item of your choice. Loans are available for amounts more than Rs.7500. Multiple Credit programs are also available to suit your fitment.

Benefits 1. 0% finance options available (for select schemes).

18

2. Simple process with minimum documentation. 3. On the spot approvals with fastest processing. 4. Flexible repayment options. 5. ECS clearing, reducing hassle of arranging cheques. 6. Extended Warranty available.

Eligibility

If you are a Salaried person your age should be between

o

21 years to 60 years.

If you are Self Employed your age should be between

o

21 years to 65 years.

19

Documents Self Employed Y Y Y Y N Y N Y Y Y Y N

Salaried Id Proof Residence Proof 3 Cheques 1. Credit Card front side photocopy 2. Visiting Card & Employee Id proof 3. Photocopy of RC book (Not applicable for vehicles registered after 2004 & commercial cars) 4. PPF Account Statement. 5. Bajaj Finance existing loan Repayment Schedule (subject to not later than 18 months old) 6. Any other Bank/NBFC Repayment Schedule 7. Latest Original Post Paid mobile bill 8. Insurance Premium Receipt 9. Salary Slip FEES & CHARGES: As per schemes selected by Customer Y Y Y Y Y Y Y Y Y Y Y Y

Credit Program Specific Documents (Any 1 of the following):

IT Product Loans Features

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Bajaj Finance, the sole organized financier in the market offering IT Product loans, offers your Dream Desktop/Laptop on EMI, with 0% options also available. These IT Product loans come at a very reasonable price, with a very simple process. You can just walk into one of our Dealer partner showrooms and avail of this facility for the item of your choice. PC loans are available up to 100% of the product price. Loans are available for amounts above Rs. 20000. Benefits 1. 0% finance options available (for select schemes). 2. Simple process with minimum documentation. 3. On the spot approvals with fastest processing. 4. Flexible repayment options. 5. ECS clearing, reducing hassle of arranging cheques. 6. Extended Warranty available. Eligibility

If you are a Salaried person your age should be between

o

21 years to 60 years.

If you are Self Employed your age should be between

o

21 years to 65 years.

Documents
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Salaried Id Proof Residence Proof 3 Cheques 1. Credit Card front side photocopy 2. Visiting Card & Emp. Id proof 3. Photocopy of RC book (Not applicable for vehicles registered after 2004 & commercial cars) 5. Bajaj Finance existing loan Repayment Schedule (subject to not later than 18 months old) 6. Any other Bank/NBFC Repayment Schedule 9. Salary Slip Y Y Y Y Y Y Y Y Y

Self Employed Y Y Y Y N Y Y Y N

Credit Program Specific Documents (Any 1 of the following):

Loan against Property: Features Loan Against Property is a Loan facility which a person or an entity avails by keeping property as a collateral.
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Bajaj Finance offers Loan Against Property for all your business and personal needs - whether you need money for your business expansion, working capital, loan consolidation, marriage in the family, childrens education or any other need you may have. The loans are available up to Rs.12.5 Crores and can be paid back over a comfortable term up to 15 years. We offer you a wide range of products to choose from: 1. Loan Against Residential Property 2. Loan Against Commercial Property 3. Loan for Purchase of Commercial Property 4. Loan Against Plot 5. Lease Rental Discounting To meet the needs of all our customer we bring you a complete suite of programs that are tailor made to your requirements, you can avail a loan under any of the following programs:

Normal Income Program: You can avail loan basis your financial statements. Debt Consolidator: If you have multiple loans running and want to consolidate to one single EMI this has been designed just for you. There is also a flexibility of availing additional loan under this program.

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Alternate Income Program: You can avail of loans upto Rs. 1 Crore under our Low LTV and Banking programs, which have been designed specifically to meet your requirements in a quick and hassle free manner.

Benefits Only Bajaj Finance Loan Against Property comes with the following exclusive benefits:

Nil Prepayment Charges You have the flexibility of partially or completely repaying your loan at any point of time! We do not levy any charges on partial (1 EMI or more) or complete closure of your loan after repayment of 6 monthly installments. Prompt Repayment Reward You will be rewarded for repaying your loan in time! We pay you 1% of the Equated Monthly Installment (EMI) paid in the first 12 months subject to timely clearance and no defaults. This amount shall be sent to you as a token of appreciation from Bajaj Finance at the end of the 13th month.

Free Personal Accident Insurance You are given a completely free Personal Accident Coverage! In case of untowards incident you would be covered with a personal accident insurance upto Rs. 10 Lacs.

Best in class Insurance Schemes: You can avail attractive Insurance packages at a very competitive premium!
o

Group Suraksha from Bajaj Allianz

Non Medical Loan & Life Insurance up to Rs. 70 Lacs

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Level term Plan, which means you are covered for the complete amount despite reduction/ prepayment of loan amount

Coverage for the complete tenor of the loan to a maximum of 30 Yrs

Home Safe Plus from ICICI Lombard

Non Medical Insurance up to Rs. 3 Crores Provides coverage against accidental death, permanent or total disability, diagnosis of critical illness and loss of job*

Coverage for 5 years

Transparency and Flexibility - You are given the details of all the charges upfront. A no surprises in future promise from Bajaj Finance awaits you! Bajaj Finance believes in complete transparency and flexibility for its customers. To ensure that you are aware upfront of every charge that you might have to incur over the term of 15 years we have taken the following steps:
o

You are issued a sanction letter and a copy of loan documentation for your records.

You are issued a welcome letter which is exclusively designed and customized for you. It is sent to you within a week of the loan disbursal giving you complete details of your loan, repayment schedule and comprehensive details on Insurance along with a tariff

25

card detailing all applicable charges and benefits available as a customer.

o

You have the option to make a prepayment in part or full at your convenience without any charges

And a special gift for a special customer!

RE-PRICING POLICY The prevalent Bajaj FRR is 17% effective 1st Dec 2008. Bajaj FRR is the benchmark reference rate of BAFL Loan against Property and is determined based on the prevalent market conditions and the cost of funds of BAFL. As the cost of funds reduces/ increases, Bajaj FRR may reduce/ increase. Any revision in this rate would impact the interest rate on the floating interest rate loans. Re pricing would be done only for the loans booked under the floating rate scheme. For the loans which have been booked under the fixed rate scheme there will be no changes done for the fixed rate period. The increase/ decrease in the Interest rate will by default increase/decrease the loan tenor. In case of increase in interest rate, if you want to retain your existing EMI/ Tenor, you will have an option of making a part pre payment and keeping your EMI/ Tenor at the same level. No additional charges would be levied on the part pre payment.
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 The communication on the changes (Increase/ decrease) in the rate of interest would be sent by mail Personal Loans Features Our Personal Loans are the cash loan which can be availed for your own personal use without providing security or guarantors. Personal Loans could be taken for renovation of your home, marriage in the family, a holiday with your family, your child's education, medical expenses or any other emergencies. Bajaj Finance Personal loans are offered from Rs. 3 lacs to Rs. 30 lacs which can be repaid in 12 - 60 monthly installments. Bajaj Finance Personal Loans comes with the following unique features: 1. Free Personal Accident Insurance of upto Rs 5 lacs 2. Prompt Repayment Benefits 3. No Foreclosure Charges Benefits Only Bajaj Finance Personal Loans comes with the following exclusive benefits: 1. Free Personal Accident Insurance of up to Rs 5 lacs - In case of untoward incident you would be covered with a personal accident insurance up to Rs 5 lacs. 2. Prompt Repayment Benefit - You get refund of 50% of the processing fee charged if you clear all your monthly installment on time.

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3. Nil Foreclosure Charges -If you want to repay your loan, please go ahead, we do not charge any foreclosure charges if the loan is closed after repaying 6 monthly installments as per repayment schedule. Eligibility

Salaried person
o

Individuals working in the approved list of companies

Self Employed
o o

Businessmen ( Traders, Small Manufactures etc) Professionals ( Doctors (MBBS , MD , BDS , MDS only) & Chartered Accountants only)

Documents Salaried Individual Application form 1 Photograph Identity Details Residence Details Signature verification
28

Professionals Yes Yes Yes Yes Yes

Businessmen Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

from Bank Degree Certificate & Certificate of Practice Repayment Track record Income Details No* No* Yes IT Returns & Balance Sheet & P/L Account statement for the last 2 years For the last 6 months No Yes No

Latest payslip & IT Returns & Form 16 (Form Balance Sheet & 16 required only P/L Account when applying under holiday finance) statement for the last 2 years For the last 6 months

Bank Account Statements

For the last 3 months

leProcessing Fees2% of the loan amount Prepayment Charges

6% of the principal outstanding amount if the loan is closed within 6 months 5% of the principal outstanding amount if the loan is closed after 6 months

EMI bounce charges Rs 500 for every bounce

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Penal Interest 2.15% p.m Two Wheeler Loans Bajaj Auto Finance Ltd offers attractive loans for purchase of new Bajaj vehicles. Bajaj Finance executives are available at most of the Bajaj Auto dealerships to offer finance schemes to suit the requirements of individuals. Bajaj Finance is the only finance company to offer a unique Extended Warranty on the two wheelers financed by it. Bajaj Finance also finances Bajaj three wheelers.

Insurance Services Bajaj Auto Finance Limited (BAFL) has tied up with Bajaj Allianz Life (part of Bajaj Group), to offer a rich bouquet of world class life insurance products to suit the financial needs of all segments of buyers through different stages of their lives. With its successful track record and its highly acclaimed standing, Bajaj Allianz Life Insurance Company (BALIC) prides on serving over 8 million Indian customers. BAFL shares BALIC's philosophy of providing insurance solutions relevant to the customer's needs.

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Employment fell from about 23,000 in 1995-96 (the year Bajaj suffered a twomonth strike at its Waluj factory) to 17,000 in 1999-2000. The company planned to lay off another 2,000 workers in the short term and another 3,000 in the following three to four years. Principal Subsidiaries: Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; Bajaj Electricals Ltd.; Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd. Principal Competitors: Honda Motor Co., Ltd.; Suzuki Motor Corporation; Piaggio SpA.
Balance Sheet of Bajaj Auto Mar '06 ------------------- in Rs. Cr. ------------------Mar '07 Mar '08 Mar '09 Mar '10

12 mths

12 mths

12 mths

12 mths

12 mths

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans 101.18 101.18 0.00 0.00 4,669.55 0.00 4,770.73 0.02 1,467.13 101.18 101.18 0.00 0.00 5,433.14 0.00 5,534.32 22.46 1,602.97 144.68 144.68 0.00 0.00 1,442.91 0.00 1,587.59 6.95 1,327.39 144.68 144.68 0.00 0.00 1,725.01 0.00 1,869.69 0.00 1,570.00 144.68 144.68 0.00 0.00 2,783.66 0.00 2,928.34 12.98 1,325.60

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Total Debt Total Liabilities

1,467.15 6,237.88 Mar '06

1,625.43 7,159.75 Mar '07

1,334.34 2,921.93 Mar '08

1,570.00 3,439.69 Mar '09

1,338.58 4,266.92 Mar '10

12 mths

12 mths

12 mths

12 mths

12 mths

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 2,894.22 1,761.22 1,133.00 43.33 5,856.97 272.93 301.55 80.84 655.32 2,282.98 1.25 2,939.55 0.00 1,419.08 2,315.89 3,734.97 -795.42 0.00 6,237.88 3,178.54 1,904.94 1,273.60 107.62 6,447.53 309.70 529.83 62.16 901.69 2,925.24 21.32 3,848.25 0.00 1,683.46 2,833.79 4,517.25 -669.00 0.00 7,159.75 2,994.68 1,726.07 1,268.61 34.74 1,857.14 349.61 275.31 54.74 679.66 1,099.68 1.33 1,780.67 0.00 1,185.19 834.04 2,019.23 -238.56 0.00 2,921.93 3,350.20 1,807.91 1,542.29 106.48 1,808.52 338.84 358.65 135.68 833.17 1,567.09 1.19 2,401.45 0.00 1,378.20 1,224.15 2,602.35 -200.90 183.30 3,439.69 3,379.25 1,899.66 1,479.59 120.84 4,051.52 446.21 272.84 100.20 819.25 2,291.29 1.21 3,111.75 0.00 2,218.06 2,248.72 4,466.78 -1,355.03 0.00 4,266.92

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Contingent Liabilities Book Value (Rs)

719.06 471.49

811.66 546.96

1,129.29 109.73

924.96 129.23

818.25 202.40

Chapter 2 PRODUCT PROFILE AND FINANCIAL PERFORMANCE

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Bajaj Auto Finance Limited (BAFL) has launched today a unique finance scheme exclusively for all Bajaj Motorcycles. With this initiative Bajaj Auto Finance aspires at capitalizing on the void created in the market due to the exit of many Banks and NBFCs from the 2-wheeler financing business. The major profit of this worth full scheme is that A FREE EXTENDED WARRANTY is availed on each Bajaj Motorcycle. Now the Bajaj motorcycle customers enjoy a dual play by its finance availability and extended warranty. Mr K Srinivas. Vice President of Retail Finance said that , for a loan of 36 months tenor the free extended warranty offered by Bajaj Auto Finance extends for the entire 3months. Timely payment of EMI is the only required thing from the customers. The maintenance cost for the vehicle will be taken care by the finance itself. Extension is going on in a rapid speed. BAFL has now extended its reach to more than 300 Bajaj dealership locations. Each of this Bajaj dealership invokes full-time employees to ensure a smooth and hassle free financing to deserving customers. The Base Rate This is the rate of interest at which the financier is willing to do business. For example, a financier may be willing to provide car loans at a base rate of 10.5% to 11% per year. This rate is generally fixed and cannot be negotiated. Most financiers operate at similar base rates. However, financiers generally provide "interest rate breaks" to the extent of 0.5% to 1% per year for customers who have an existing relationship with them, a credit card issued by them or an income level that is higher than their eligibility requirement. Contrary to popular belief, reduction of a customer's car loan interest rate is achieved as a result of financial
34

contributions provided by other players such as the manufacturers, dealers or sales agents, and not the financier except for the "interest rate breaks". Car manufacturers' subvention Car manufacturers give a financial incentive to a select few car finance firms to push sales of their cars. This makes some of the larger car financiers more competitive than the smaller players who are not eligible to receive manufacturers' subvention. For example, a financier may receive Rs.6000 from Maruti Udyog for every Esteem car loan booked by him. Generally, the financier will build this incentive amount received from the manufacturer into the pricing of the car loan.

Dealer discount

Agent re-subvention Agents market the financier's loan schemes to you and complete all the paperwork on behalf of the financier. It is the agent who negotiates the discounts provided by the car dealers. The amount of discount that the agent is able to negotiate from the dealer depends upon how many cars are sold from the dealership by the agent and the relative importance of the given agent's business to the dealership. The agent also receives a commission from the financier for bringing him his car finance customers. This commission is of two types. The first is a standard commission given to the agent by the financier on the loan amount disbursed to you. This could be around 3% of the loan amount disbursed. The second is a target-achievement incentive. Most agents give away the standard commission so that their rates can be cheaper than those of their competitors'. This is called the agent's re-subvention i.e. the agent giving back his standard commission to the financier in order to
35

further reduce the borrowing rate for you.

Borrowing rate From the above you would observe that you may get your loan at 9.5% per year even though the car finance firm has priced the loan at 11% per year. The difference between your borrowing rate and the financier's base rate is the benefit to you, the customer, created as a result of the car manufacturers' subventions, dealers' discounts and agent re-subventions.

Two wheeler loan Whichever the bike, our Two Wheeler loan is the answer. With quick approvals, flexible payment options and easy repayment - we'll help you buy the bike you desire. Features & Benefits Flexible repayment options, ranging from 12 to 48 months available even at the point of purchase. Repay through post-dated cheques with easy EMIs. Calculate your EMI. Hassle free loans - No guarantor required. Speedy loan approval. Available for almost all models at attractive interest rates. Free gifts from time to time on approval of your Two Wheeler Loan. (Watch this space for more details on the free gift promotion). Special Schemes to suit your needs Now enjoy exciting offers on Honda Two-Wheeler bikes with the Bajaj Auto
36

Finance Two-Wheeler Loan. Choose from a great range of top quality models on offer and enjoy the amazing experience of riding your dream machine. Some of the key features of Bajaj Auto Finance Two-Wheeler Loan include: - 3% lower interest rate - 50% discount on processing fees - Additional One year warranty* - Priority delivery of your Honda within 30 days* - Upto 95% Loan on Honda Two wheelers *Offer from HMSI, Conditions apply To avail offer please click here Offer vaild till 10th October 2011 FastTrack - If a spot approval is what you need, this highly flexible scheme gets you a loan of up to 70% with minimum interest rates. EasyLoan - This great scheme gets you a loan of upto up to 85% with minimal documentation. All you need as a Surrogate Income proof is: - A copy of credit card and credit card billing statement for the last 2 months OR - A repayment track record OR - Last 3 months bank statements.

New car loan Features & Benefits

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Covers the widest range of cars and multi-utility vehicles in India. Avail 100% finance on your favourite car** Loan repayment tenure ranging from 12 to 60 months. Borrow up to 3 times your annual salary (for salaries professionals) and 6 times your annual income (for self employed professionals)*. Speedy processing - within 48 hours. Repay with easy EMIs Attractive car loan plans - To fastrack your loan, just choose the plan that is right for you. Attractive interest rates Hassle-free documentation. Customer Priviledges If your an Bajaj Auto Finance account holder, we have special rates for you. If you have a Preferred Account or a Corporate Salary Account with Bajaj Auto Finance for more than 6 months, you can get fast approvals on your loans with minimal documentation. If you are an Bajaj Auto Finance Car Loan customer with a clear repayment of 12 months or more we can Top-Up your car loan to the extent of the original loan value.

Features & Benefits Choose any car manufactured in India within a certain age*. Borrow up to 80% of the value of the car. Flexible repayment options, ranging from 12 to 60 months.
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Borrow up to 3 times your annual salary (for salaried professionals) and 6 times your annual income (for self employed professionals)**. Available for almost all car models at attractive interest rates. Repay with easy EMIs. Attractive car loan plans - To Fastrack your loan, just choose the plan that is right for you. Additional loan on existing loan - If you are a existing Bajaj Auto Finance Auto loan customer with a clear track record of 12 months or more, then you can get an additional loan to the extent of your existing loan amount at attractive rate of interest. Customer Privileges Special benefits for Bajaj Auto Finance account holders. If you have had a Preferred Account or a Corporate Salary Account with Bajaj Auto Finance for more than six months, you can get fast approvals on your loans with minimal documentation.

LOGO of BAJAJ:

INITIAL 2004)

LOGO

(upto CHANGED LOGO (upto LATEST LOGO (since 2007) 2007)

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Hexagonal blue and white Completely blue logo to To stress the leadership logo signify modernity and position of the brand in the market dynamism

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SWOT Analysis: Let's analyze the position of Bajaj in the current market set-up, evaluating its strengths, weaknesses, threats and opportunities available.

Strengths: Highly experienced management. Product design and development capabilities. Extensive R & D focus. Widespread distribution network. High performance products across all categories. High export to domestic sales ratio. Great financial support network (For financing the automobile) High economies of scale. High economies of scope.

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Weaknesses:

Hasn't employed the excess cash for long. Still has no established brand to match Hero Honda's Splendor in commuter segment. Not a global player in spite of huge volumes. Not a globally recognizable brand (unlike the JV partner Kawasaki)

Threats: The competition catches-up any new innovation in no time. Threat of cheap imported motorcycles from China. Margins getting squeezed from both the directions (Price as well as Cost) TATA Ace is a serious competition for the three-wheeler cargo segment.

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Opportunities: Double-digit growth in two-wheeler market. Untapped market above 180 cc in motorcycles. More maturity and movement towards higher-end motorcycles. The growing gearless trendy scooters and scooterette market. Growing world demand for entry-level motorcycles especially in emerging markets.

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Porters Five Forces Analysis:

Supplier Bargaining Power: Suppliers of auto components are fragmented and are extremely critical for this industry since most of the component work is outsourced. Proper supply chain management is a costly yet critical need. Buyer's Bargaining Power: Buyers in automobile market have more choice to choose from and the increasing competition is driving the bargaining power of customers uphill. With more models to choose from in almost all categories, the market forces have empowered the buyers to a large extent. Industry Rivalry: The industry rivalry is extremely high with any product being matched in a few months by competitor. This instinct of the industry is primarily driven by the technical capabilities acquired over years of gestation under the technical collaboration with international players. Substitutes: There is no perfect substitute to this industry. Also, if there is any substitute to a two-wheeler, Bajaj has presence in it. Cars, which again are a mode of transport, do never directly compete or come in consideration while selecting a two-wheeler, cycles do never even compete with the low entry level moped for even this choice comes at a comparatively higher economic potential.

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Managerial Style: Off late Bajaj Auto Limited, Indias premier automotive company, has emphasised a lot on organizational restructuring for the Auto business. With this restructuring, the existing business roles and responsibilities at the company has been strengthened and enhanced to ensure greater operational empowerment and effective management. The five pillars of this new structure (Strategic units) are R&D, Engineering, Two Wheeler Business Unit, and Commercial Vehicles Business Unit & International Business Unit. These pillars will be supported by functions of Finance, MIS, HR, Business Development and Commercial. Pradeep Srivastava, who was VP-Engineering prior to restructuring, will now be President- Engineering. As per the reorganized structure the company will have three CEOs. S. Sridhar, currently, VP, Mktg. & Sales Two-Wheelers, will now head the Two Wheeler Business Unit as CEO with manufacturing operations at Waluj and Akurdi also reporting to him. RC Maheshwari has joined Bajaj Auto as CEO Commercial Vehicles. The company is in the process of identifying a CEO for its International Business. The three CEOs will be responsible for Top line, Business Growth & profitability of their respective businesses. Abraham Joseph will continue to lead Research & Development.

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Business Stratergies: Marketing Strategies: The focus of BAL off late has been on providing the best of the class models at competitive prices. Most of the Bajaj models come loaded with the latest features within the price band acceptable by the market. BAL has been the pioneer in stretching competition into providing latest features in the price segment by updating the low price bikes with the latest features like disk-brakes, anti-skid technology and dual suspension, etc. BAL adopted different marketing strategies for different models, few of them are discussed below: Kawasaki 4S - First attempt by bajaj to make a mark in the motorcycle segment. The target customer was the father in the family but the target audience of the commercial was the son in the family. The time at which Kawasaki 4S was launched Hero Honda was the market leader in fuel-efficient bikes and Yamaha in the performance bikes. Boxer - It took the reins from where the Kawasaki 4S left. Target was the rural population and the price sensitive customer. Boxer marketed as a value for money bike with great mileage. Larger wheelbase, high ground clearance and high mileage were the selling factors and it was in direct competition to Hero Honda Dawn and Suzuki MX100. Caliber - The focus for the Caliber 115 was youth. And though Bajaj made the bike look bigger and feel more powerful than its predecessor (characteristics that will attract the average, 25-plus, executive segment bike buyer), its approach towards advertising is even more radically different this time around. Bajaj gave
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the mandate for the ad campaign to Lowe, picking them from the clique of three agencies that do promos for the company (the other two being Leo Burnett and O&M). Going by the initial market response, the campaign was clearly a hit in the 5-10 years age bracket. So, the teaser campaign and the emphasis on the Caliber 115 being a `Hoodibabaa' bike placed it as a trendy motorcycle for the collegegoers and the 25 plus executives both at the same time. Pulsar - Pulsar was launched in direct competition to the Hero Honda's 'CBZ' model in 150 cc plus segment. The campaign beared innovative punch line of "Definitely Male" positioning Pulsar to be a masculine-looking model with an appeal to the performance sensitive customers. The Pulsar went one step ahead of Hero Honda's 'CBZ' and launched a twin variant of Pulsar with the 180 cc model. The model was a great success and has already crossed 1 million mark in sales. Discover - The same DTSI technology of Pulsar extended to 125 cc Discover was a great success. With this, Bajaj could realize its success riding on the back of technological innovation rather than the joint venture way followed by competitors to gain market share. BAL now is taking a leaf out of the FMCG business model to take the company to greater heights.Bajaj has kicked off a project to completely restructure the company's retail network and create multiple sales channels. Over the next few months, the company will set-up separate sales channels for every segment of its business and consumers. Bajaj Auto's entire product portfolio, from the entry-level to the premium, is being sold by the same dealers. The restructuring will involve separate dealer networks catering to the urban and rural markets as well as its three-wheeler and premium bikes segments. Bajaj Auto also plans to set-up an independent network of dealers for the rural areas. The needs of
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financing, selling, distribution and even after-sales service are completely different in the rural areas and do not makes sense for city dealers to control this. The company also plans to set-up exclusive dealerships for its three-wheeler products instead of having them sold through an estimated 300 of its existing dealers.

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Other Strategic Issues: Cash is strength: Bajaj Auto has been sitting on a cash pile for over five years now. Over the next couple of years, competition in the two-wheeler market is set to intensify. TVS Motors and Hero Honda are on a product expansion binge. To fight this battle and retain its hard-earned market share in the motorcycle segment, Bajaj Auto will need its cash muscle. A look at its own story over the past five years provides valuable insight. Stake for Kawasaki: Bajaj Auto's attempt to vest the surplus cash in a separate company may be a prelude to offering a stake to Kawasaki of Japan in the equity of the automobile company. The latter has been playing an increasingly active role in Bajaj's recent models, and its brand name is also more visible in Bajaj bikes than in the past. Better value proposition: Shareholder interests may be better served if the cash is retained to pursue growth in a tough market. This would also obviate the need to fork-out fancy sums as stamp duty to the government for the de-merger. A combination of a large one-time dividend and a regular buyback program through the tender route may offer better value. A strategic stake for Kawasaki would only positively influence the stock's valuation. Strategies for the Overseas Markets: Bajaj Auto looks at external markets primarily with three strategies: 1) A market where all BAL need to do is distribute through CKD or CBU routes. 2) Markets where BAL need to create new products.

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3) Markets where BAL need to enter with existing products and probably with a good distributor or a production facility or a joint venture. Earlier, most of the products that Bajaj exported were scooters and some motorcycles. However, in its target markets, like in India, the shift was towards motorcycles. With the expansion in Bajaj's own range to almost five-six platforms of motorcycles, it had a better offering to export, also the reason for its stronger showing. For the last fiscal, 60 per cent of its exports were two-wheelers and the rest three-wheelers. Exports to middle Africa and the Saharan nations. Egypt and Iran also continue to be strong markets for Bajaj.

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Conclusion The company currently offers six lending products, including loans for twowheelers and three-wheelers, consumer durables, small business loans, construction equipment finance, mortgages and loan against securities, it said. Bajaj Auto Finance recently got shareholders' approval for changing the name of the company to Bajaj Finance. Meanwhile, Bajaj Finserv, the holding company of Bajaj Auto Finance, has picked up a further 4.37 per cent stake in the auto finance company for Rs 111.33 crore through open market transactions. As per the bulk deal data available with the National Stock Exchange, Bajaj Finserv yesterday bought 16,01,900 shares of Bajaj Auto Finance, representing a 4.37 per cent stake, at a price of Rs 695 per piece. After the latest deal, Bajaj Finserv now holds a 54.79 per cent stake in Bajaj Auto Finance. Bajaj Finserv is engaged in the life and general insurance and consumer finance businesses.

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Recommendations The impression of Bajaj in the minds of the public is that it is a moped & a three-wheeler company, & it is a very orthodox & unhappening image in the minds of the youth. It should use a powerful brand ambassador & individual whom the youth can relate with. It should aggressively market itself as a motorcycle company & move from its traditional mindset (Rahul Bajaj had once stated that he had only one department in his company the dispatch department & that he did not require a marketing department.) Bajaj should aggressively push sales of higher margin products & launch new products in niche segments. Bajaj should also try & push for tie-ups & Joint Ventures in foreign market & try & increase its export base. (E.g. Tata Motors tie-up with Rover for marketing of India & Joint Venture with Senegal government for manufacturing trucks & commercial vehicles.) Bajaj should look for possible mergers & acquisitions. (E.g. Maharashtra Scooters) & try & improve its distribution network & provide it with products in niche segments & help increase production capacity & provide economies of scale. Bajaj should evaluate the process of backward integration as it has huge cash reserves surplus. This process would help it in acquiring inputs continuously at lower cost & at regular intervals.
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 Increase its dealer network to tap rural growing markets by going in for tieups & offering better margins to dealers.

The key to Bajaj real success lies in Research & development. How it is able to use value analysis & value engineering by adding new features to its existing product line & how it is able to come out with new product for different niche markets. Analysis of different alternatives like outsourcing, in-house, purchase & tie-up should be evaluated.

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BIBLIOGRAPHY www.bajajauto.com http://www.business-standard.com/india/news/bajaj-auto-revampsorganisational-structure/ http://www.karmayog.org/csr500companies/csr500companies_7373.htm www.wikipedia.org http://www.bma.ac.in/KnowledgeCentre/index1.html http://www.prdomain.com/companies/B/BajajAuto http://www.coolavenues.com/know/gm

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