Bajaj Auto subsidiary gets RBI nod for NBFC business in 2023
Bajaj Auto, a prominent player in the automotive industry, recently made a significant announcement in its filing to stock exchanges on September 1. According to this filing, the company’s subsidiary, Bajaj Auto Consumer Finance, has successfully obtained a Certificate of Registration from the Reserve Bank of India (RBI), signaling its official entry into the non-banking finance company (NBFC) sector.
This development is noteworthy as it marks Bajaj Auto’s strategic diversification into the financial services domain through its subsidiary, Bajaj Auto Consumer Finance. The NBFC sector plays a crucial role in providing various financial services, including loans, leasing, and asset financing, to consumers and businesses. By acquiring this registration, Bajaj Auto is poised to leverage its expertise and resources in the automotive industry to offer tailored financial solutions to its customers.
It’s important to highlight that Bajaj Auto Consumer Finance’s operations will be conducted as a non-banking financial institution without the acceptance of public deposits. This reflects a responsible and prudent approach to financial services, focusing on lending and financing activities while ensuring regulatory compliance.
The issuance of the license by RBI on August 31, 2023, underscores Bajaj Auto’s commitment to expanding its business portfolio and catering to a broader spectrum of customer needs. This strategic move is likely to contribute to the company’s growth and further solidify its position in the Indian financial services sector. It also exemplifies Bajaj Auto’s proactive stance in diversifying its offerings to enhance its market presence and meet the evolving demands of its customer base.
Bajaj Auto, a prominent manufacturer of two- and three-wheelers, took a significant step towards diversification by applying for a non-banking finance company (NBFC) license with the Reserve Bank of India (RBI) on July 9, 2023. This strategic move was aimed at expanding its business operations and venturing into the financial services sector.
In a recent communication, Bajaj Auto confirmed that its wholly-owned subsidiary, Bajaj Auto Consumer Finance Limited, has received a Certificate of Registration from the RBI on August 31, 2023. The certificate, bearing No. N-13.02465 and dated August 29, 2023, was issued under section 45-IA of the Reserve Bank of India Act, 1934. This certification allows Bajaj Auto Consumer Finance Limited to commence and carry out the business of a non-banking financial institution without accepting public deposits.
This development underscores Bajaj Auto’s strategic intent to leverage its industry expertise and resources to diversify into the financial services sector, offering tailored financial solutions to its customers. By obtaining the RBI license, the company has taken a significant step towards entering the NBFC domain, which plays a vital role in providing various financial services to individuals and businesses.
Bajaj Auto’s commitment to regulatory compliance and responsible financial operations is evident in its decision to operate without accepting public deposits, ensuring a secure and prudent approach to its financial services offerings. This move is expected to enhance Bajaj Auto’s market presence and contribute to its growth in the financial services sector.
The Reserve Bank of India (RBI), while issuing the license to Bajaj Auto Consumer Finance Limited, included a disclaimer emphasizing that the RBI does not take responsibility for the financial soundness of the company nor does it guarantee the accuracy of any statements, representations, or opinions expressed by the company. The RBI also disclaims any liability on the part of the company.
This disclaimer is a standard practice and serves as a reminder that the RBI’s role in issuing such licenses is primarily regulatory. It ensures that financial institutions and non-banking finance companies (NBFCs) adhere to the necessary regulatory standards and guidelines. The disclaimer underscores that the financial soundness and conduct of the company fall within its own responsibility and accountability.
Bajaj Auto had previously announced the establishment of Bajaj Auto Consumer Finance as a wholly-owned captive finance subsidiary in 2021. The company’s strategic decision to set up this subsidiary was in line with its objective to provide financing options exclusively for products manufactured by Bajaj Auto. This approach allows Bajaj Auto to offer tailored financial services to its customers, further strengthening its position in the market and enhancing customer convenience by providing financing solutions directly associated with its vehicles and products.
Bajaj Auto, a prominent two-wheeler manufacturer headquartered in Pune, demonstrated robust financial performance in the first quarter of the fiscal year 2023-24 (Q1FY24). The company reported a substantial Profit After Tax (PAT) of Rs 1,665 crore during this period, marking an impressive 42 percent increase compared to the corresponding quarter in the previous year when it reported a PAT of Rs 1,173 crore. This remarkable growth in profitability signifies Bajaj Auto’s effective management, market presence, and resilience in the face of economic fluctuations.
The positive financial results have garnered investor confidence in Bajaj Auto’s prospects, as evidenced by the stock’s performance on the National Stock Exchange (NSE). On September 1, the company’s stock closed at Rs 4,668.45 on the NSE, recording a notable 1.18 percent increase from the previous day’s closing price. This uptrend reflects investor optimism regarding the company’s financial health and future growth potential.
Bajaj Auto’s impressive Q1FY24 performance and the subsequent uptick in its stock price highlight its competitive strength and ability to navigate market dynamics effectively. The company’s strategic initiatives, product offerings, and financial acumen contribute to its resilience and continued success in the two-wheeler industry. These developments also underscore its importance as a key player in India’s automotive sector and the confidence it instills among investors in the stock market.
