Beyond profits

Why did the Bajaj Group, which was really known as a scooter company, decide to go into financial services?

Sanjiv Bajaj: The interesting answer to that is that we didn’t. When the government opened up the insurance market to the private sector in the late 1990s, a number of foreign insurers were interested. However, as regulation restricted them to owning 26% of an Indian company, they needed a local partner. A number of foreign companies approached Bajaj for a partnership. It was my father who dealt with them, but he maintained that we should focus on what we did well already and build our existing businesses to world-class companies: motorcycles, auto-rickshaws, electrical appliances and steel. Insurance was not something that we should shoot for.

So what changed your minds?

We realized that insurance could be an interesting way to develop a financial services business. We had a small finance company that gave loans against our own motorcycles, that was our limited presence in financial services. What triggered the Bajaj-Allianz cooperation was the tremendous comfort that we had with Allianz when they approached us.

We believe in running our operations with the highest level of integrity and transparency. We also like to build businesses based on long-term sustainability and profit. Allianz were keen to find a partner in India who thought in the same conservative long-term manner as them. We believed that it was a good opportunity. It took a lot of convincing to get us involved in the partnership, but I am glad that we did that, though to be honest, I don’t think any of us expected the business to grow to be as successful as it is today.

The philosophical underpinnings of the Bajaj Group are quite unique. I refer to Jamnalal, your great-grandfather, and his belief that inherited wealth is a sacred trust to be used for the benefit of the people, as well as his close association with Mahatma Gandhi.

That is absolutely correct. The values that exist across our businesses are based on those he got from Gandhiji. Of course, as the business develops, you do what you need to do to continue to build it. But we are very clear we will never compromise on ethics or transparency.

On that point, in 2011 India dropped 11 places on the Transparency International Corruption Index. Is corruption in India getting worse?

Previously, corruption existed when the government was handing out big contracts. In some areas there was an unholy axis between business and government, but once you received your license you built a business based on your own capabilities. Over the last 10 years it has become far unhealthier with some businesses pro-actively paying certain politicians for specific favors. This blew up dramatically, amongst other examples, during the Commonwealth Games preparations. This is affecting business sentiment in India and has contributed to the economic slowdown. I honestly wouldn’t mind if the economy slowed down for a couple of years in order to clean this out. I believe India has such great promise that you can’t afford for a few corrupt people – business people, politicians or bureaucrats – to hold the country to ransom. An honest person must be able to work in this country, and it’s getting increasingly difficult to do so.

The opportunity for India is almost limitless.

Is the Indian economy really performing as badly as is being currently reported?

We were growing at 9% but are now at 5%. Optimists say that almost anywhere else in the world today one would be exceedingly happy with 5%, but they forget our inflation rate is 8%. If you look at our per capita income, we are at less than $2,000 per person per year. If we can grow at 9%, but are only growing at 5% we are missing the opportunity to bring 15 million to 16 million people out of poverty over the next five years.

We have a large, young and increasingly literate population that will have huge demands and also the ability to fulfill them. Our economy could be firing on all cylinders in terms of both producing jobs and consumption based largely upon our own internal needs. This huge domestic strength is evident if you look back to 2008-2009 when the West slowed down. Our GDP growth rate dropped, but only to 8.5%. That we now languish at 5% is frustrating because we are solely responsible for driving ourselves down to that lower number.

Your great grandfather was a famed philanthropist and an important member of Gandhi’s inner circle. Your father, Rahul, is a legendary entrepreneur who built Bajaj into one of t he world’s leading automotive companies. What was it like growing up in the shadow of giants?

We grew up going to a school five minutes away from home. My classmates’ parents were employed in middle management by Bajaj, or were drivers, or employees in various companies. It was an unassuming environment, so much so that it took us quite a while to realize what it meant to be a Bajaj. This was due to my mother. She was a teacher before she got married and came from a middle-class, but very cultured and well-educated, family. She insisted on a simple environment that helped us keep a level head, and this still helps us today.

What core values of your great grandfather are still evident in the business?

A high level of ethics. Transparency. Long-term value creation. Customer service and a focus on employees. In my great grandfather’s writings, he talks about Mahatma Gandhi telling him to build businesses for public good. I recall we once had a renowned speaker at our companies and we asked him, “What is the role of a profitable business?” He said that for a company, people are the purpose. People can be customers or employees, but people are the purpose. Profit is the means, but never the end goal. Your end goal has to be to do something better than someone else, only then will your products sell, only then will your best employees stay with you to build a better future, but you need to be profitable to do that.

While you were ticking off points on your finger, I think you missed the philanthropic aspect. The Bajaj family has a lot of charitable trusts.

Yes, but we are quiet on that front, as they are not part of the business. We know we have a social responsibility, but we just don’t give our money away to good causes. We try to execute in the right manner. That is why we have a dedicated team involved in our social activities, whether it is education, healthcare, or building independence and sustainability in over one hundred villages. This includes teaching women how to do small jobs such that they can make enough money to manage their houses, or ensuringbasic things like education and health are available for their families. There are many things we are involved with, but, unfortunately, with half our population surviving on less than $1 a day, whatever we do is nowhere near enough.

Many Western companies headed by CEOs of the Gordon Gecko school would say that really the corporate social responsibility stuff is just PR. How would you respond?

When I did my MBA at the Harvard Business School, we were drilled by some to say that the role of an enterprise is only to make money. You make the money, you share it with your shareholders and they do what they want with it. Getting into social work is not the role of the company, I think it’s more obvious today that for any enterprise to be seen as successful, stakeholders expect it to be responsible.

And responsibility is not just to your shareholders, it’s to customers, employees, society and the environment. It’s not just a question of quarterly or yearly profits, but impact on the long-term future. Today, you do have to take a larger view of society, but where you draw the line is for each business to decide.

You are still on the board at Bajaj Auto, so we can look forward to the Bajaj Group releasing environmentally friendly three-wheelers?

We already have. We were the first to launch, almost ten years ago, three-wheel rickshaws running on alternate fuels. At the Taj Mahal, for example, the elderly and disabled people can use rickshaws from us running on electricity. We have a number of other technologies that we are working on to make our vehicles more fuel efficient and less polluting. The motorcycles we make today have 100cc engines, and are amongst the most fuel efficient in the world. They typically give 85 kilometers per liter of petrol. It’s cheaper to use them than to use public transport.

Where do you hope Bajaj Allianz, Bajaj FinServ and India will be in 10 years?

The opportunity for India is almost limitless. If a country like China could grow at 8-9% plus per year for 25 years, there is no reason why India cannot do that. Some 70% of our population is under 30, and we are a very literate, tolerant and capable society. I also believe India, because of its non-aligned, non-aggressive foreign policies, could play a responsible role in the global sphere.

Specifically, I think financial services in India should grow at 2-2.5 times the GDP growth rate, which means that over the next 10 to 20 years we are talking about 20% growth rates. That is a very large opportunity and the challenge for us is to continue to build profitable and responsible businesses that we can be proud of.

Gesa Walter
Allianz Group Asia Pacific
Phone +65.6297-2724
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