Analysis of Bajaj Finance of last 20 years

MSC FINANCE PART 1

Sub : QTF

Krupa Hemant Shah

Roll no : 28
History
Originally incorporated as Bajaj Auto Finance Limited on March 25, 1987, as a
non-banking financial company, primarily focused on providing two and
three-wheeler finance.After 11 years in the auto finance market, Bajaj Auto
Finance Ltd launched its initial public issue of equity share and was listed on
the Bombay Stock Exchange and National Stock Exchange of India. At the turn
of the 20th century, the company ventured into the consumer durables finance
sector and started offering small-size loans at zero interest rates. In the
subsequent years, Bajaj Auto Finance diversified into business and property
loans as well.
In the year 2006, the company's assets under management hit the ₹1,000 crore
(US$130 million) crore mark and are currently at ₹52,332 crore (US$6.6
billion). 2010 saw the company's registered name change from Bajaj Auto
Finance Limited to Bajaj Finance Limited.
By 2015, BFL was known to be the first in the industry to set up a series of
Disaster Recovery (DR) data centers that ensure business continuity for
customer acquisition, loan processing, and servicing. Additionally, by 2020, it
started using data analytics and various big data tools to maintain its
competitive position
As of June 2022, Bajaj Finance has been working with RBL Bank and DBS
Bank to issue co-branded credit cards. But, after the Reserve Bank of India
opened the door for non-banking financial companies to enter the credit card
industry, the company plans to introduce its credit card products by the
beginning of the first quarter of 2023.
In January 2023, the company released its long-term strategy (LRS) to guide
growth through different online and offline products. Under that strategy, Bajaj
Finance launched its loan against property (LAP) business for micro, small, and
medium-sized enterprise (MSME) customers, and has plans to launch new auto
loans in the second quarter of 2024, microfinance in the fourth quarter of the
same year, and tractor financing in the first quarter of 2025.
As of March 2023, the company deals in consumer lending, SME (small and
medium-sized enterprises) lending, commercial lending, rural lending, deposits,
and wealth management. And, has 294 consumer branches and 497 rural
locations with over 33,000+ distribution points and 1,50,000+ stores
Products / Services
Consumer Finance

Durable Finance: A finance option for purchase of household items like

washing machines, refrigerators, air-conditioner, LED TVs, microwaves,
furniture etc consumers can avail up to Rs.4 lakh with the Bajaj Finserv EMI
Network. Consumers can get up to 100% funding of purchase at zero or low
interest rates and Pick a convenient tenor and repay in easy EMIs.

Lifestyle Finance: Financing options through easy EMI loans offered to

purchase home appliances, personal appliances, groceries, fashion and
accessories, travel, healthcare fitness and health that give hassle-free access to
affordable luxury, with payment convenience at every avenue.

Digital Product Finance: Customers can buy products affordably on the Bajaj
Finserv EMI Network. With more than 80,000 stores customers can just walk in
partner stores, select the electronics, mobile, appliance or any other product, talk
to the representative, and convert the cost of the purchase into easy EMIs.

EMI Card: EMI Network Card comes with a pre-approved loan of up to Rs.4
lakh that customers can use across any of Bajaj Finserv’s 60,000+ partner stores
in more than 1,300 cities.

It comes with features like flexible tenors ranging from 3 – 24 months, nil
foreclosure charges, and one time document submission to allow shopping
favourite products on EMI from top e-commerce platforms.

2 & 3 Wheeler Finance: Offering two and three wheeler finance at Bajaj
showrooms and other authorized service stations across the country BFL offers
customers vehicle loans for the purchase of the favourite Bajaj Motorcycles
among all variants namely Pulsar, Avenger, Discover, Platina and the latest V
besides KTM motorcycles.

It also provides easy and attractive financing schemes for the wide range of
Bajaj RE three wheelers.

Personal Loan: Borrow up to Rs 25 lakh collateral free Personal Loan by just

meeting simple eligibility criteria and submitting basic documents.
Customers can avail money with an online personal loan application approved
instantly while providing them with flexible repayment tenors ranging from 12
months to 60 months.

Loan against FD:

A secured loan offered against the FDs, it comes at low interest rates, quick loan
processing, flexible repayment options and minimal documentation with no
foreclosure or part-prepayment charges etc

They also provide Commercial Lending Investment Corporate Finance

Financial Institutions Lending Investment SME Finance.

Objective :

1.To analyse the Sales of Reliance Industries for past 20 Years using
Exponential Smoothening method

2.To understand the relationship between Sales using Simple Linear

Regression method
Research Methodology:

Data Collection:

Gathered financial and operational data of Bajaj Finance spanning the last 20
years, encompassing key metrics such as revenue, profits, market trends, and
expansion initiatives.

Statistical Analysis Techniques:

​ Exponential Smoothing Method:

● Application: Identified and analyzed trends in the company's Sales
over time.
● Utility: Widely used in finance, economics, and operations
management for short-term forecasting, inventory planning, and
demand analysis.
● Calculation: Utilizes exponentially decreasing weights for past
observations, with a crucial parameter, the smoothing factor (α),
determining the rate of decline in weights.
● Forecasting: Computes forecasts by combining weighted averages,
giving more emphasis to recent data.
● Limitations: Prone to over-reactivity to short-term fluctuations and
may not perform well with data exhibiting irregular patterns.
​ Simple Linear Regression:
● Objective: Established relationships between Sales and time using
a linear model.
● Concept: A statistical method modeling the linear relationship
between a dependent variable (y) and an independent variable (x).
● Calculation: Fits a straight line to the data to understand the linear
association between variables.
● Application: Provides insights into the impact of time on Sales and
facilitates predictions.
Key Methodological Concepts:

● Exponential Smoothing: Emphasizes simplicity and effectiveness in

handling time-series data through weighted average calculations.
● Smoothing Factor (α): Determines the rate of decline in the weights given
to past observations; smaller α values prioritize older data, while larger
values emphasize recent data.
● Linear Regression: Aims to establish a linear relationship between
variables by fitting a straight line to the data.

Implications:

● The research methodology leverages both exponential smoothing and

simple linear regression to comprehensively analyze the financial and
operational dynamics of Bajaj Finance over the past two decades.
● Exponential smoothing aids in short-term forecasting and trend
identification, while linear regression provides insights into the
continuous relationship between Sales and time.

This research methodology integrates powerful statistical techniques, offering a

robust framework for understanding and forecasting the intricate patterns within
Reliance Industries' long-term dataset.

In the pursuit of understanding and modeling the relationship between two

variables, the research methodology employs simple linear regression. This
statistical technique is characterized by the model representation:

y=β0+β1⋅x+ε

Here in y denotes the dependent variable x signifies the independent

variable,β0 stands for the intercept β1 represents the slope of the
line, and ε embodies the error term.
Objectives:

Prediction and Inference: The primary objective is to predict the dependent

variable y based on the independent variable x Additionally, the methodology
aims to draw meaningful inferences from the observed data.

Minimization of Squared Differences: The methodology is designed to ascertain

the best-fitting line, achieved by minimizing the sum of squared differences
between the actual and predicted values of the dependent variable y

y is the dependent variable being predicted.

X is the independent variable.
Β0 is the intercept (the value of y when x=0).
Β1 is the slope of the line (the change in y for a unit change
in
ε represents the error term.
Regression Equation and Predictive Power:
Once the best-fitting line is determined through the research
methodology, the regression equation becomes instrumental
for prediction:
y^=β0+β1⋅x
This equation allows for the estimation of y or a given x providing a
predictive tool integral to the research process.
Significance of Simple Linear Regression:

This research methodology embraces simple linear regression as a powerful and

straightforward approach for modeling the relationship between two variables.
It facilitates prediction, inference, and a comprehensive understanding of the
direction and strength of the association between the variables under
investigation. In conclusion, the application of simple linear regression within
this research methodology serves as a robust framework for analyzing and
interpreting the relationship between two variables, contributing valuable
insights across diverse fields of study.
Data Interpretation
1.Trend Analysis using Exponential Smoothing:
Applying exponential smoothing to detect and visualize patterns and
trends in Bajaj Finance financial metrics.
Data has been collected from Bajaj Finance P&L Statement of past 20 Years

Solution:

(1) (2) (3)

year Sales Exponential Smoothing
(α=0.2)

2004 107.97 107.97

2005 145.33 0.2⋅107.97+0.8⋅107.97=107.97

2006 210.12 0.2⋅145.33+0.8⋅107.97=115.442

2007 352.76 0.2⋅210.12+0.8⋅115.442=134.3776

2008 409.66 0.2⋅352.76+0.8⋅134.3776=178.0541

2009 597.49 0.2⋅409.66+0.8⋅178.0541=224.3753

2010 910.06 0.2⋅597.49+0.8⋅224.3753=298.9982

2011 1392.33 0.2⋅910.06+0.8⋅298.9982=421.2106

2012 1996.26 0.2⋅1392.33+0.8⋅421.2106=615.4345

2013 2924.79 0.2⋅1996.26+0.8⋅615.4345=891.5996

2014 3788.55 0.2⋅2924.79+0.8⋅891.5996=1298.2377

2015 5119.97 0.2⋅3788.55+0.8⋅1298.2377=1796.3001

2016 6901.19 0.2⋅5119.97+0.8⋅1796.3001=2461.0341

2017 9272.33 0.2⋅6901.19+0.8⋅2461.0341=3349.0653

2018 13287.77 0.2⋅9272.33+0.8⋅3349.0653=4533.7182

2019 17383.97 0.2⋅13287.77+0.8⋅4533.7182=6284.5286

2020 23671.83 0.2⋅17383.97+0.8⋅6284.5286=8504.4169

2021 23369.16 0.2⋅23671.83+0.8⋅8504.4169=11537.8995

2022 26972.45 0.2⋅23369.16+0.8⋅11537.8995=13904.1516

2023 34582.82 0.2⋅26972.45+0.8⋅13904.1516=16517.8113

2024 0.2⋅34582.82+0.8⋅16517.8113=20130.813

(3)
Exponenti
al
1) (2) Smoothin (4) (5) (6) (7)
year Sales g Error |Error| Error2 |%Error|
2004 107.97 107.97
2005 145.33 107.97
2006 210.12 115.442
2007 352.76 134.3776
409.66-178.
0541=231.6
2008 409.66 178.0541 059 231.6059 53,641.30 56.54%
597.49-224.
3753=373.1
2009 597.49 224.3753 147 373.1147 139,214.61 62.45%
910.06-298.
9982=611.0
2010 910.06 298.9982 618 611.0618 373,396.51 67.15%
1392.33-42
1.2106=971
2011 1392.33 421.2106 .1194 971.1194 943,072.95 69.75%
1996.26-61
5.4345=138 1,906,679.1
2012 1996.26 615.4345 0.8255 1380.8255 9 69.17%
 2924.79-89
1.5996=203 4,133,863.3
2013 2924.79 891.5996 3.1904 2033.1904 5 69.52%
3788.55-12
98.2377=24 6,201,655.5
2014 3788.55 1298.2377 90.3123 2490.3123 9 65.73%
5119.97-17
96.3001=33 11,046,781.
2015 5119.97 1796.3001 23.6699 3323.6699 46 64.92%
6901.19-24
61.0341=44 19714984.4
2016 6901.19 2461.0341 40.1559 4440.1559 4 64.34%
9272.33-33
49.0653=59 35085064.9
2017 9272.33 3349.0653 23.2647 5923.2647 7 63.88%
13287.77-4
533.7182=8 76633422.5
2018 13287.77 4533.7182 754.0518 8754.0518 3 65.88%
17383.97-6
284.5286=1 123197599.
2019 17383.97 6284.5286 1099.4414 11099.4414 9 63.85%
23671.83-8
504.4169=1 230050421.
2020 23671.83 8504.4169 5167.4131 15167.4131 3 64.07%
23369.16-1
11537.899 1537.8995= 139978725.
2021 23369.16 5 11831.2605 11831.2605 3 50.63%
26972.45-1
13904.151 3904.1516= 170780423.
2022 26972.45 6 13068.2984 13068.2984 3 48.45%
34582.82-1
16517.811 6517.8113= 326344540.
2023 34582.82 3 18065.0087 18065.0087 3 52.24%
2024 20130.813 Total 99763.7947 1146583487 998.55%
2. Simple Linear Regression Analysis:

Performing a simple linear regression analysis on relevant variables like sales to

identify trends and predict future performance.

Interpreting regression results to understand the direction and

strength of relationships between sales .

Sales Profit Ŷ (Predicted Residual

Years Y)
2004 107.97 38.57 -198.9965 237.5665
2005 145.33 55.96 -189.7725 245.7325
2006 210.12 21.08 -173.7762 194.8562
2007 352.76 47.64 -138.5591 186.1991
2008 409.66 20.58 -124.5108 145.0908
2009 597.49 33.91 -78.1365 112.0465
2010 910.06 89.41 -0.9646 90.3746
2011 1392.33 246.96 118.1054 128.8546
2012 1996.26 406.44 267.2126 139.2274
2013 2924.79 591.31 496.4619 94.8481
2014 3788.55 719.01 709.7199 9.2901
2015 5119.97 897.87 1038.4406 -140.5706
2016 6901.19 1278.52 1478.2147 -199.6947
2017 9272.33 1836.55 2063.6371 -227.0871
2018 13287.77 2646.70 3055.0287 -408.3287
2019 17383.97 3890.34 4066.3595 -176.0195
2020 23671.83 4881.12 5618.7999 -737.6799
2021 23369.16 3955.51 5544.0722 -1588.5622
2022 26972.45 6350.49 6433.7061 -83.2161
34582.82 10289.74 1977.0725 ⇐
2023 8312.6675 Outlier
Ŷ = b0 +b1X

b1 = SPxy = Σ(xi-x̄)(yi-ȳ)

SSx Σ(xi-x̄)2

b1= 542083485.9
2195604389 = 0.2469

b0 = 1914.8855-0.2469*8669.8405 = -225.6537
R2 = SSRegression / SStotal = Σ( ŷi - ȳ)2 / Σ(yi-
ȳ)2
= 133837638.1
141406307.1 = 0.9465
x-x̄ y-ȳ (x-x̄)2 (x-x̄)(y-ȳ)
-8561.8705 -1876.3155 73305626.46 16064770.33
-8524.5105 -1858.9255 72667279.26 15846429.94
-8459.7205 -1893.8055 71566870.94 16021065.21
-8317.0805 -1867.2455 69173828.04 15530031.14
-8260.1805 -1894.3055 68230581.89 15647305.35
-8072.3505 -1880.9755 65162842.59 15183893.52
-7759.7805 -1825.4755 60214193.41 14165289.19
-7277.5105 -1667.9255 52962159.08 12138345.34
-6673.5805 -1508.4455 44536676.69 10066732.47
-5745.0505 -1323.5755 33005605.25 7604008.088
-4881.2905 -1195.8755 23826996.95 5837415.717
-3549.8705 -1017.0155 12601580.57 3610273.321
-1768.6505 -636.3655 3128124.591 1125508.16
602.4895 -78.3355 362993.5976 -47196.3162
4617.9295 731.8145 21325272.87 3379467.768
8714.1295 1975.4545 75936052.94 17214366.33
15001.9895 2966.2345 225059689 44499418.82
14699.3195 2040.6245 216069993.8 29995791.51
18302.6095 4435.6045 334985514.5 81183137.06
 25912.9795 8374.8545 671482506.6 217017433
2195604389 542083485.9
0 0 (SSx) (SPxy)

Conclusion
Exponential Smoothing Analysis:

● Bajaj Finance's sales over the past 20 years show a consistent growth
trend using exponential smoothing.
● The forecast for 2023 is ₹34,582.82 crore.

Simple Linear Regression:

● A linear model was used to establish the relationship between sales and
time.
● The regression analysis revealed a positive trend, indicating that sales
have generally increased over the years.
● The regression equation, Ŷ = -225.6537 + 0.2469X, allowed for the
prediction of sales based on the passage of time.
● The coefficient of determination (R²) was 0.9465, suggesting that the
model explains 94.65% of the variability in sales.

Data Interpretation:

● The analysis included error calculations, revealing the variance between

actual and predicted sales.
● The overall percentage error was found to be 998.55%, indicating a
relatively high level of variability.
● Outliers were identified in the data, notably in the year 2023, which had a
significant impact on the regression results.

Implications:

● The positive trend in sales indicates the company's growth over the
analyzed period.
 ● The high percentage error suggests that the model may not be the most
accurate for predicting sales, emphasizing the need for caution in relying
solely on this model.
● Outliers, such as the one observed in 2023, should be investigated further
to understand the factors contributing to their deviation from the trend.

Overall Assessment:

● Bajaj Finance has shown resilience and adaptability.

● Careful attention to forecasting accuracy is recommended for sustained
success.