When it comes to lending, Bajaj Finance is one of the biggest players on the non-banking finance company (NBFC) playground. Take zero-interest consumer durable loans, for instance. The company accounts for over one-fifth of the market in India. And even as large swathes of the NBFC space are reeling from the prevailing liquidity crisis post the implosion of Infrastructure Leasing and Financial Services Ltd (IL&FS), Bajaj has set its sights on a new growth driver.
Healthcare loans.
Bajaj is not taking any half-measures either. It has tied up with over 3,500 hospitals and clinics to try and replicate the success it achieved in the consumer durables lending space. Of these, 90% are beauty and hair clinics like RichFeel and VLCC, eye care clinics like Centre for Sight and Dr Agarwals, and even dental chains like Star, a former senior executive with Bajaj confirms.
Bajaj has estimated that the potential market for healthcare loans is larger than that of consumer and digital products combined, says the former executive requesting anonymity. Since 65% of health expenditure in India is paid for by the patients – estimated at Rs 3,20,000 crore ($40.5 billion). Against financing consumer durables that is estimated as Rs 1,00,000 crore ($10.4 billion) and digital products pegged at Rs 1,50,000 crore ($20 billion). Three years ago, Bajaj Finance had pegged the potential market for healthcare conservatively at Rs 5,000 crore ($701.9 million) growing at 18% every year.
Which is why, starting this financial year, Bajaj plans to crack the healthcare loans market. It is already the market leader with a Rs 600 crore annual loan book for healthcare. The number is a fraction of its overall assets under management of Rs 98,671 crore ($13.9 billion) that grew at 25% in the year ending March 2019. Of this, healthcare loans grew at over 70%, said the former executive with Bajaj.
However, this growth was predicated on the same approach as Bajaj applies to all consumer loans. Since late 2015, Bajaj has targeted lower-to-middle classes for aspirational medical procedures—called electives as they’re governed by consumer choice—such as cosmetic surgeries, hair transplants, dental care, etc. The number of urgent medical procedures it finances—non-electives such as heart surgery or organ transplant—are insignificant.
But Bajaj can’t avoid non-electives for too long. That’s where the bulk of the healthcare loans business is.
And there’s where Bajaj needs to watch out for competition.
Delhi-based medical loans aggregator startup LetsMD’s, for instance, saw its annual loans increase by over 12X, from Rs 2 crore in the year ending March 2018 to Rs 25 crore ($3.5 million) in the following year. It’s a far cry from Bajaj’s Rs 600 crore ($84.2 million), but it’s growing faster.
