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“The customer right now is in a state of shock... The impact clearly is very brutal,” said Rajeev Jain, Managing Director, Bajaj Finance Ltd (BFL), in his assessment of the impact of the Covid-19 pandemic.
Given the unprecedented and sudden shock, the customer is clearly focused on saving / holding cash, added Jain in a concall with analysts.
“In my 25 years of experience, behavioural science has never been an area of attention from the risk management standpoint. It is so now,” Jain told analysts.
BFL has reasonably assessed that as customers and businesses get back to work, it should get back to normalcy in a short period of time.
“None of us have ever worked from home or ever faced such a long and sudden lockdown. Nor has the economy ever been stalled for such a long period in such a sudden manner.
“...We are confident that the economy has the resilience to navigate a 21-day lockdown. We experienced the same during demonetisation as well. This, of course, seems bigger and has more uncertainties,” explained Jain.
Three likely business scenarios
In the first scenario, if the lockdown opens on April 14, BFL sees business in April to be 20 per cent of its planned volumes, May at 60 per cent and gradually return to 100 per cent of its planned volumes by September.
“The impact of demand is likely to be transient... We may gain some of the lost volumes in the second half of the year, albeit marginally,” said Jain.
In the second scenario, if the lockdown opens on April 30, there could see a reasonable impact on customer psyche. In this scenario, BFL expects business in April to be nil, May to run at 30 per cent of its planned volumes, June at 70 per cent and return to 100 per cent of its planned volumes by October.
“The impact on demand, however, is likely to be material...We are not likely to gain any of the lockdown lost sales volume,” assessed Jain.
In the third scenario, if the lockdown goes all the way to 49 days and opens on May 15, BFL sees business in April to be zero, May will be at 20 per cent of its planned volumes, June at 50 per cent and return to 100 per cent of its planned volumes only by Q4.
“The company will be forced to take a harder view on opex (operating expenditure) and explore a 12-15 per cent cut vs current opex cuts of 7-8 per cent,” said the BFL chief.
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