Cholamandalam Investment and Muthoot Finance Beat HDFC and Bajaj Finance in Employee Productivity in FY22 – ATT Analysis
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Cholamandalam Investment and Muthoot Finance Beat HDFC and Bajaj Finance in Employee Productivity in FY22 – ATT Analysis

, Senior Manager - Editorial & Content, Naukri

India’s shadow banking sector, or non-banking finance companies (NBFCs), comprise an essential alternative channel of financing for companies both big and small as well as individuals. Over the years, as banks faced a huge bad loan problem and tightened their purse strings, NBFCs provided the necessary liquidity in the ecosystem.

However, over the past few years, the shadow banking industry faced challenges as some large names tanked under their own load of bad loans. But a deep clean in the system with the strengthening of the underwriting process and the appetite of borrowers has seen the large NBFCs scale up significantly in recent years. This has also pushed up the demand for white collared employees. So, how have the top NBFCs done in terms of managing their workforce, generating performance from their employees and how do they compare with the top banks?

To assess these aspects, we looked at the numbers of the top four most valued NBFCs in the country: HDFC Ltd, Bajaj Finance, Cholamandalam Investment & Finance, and Muthoot Finance. We factored out Bajaj Finserv as it is essentially a holding company for several financial service companies including the flagship Bajaj Finance.

Also read: SBI, HDFC, ICICI, Kotak Mahindra – Top 4 Banks’ Employee Productivity Data Say A Lot About Their Hiring Ambitions

Talent acquisition at NBFCs

Overall, the top four NBFCs have jointly created around 28,000 additional jobs in the last four years. This number is a third of around 87,000 new jobs created by top four banks in the same period. But the large shadow banks have upped their workforce by 55% in absolute terms in the same period while banks, with a larger base of employees, have pushed up their headcount by around 19%.

If we take only the largest private banks, to keep out State Bank of India—which has rightsized itself—they increased their workforce increased by 51% in the same period, marginally short of what the NBFCs have added.

Bajaj Finance was the flagbearer, more than doubling its workforce with around 20,000 new employees. As a result, Bajaj Finance, which accounted for one in three jobs among its peers five years ago, now has around the same number of people as the combined workforce of its three nearest competitors.

The top four NBFCs have jointly created around 28,000 additional jobs in the last four years. This number is a third of around 87,000 new jobs created by top four banks in the same period. But the large shadow banks have upped their workforce by 55% in absolute terms in the same period while banks, with a larger base of employees, have pushed up their headcount by around 19%.

Productivity at NBFCs

Things get interesting when it comes to productivity. For NBFCs, we captured productivity via two metrics: assets under management (AUM) per employee and profit per employee.

Over a five-year period, this number has changed materially for two of the top four NBFCs in the country.

Cholamandalam and Muthoot have done much better than bigger peers HDFC and Bajaj Finance on both counts.

In particular, Muthoot has been the golden performer. It has nearly doubled the profit per employee and has also topped the chart when it comes to AUM per employee. To be sure, this is also a factor of the price of gold as that has a direct impact on fortunes of gold loan companies like Muthoot, the market leader in the segment.

What’s more, Muthoot has consistently generated more out of its employees. For each of the last four years it has improved both AUM per employee as well as profit per employee.

Cholamandalam, too, was on track with an increase in AUM per employee for three straight years but slipped during the year ended March 2022. In terms of profit per employee, however, it had seen some pressure four years ago but has pulled up strongly since then.

Also read: How Work Culture Shift Helped Tilaknagar Industries Beat Financial Stress?

HDFC, the largest housing financier in the country, has seen a flip-flop when it comes to profit per employee. This was largely due to some extraneous factors such as profit jump due to corporate M&A (Gruh Finance and Bandhan Bank), among others. It did show consistency in growing its AUM per employee. It is also an outlier among the pack due to the higher average value of its loans.

Cholamandalam and Muthoot have done much better than bigger peers HDFC and Bajaj Finance on both counts. Muthoot has nearly doubled the profit per employee and has also topped the chart when it comes to AUM per employee. Cholamandalam is the only one among its peers that comes neck and neck with profit per employee of large private banks.

Bajaj Finance has been the investors’ darling and its recruiters have been busy boosting the human capital of the company. But when it comes to boosting productivity, it is lagging behind.

Bajaj’s AUM per employee has been almost flat for the last five years. Meanwhile, Cholamandalam, which was marginally ahead, has sped away. Muthoot remains way behind, though it has bridged some of the gap.

In terms of profit per employee, Cholamandalam surpassed Bajaj Finance two years ago and has increased its gap. In fact, it is the only one among its peers that comes neck and neck with profit per employee of large private banks.

Also, even by AUM per employee it is the only one among its peers that comes close to matching private banks.

Also read: 89% Employers Think Inflation Will Not Change How Companies Hire and Pay Employees: Report

Conclusion

Bajaj Finance has been aggressively hiring people and has become the prime magnet of talent in the NBFC space. This has had an impact on its employee productivity compared to smaller peers. But how it manages to leverage this human capital is something to be watched out. 

Meanwhile, Cholamandalam Investment has been a star performer when it came to generating business and profit from its employees. Whether it can maintain its recent trends and rub shoulders with banks across the key parameters would be interesting to track in the future.

Muthoot Finance has also gained from a low base, thanks to the increasing trend in the price of the yellow metal. It would also be looking to maintain its gains as it still has some distance to go to match its larger NBFC peers.

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SOURCES
https://www.bseindia.com/stock-share-price/housing-development-finance-corpltd/hdfc/500010/financials-annual-reports/
https://www.bseindia.com/stock-share-price/cholamandalam-investment-and-finance-company-ltd/cholafin/511243/financials-annual-reports/
https://www.bseindia.com/stock-share-price/bajaj-finance-limited/bajfinance/500034/financials-annual-reports/
https://www.bseindia.com/stock-share-price/muthoot-finance-ltd/muthootfin/533398/financials-annual-reports/

 

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