Airtel Knows Its Customers, but Lending Them Money Is Another Matter

Sunil Mittal, chairman of Bharti Airtel, reportedly told investors that he hopes to build a "Bajaj Finance within the Airtel ecosystem" within five to seven years. He was briefing them about Bharti Airtel’s foray into the NBFC business. There may be logic in Mittal’s plan because a telecom company with 370 million subscribers, 500 data scientists, and a real-time goldmine of behavioural data is, on paper, a lender waiting to happen. The question is whether having access to data is a sound reason to start lending. 

For perspective, the subsidiary Airtel Payments Bank has monthly transacting users of 108 million, a gross merchandise value run rate of ₹4.6 trillion, and sourced ₹90 billion in loans as a Loan Service Provider. Another comforting factor is knowing that if a subscriber tops up every 28 days without fail, pays for a premium plan, and lives in a Tier-1 city, you may have an inkling about repayment prospects.

Where the logic frays is when Airtel crosses from knowing about a borrower to being financially responsible for that borrower. Whenever those loans went bad, the loss landed on the balance sheets of Bajaj Finance, DMI Finance, and Fibe, among others. With an RBI licence, now housed in another subsidiary, Airtel Money, that loss will now land on Bharti Airtel's own balance sheet too, which is not merely a procedural distinction but a fundamental change from running a marketplace to taking on credit risk. RBI’s digital lending guidelines already require lenders to retain ultimate credit risk rather than outsourcing underwriting decisions.

What happens to the loan sourcing business? The moment Airtel Money starts lending from its own NBFC book to those same customer segments, it competes against the very partners whose credit judgement built its ₹90 billion track record. Origination platforms tend to route the best customers to the most profitable unit, and partners are sophisticated enough to read that routing data every single month.

Airtel also has a serious lack of underwriting experience and a short track record of “static pool data”, the granular, vintage-wise record of how a specific borrower segment performs at three months, six months, 12 months, and 24 months on book. This data cannot be purchased or reverse-engineered from mobile usage behaviour because it is produced only by passing through credit cycles, through defaults, and through institutional memory. Airtel has accumulated two years of Loan Service Provider history inside a benign credit environment, which means its underwriting models have yet to be exposed to any meaningful stress.

Weeks before Mittal spoke to investors, Bajaj Finance CEO Rajeev Jain was on his own earnings call announcing a permanent restructuring of his provisioning framework, by implementing a minimum Loss Given Default floor across all businesses, which led to an accelerated expected credit loss provision of over ₹14 billion across loan default stages. This follows tracking three-month, six-month, and nine-month curves on every borrower segment across every product. When an analyst asked him about the macroeconomic outlook, Jain replied that he was "not that much of a macro person" but rather "a micro person" who believed his firm controlled who it lent to. That reply is the difference between a lender and a telecom company that distributes loans.

Airtel will have to learn this from scratch, with real money at risk, while the parent company is already stretched thin fighting battles on multiple fronts.

Parent Bharti Airtel also has steep capital commitments linked to a 5G rollout, a home broadband land-grab, $1 billion a year in Africa capital expenditure, and a 1GW data centre ambition. There is also concern over a continued 8.5% stake sale by promoters over the next few years, as it comes on top of a near 7.05% stake sale in the last 42 months.

Airtel Money could find its footing in time, and the cross-sell potential across broadband, enterprise, and lending is a real long-term story. But those pricing in a Bajaj Finance inside the Airtel ecosystem by 2031 should perhaps listen to Bajaj Finance’s earnings call, because the man whose company Mittal wants to replicate spent that call explaining, with considerable precision, exactly why it took him three decades to get here.