Five Star Business Finance
Listing performance
Scheduled dates
Tentative timetable — a past date is not confirmation the step completed
Issue details
- IPO date
- 09 Nov 2022 – 11 Nov 2022
- Listing date
- 21 Nov 2022
- Face value
- ₹1 per share
- Issue price
- ₹474 per share
- Lot size
- 31 shares
- Total issue size
- ₹1,593 Cr
- Market cap at offer price
- ₹13,811 Cr
- Promoter holding
- 39.92% → 39.92% pre-issue → post-issue
- ISIN
- INE128S01021
- Registrar
- Kfin Technologies Ltd.
- Lead managers
- ICICI Securities Ltd.
- Registered office
- New No.27, Old No.4, Taylor's Road, Kilpauk, Tamil Nadu
Reservation and application size
How the issue is split between investor categories, and what each may bid
| Investor category | Shares | % of net | % of total |
|---|---|---|---|
| Anchor investor · within QIB | 1,24,05,094 | — | — |
| Market maker | 0 | — | — |
Application size
Minimum 31 shares per lot, in multiples, at ₹474
| Application | Lots | Shares | Amount |
|---|---|---|---|
| Retail (min) | 1 | 31 | ₹14,694 |
| Retail (max) | 13 | 403 | ₹1,91,022 |
| S-HNI (min) | 14 | 434 | ₹2,05,716 |
| S-HNI (max) | 68 | 2,108 | ₹9,99,192 |
| B-HNI (min) | 69 | 2,139 | ₹10,13,886 |
Category limits
| Category | Bid size | Cut-off |
|---|---|---|
| Retail (RII) | Up to ₹2 lakh | Yes |
| Small HNI (sNII) | ₹2 lakh – ₹10 lakh | No |
| Big HNI (bNII) | Above ₹10 lakh | No |
| Employee | Up to ₹5 lakh | Yes |
Bidding at cut-off means accepting the final issue price without naming one. Only retail and employee applicants may do so.
Anchor investors
Institutional allocation placed a day before the issue opens, carved out of the QIB portion and locked in after listing.
Valuation and performance
Valuation at offer price
| Metric | Pre-issue | Post-issue |
|---|---|---|
| EPS (₹) | 16.09 | — |
| P/E (×) | 29.46 | — |
| Market cap | — | ₹13,811 Cr |
Key performance indicators
- Return on net worth
- 13.86%
- Debt / equity
- 0.69
- EBITDA margin
- 73.13%
- NAV per share
- ₹127.35
Single period as reported. Year-on-year movement is in the financials table below, where every period is published.
About Five Star Business Finance
Five-Star Business Finance Limited, incorporated in 1984 as a private limited company and converted to a public limited company in 1988, is a Reserve Bank of India registered NBFC-ND-SI providing secured small business loans. The company specializes in lending to micro-entrepreneurs and self-employed individuals who are typically excluded by traditional banking institutions. The company developed a distinctive business model based on detailed personal credit assessment, with no reliance on traditional income proofs. The company's loans are secured by borrowers' property, predominantly self-occupied residential property. The company has experienced significant growth, with Gross Term Loans growing from ₹38,922.28 million as of March 31, 2020 to ₹52,965.35 million as of June 30, 2022, and expanded its branch network from 252 to 311 over the same period. The company generates revenue primarily through interest income on loans, fees income, and fair value changes on investments.
Company Analysis
from RHPFIVE-STAR BUSINESS FINANCE LIMITED is a non-banking financial company providing secured business loans to micro-entrepreneurs and self-employed individuals, operating primarily in south India.
Five-Star Business Finance Limited, incorporated in 1984 as a private limited company and converted to a public limited company in 1988, is a Reserve Bank of India registered NBFC-ND-SI providing secured small business loans. The company specializes in lending to micro-entrepreneurs and self-employed individuals who are typically excluded by traditional banking institutions. The company developed a distinctive business model based on detailed personal credit assessment, with no reliance on traditional income proofs. The company's loans are secured by borrowers' property, predominantly self-occupied residential property. The company has experienced significant growth, with Gross Term Loans growing from ₹38,922.28 million as of March 31, 2020 to ₹52,965.35 million as of June 30, 2022, and expanded its branch network from 252 to 311 over the same period. The company generates revenue primarily through interest income on loans, fees income, and fair value changes on investments.
Objects of the Issue
- Offer for Sale of Equity Shares by the Selling Shareholders and achievement of the benefits of listing the Equity Shares on the Stock Exchanges ₹15,934.49 million p.104
Issue Structure
- Total Issue
- ₹15,934.49 million
- Fresh Issue
- Not applicable
- Offer for Sale
- 33,617,061 Equity Shares aggregating to ₹15,934.49 million
- Price Band
- ₹450 to ₹474 per Equity Share
- Lot Size
- 31 Equity Shares (Bid Lot)
- Face Value
- ₹1 each
Business Model
The company earns revenue primarily through interest income from secured small business loans, with a secondary revenue source from fees income and net gains on fair value changes. The company sources all loans in-house and conducts comprehensive credit assessment without requiring traditional income documentation. The company securitizes a portion of receivables to banks and financial institutions for funding and manages an asset-liability position through term loans, working capital facilities, and securitization proceeds.
Business Segments
SWOT Analysis
- • Fastest Gross Term Loans growth among compared peers with >₹30,000Mn in GTL, strong returns and significant market potential(p.106)
- • 100% in-house sourcing, comprehensive credit assessment and robust risk management leading to good asset quality(p.106)
- • Developed underwriting model for assessing cash flows of small business owners lacking traditional documentary proof of income(p.106)
- • Strong on-ground collections infrastructure maintaining robust asset quality(p.106)
- • Ability to expand to new underpenetrated geographies through calibrated expansion strategy(p.106)
- • Access to diversified and cost-effective long-term financing with conservative ALM and liquidity management(p.106)
- • Experienced cycle-tested leadership with marquee investor backing(p.106)
- • Concentration risk with 85% of branch network in 4 southern states(p.31)
- • Dependence on personal guarantees from Promoter Lakshmipathy Deenadayalan for 33.47% of total borrowings(p.42)
- • Significant portion of loan portfolio is recent with 18-36 months carrying higher delinquency risk(p.22)
- • 30.42% of customers are first-time borrowers with higher default risk(p.30)
- • Stage 3 Gross Term Loans could increase as loan portfolio matures(p.23)
- • RBI observations on risk management structure and loan book composition in inspection reports(p.24)
- • Expansion into new underpenetrated geographies including Madhya Pradesh, Chhattisgarh, Maharashtra and Uttar Pradesh(p.34)
- • Financial inclusion opportunity in rural markets with faster credit growth expected(p.34)
- • Growing small business finance industry in India with Government support for MSME lending(p.45)
- • Digital transformation and technology investments to improve efficiency and customer experience(p.36)
- • India expected to remain one of fastest growing economies supporting credit growth and consumption(p.115)
- • Increased competition from unorganized lenders, larger NBFCs, HFCs and new market entrants(p.33)
- • Customer default risk in low-income segment with 70.15% of GTL from customers earning ≤₹25,000/month(p.22)
- • Adverse economic conditions and customer default increase due to business failure or personal emergencies(p.22)
- • RBI's PCA Framework could restrict dividend distribution and branch expansion if Net NPA ratio exceeds threshold(p.23)
- • Changes in RBI regulations on NBFC operations and asset classification requirements(p.22)
- • Macroeconomic volatility including inflation, interest rate increases and potential slowdown(p.45)
- • Deterioration in real estate sector affecting collateral values and loan recovery(p.24)
- • COVID-19 pandemic effects on customer repayment capacity and business conditions(p.25)
Promoters
| Name | Role | Pre-Issue | Post-Issue |
|---|---|---|---|
| Lakshmipathy Deenadayalan | Individual Promoter | 10.49% | 10.49% |
| Hema Lakshmipathy | Individual Promoter | 7.14% | 7.14% |
| Shritha Lakshmipathy | Individual Promoter | 0.07% | 0.07% |
| Matrix Partners India Investment Holdings II, LLC | Corporate Promoter | 12.46% | 12.46% |
| SCI Investments V | Corporate Promoter | 8.79% | 8.79% |
Leadership
Auto-extracted from the company's RHP using AI, with each fact linked to its source passage (hover any row to see the quote & page). Provided for research only, not investment advice — verify against the official RHP before relying on it.