Five Star Business Finance Limited

Five Star Business Finance Unlisted Shares Logo

About the Company

  • Five Star provides small business loans to meet borrower requirements for commencing new businesses, expansion of their existing businesses,and to settle any unorganized dues they have taken to further their businesses
  • The loans are given based on the company’s evaluation of the borrower household cash-flows coupled against the security of the borrower’s house collateral.
  • Five Star Business Finance Limited is a Non-Banking Financial Company (NBFC) with the Reserve Bank of India (RBI), specialized in providing financial services to address the needs of unbanked, and unserved segment, funding the people who were perceived to be non- fundable.

Profitability Growth

Five Star Business Unlisted Shares Profitability Growth
CAGR of 107% from FY17 to FY21

Source: DRHP, Financial Reports and Annual Return of Five Star Business Finance Ltd.

Industry Overview

  • India Ratings and Research (Ind-Ra) has changed the outlook for retail non-banking financial companies (NBFCs) to ‘improving’ from ‘stable’ for the second half of 2021-22.
  • NBFCs with a diversified asset mix and non-overlapping customer segments could be considered better placed, according to the agency. It expects NBFCs to maintain growth in the range of 9-10%. – Ind-RA.
  • The Govt of India has announced INR 450 Bn Partial Guarantee Scheme and INR 300 Bn Special Liquidity Scheme for NBFCs with the purpose of extending liquidity support.

Investment Rationale

  • Five Start Business Finance is one of the country’s leading NBFCs engaged in extending credit facilities to small businesses and self- employed individuals, as well as small mortgage loans with significant market share.
  • The Assets Under Management (AUM) of the Company grew at a CAGR of over 73% between FY17 to FY21 which is the highest amongst peers. The Disbursements grew at a CAGR of 35% in the same period.
  • The Profit After Tax has reported a stellar CAGR of 107% from FY17 to FY21. The Company’s trend of increasing profitability continues in H1 FY2020 as well with reported PAT of INR 2,175 Mn at a Net Profit margin of 36%.
  • Five Star Finance has increasing revenues with an average Net Interest Margin of ~16% since FY20. The average Return on Equity stands at ~15% between FY20 to H1 FY22

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