Five-Star Business Finance IPO

7 important insights before investing in Five-Star Business Finance IPO

What is Five-Star Business Finance IPO Size?

Five-Star Business Finance IPO details; the company filed DRHP with market regulator SEBI on November 9, 2021.  Five-Star Business Finance Limited is coming up with only an Offer for Sale (OFS) of INR 2752 Crore. The face value of each equity share will be INR 1 per equity share. Investors as well as promoters are selling part of their stakes in the company.

Utilization of Net Proceeds from Five-Star Business Finance IPO 

Five-Star Business Finance Limited will not receive any amount from the offer for sale. The company will achieve the benefits of listing Equity Shares on the Stock Exchanges. This will enhance the visibility and brand image of the company, and provide liquidity to the Shareholders as well.

What is Five Star Business Finance IPO?

The company was incorporated as ‘‘Five-Star Business Credits Private Limited in Chennai, Tamil Nadu as a private limited company on May 7, 1984. The name again changed to “Five-Star Business Finance Limited” on April 12, 2016, and a certificate of change of name was issued by the RoC.  Five-Star Business Finance is registered with the Reserve Bank of India (“RBI”) to carry on the business of a non-banking financial institution (NBFC) without accepting public deposits.

  • Five-Star Business Finance Limited is a non-deposit-taking non-banking financial company (NBFC-ND-SI) company providing secured business loans to micro-entrepreneurs and self-employed individuals.
  • Reaching out to the population that remains outside the realms of funding availability.
  • Focused on south Indian states with target customers in urban and semi-urban locations, as well as in the rural markets of India.
  • Four south Indian states of India – Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka – are the major focus area of the company for its business.
  • Typically target lower to middle-income group people from “everyday” cash and carry businesses with household net cash-flows of INR 25,000 to INR 40,000 per month.
  • Fastest Asset under management as against peers with more than INR 3000 Crores. As of March 2022, total portfolio with the company is over INR 4639 Crores.
  • The company has an extensive network of 268 branches in four states of South India as of September 30, 2021

Five-Star Business Finance Limited – Founders and Leadership team

Mr. Lakshmipathy Deenadayalan is one of the promoters, Chairman, and Managing Director of the Company. He holds a bachelor’s degree in engineering in computer science and engineering from the University of Madras. He has over 20 years of experience running this business.

Mr. Rangarajan Krishnan is the Chief Executive Officer of the Company. He holds a bachelor’s degree in commerce and a master’s in business administration from Sri Sathya Sai Institute of Higher Learning. Before this assignment, he was associated with The World Bank, HDFC Bank

Limited, Spark Capital Advisors (India) Private Limited, and Standard Chartered Bank India in various roles. He has been with the company since August 2015.

Five-Star Business Finance Limited Financial snapshot

  • The total income of the company has been growing over the years.
    • The company is performing well in terms of AUM which has been going up over the period.
    • Revenue from the operation is more than double in FY21 from FY19.
    • Both EBITDA and PAT have been growing over the years.
    • EPS has also been increasing over the period.
    • However, Net debt/ equity is quite high for the company which is a risk factor.
    • Consistently generated negative net cash flows from operating activities that may harm the business operation of the company.
    • Low Net NPA to AUM

Five-Star Business Finance IPO – Valuation Parameters

All amounts in INR Million
(Year ended March 31)
201920202021
Revenue Operation4,089.08 7,867.1510,497.42
Total Income4,089.86 7,873.4710,512.55
Total Borrowings 9,600.29 23,636.9334,251.97
EBITDA3,026.92 5,763.048,130.16
EBITDA Margin74.02% 73.25%77.45%
Profit after tax1,564.14 2,619.513,589.94
Net Profit Margin38.24% 33.27%34.15%
Earnings Per Share-Diluted6.7310.0713.61
Net Cash from Operating Activities(11,614.61) (18,982.31)(7,181.23)
Total Borrowings to Total Equity Ratio0.701.221.48
Return on Equity Percentage15.11% 15.35%16.85%
Return on Total Assets8.76%7.31%6.99%
AUM21,128.06 38,922.2844,453.81
Net NPA/AUM0.68% 1.13%0.83%
Live Accounts72,890143,079176,467
Amount Disbursed (₹ in million)14,814.6224,086.6912,450.54
Gross NPA to AUM (%)0.881.371.02
Net NPA to AUM (%)0.681.130.83

Five-Star Business Finance IPO: Do you invest?

  • Strong presence in south Indian states with over 268 branches and 3897 employees.
  • Five-Star Business Finance credit rating is A+ and manages over INR 4639 crores portfolio.
  • Total income is better than its listed close competitors such as Aavas Financiers and Aptus Value. Another peer Utkarsh small finance bank is also listing in the exchanges soon.
  • Return on Net worth (RoNW), EPS, and NAV are better in comparison to their above peers.
  • However, Five-Star Business Finance Limited has had negative net cash flow from operations over the years.
  • The borrowing-to-equity ratio has increased over the years.
  • Its close peer Aptus Value has fallen more than 20% from its high after listing Aug 2021.
  • The valuation seems reasonable to me.
  • I would invest in the IPO for long term.

Five-Star Business Finance IPO Details

Five-Star Business Finance IPO DetailsDetails
Five-Star Business Finance IPO DateNov 9, 2022 to Nov 11, 2022
Five-Star Business Finance IPO Price band₹450 to ₹474 per share
Five-Star Business Finance IPO Allotment dateNov 16, 2022
Refunds Initiation dateNov 17, 2022
Credit of Shares to Demat AccountNov 18, 2022
Listing DateNov 21, 2022
Five-Star Business Finance IPO Issue SizeINR 2752 Crore
Offer for SaleINR 2752 Crore
Equity Shares outstanding prior to the Offer290,135,120 Equity Shares
Minimum bid for Retail (equity Shares)                                           31 Shares
Minimum bid Size for RetailsINR 14, 694
Maximum bid Size for RetailsINR 191,022
Face ValueINR 1 per share
Listing on BSE & NSE

Suggested Readings

We endeavor to help you to understand different aspects of a company before you invest in the company’s IPO. Here are some suggested readings on company insights Prasol Chemicals Limited, Concord Biotech Limited, Sah Polymers Company, Utkarsh small finance bank.

Five-Star Business Finance limited Contact Details and lead managers

Contact DetailsLead Managers
Five-Star Business Finance Limited
New No. 27, Old No. 4, Taylor’s Road,
Kilpauk, Chennai 600 010, Tamil Nadu,
India; Tel: +91 44 4610 6260;
Website: www.fivestargroup.in;
1. ICICI Securities
2. Edelweiss Financial Services Limited
3. Kotak Mahindra Capital Company
Limited
4. Nomura Financial Advisory and Securities
(India) Private Limited

 Five-Star Business Finance IPO Allotment Status

 Five-Star Business Finance IPO allotment will be available on KFin Technologies website. To know your allotment status, get ready with your PAN number and click on this link.

Five-star business finance IPO GMP

DateGrey Market Premium IPO Price
9-11-2022INR 10INR 474
8-11-2022INR 10
7-11-2022INR 8

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