Chennai-based non-banking financial corporation Five Star Business Finance Limited (“The Company”) has fixed the price band at ₹450 to ₹474 per Equity Share for its maiden public offer. The initial public offering (“IPO” or “Offer”) of the Company will open on Wednesday, November 09, 2022, for subscription and closes on Friday, November 11, 2022. Investors can bid for a minimum of 31 Equity Shares and in multiples of 31 Equity Shares thereafter.

The offer is an Offer for Sale aggregating to Rs 1960 crore by the company’s promoters and existing shareholders.

The offer for sale comprises Rs 166.74 crore by SCI Investments V, Rs 719.4crore by Matrix Partners India Investment Holdings II, LLC, Rs 12.08 crore by Matrix Partners India Investments II Extension, LLC, Rs 361.4 crore by Norwest Venture Partners X – Mauritius, Rs 700.3 crore by TPG Asia VII SF Pte. Ltd.

Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions.

It has a strong presence in south India, and all loans are secured by the borrowers’ property, predominantly self-occupied residential property (SORP). It is the fourth fastest AUM growth of 50% CAGR over fiscal 2018-22 among the compared peers. Over 95% of its loan portfolio comprises loans from between ₹0.1 million to ₹1.0 million in principal amount, with an average ticket size of ₹0.29 million, for the three months ended June 30, 2022.

Asset Under Management stood at Rs. 5100 crore as of March 31, 2022, compared to Rs. 4400 crores as of March 31, 2021. As of June 30, 2022, Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana accounted for 85% of the overall portfolio. Five Star Business has the second highest Capital Adequacy Ratio of 75.2% after Aptus Value Housing (85.6%) among the compared peers as of March 2022.

As of June 30, 2022, it has a network of 311 branches in 150 districts, 8 states, and 1 union territory. With a workforce of 6077 employees, live accounts grew from 33,157 in fiscal 2018 to 230,175 as of June 30, 2022. In addition, it also has a business and collections team of 2,550 employees including 2,250 Relationship Officers.

Five-star Business Finance competes with Shriram City Union Finance Limited, Vistaar Financial Services Private Limited, Veritas Financial and Management Services Private Limited, Aye Finance, Lendingkart Technologies Private Limited, Digikredit Finance Pvt Ltd and AU Small Finance Bank, Aavas Financiers Limited, Home First Finance Company India and Aptus Value Housing Finance India.

The NBFC posted a 19.49% growth in total income at Rs 1256.16 crore in FY22 from Rs 1051.25 crore in FY21, while its net profit stood at Rs 453.54 crore in FY22 from Rs 358.99 crore in FY21.

Total income increased by 12.74% to 339.05 crore for the three months ended June 30, 2022, from Rs 300.75 crore for the three months ended June 30, 2021, primarily due to an increase in revenue from operations. Profit after tax increased by 37.28% to Rs 139.43 crore for the three months ended June 30, 2022, from Rs 101.57 crore for the three months ended June 30, 2021.

ICICI Securities, Kotak Mahindra Capital Company, Edelweiss Financial Services, and Nomura Financial Advisory and Securities (India) Private Limited are the book-running lead managers to the issue and Kfintech are the registered to the issue.

By Mansi