Five Star Business Finance IPO | Review

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Five Star Business Finance Limited has come up with an initial public offer (IPO). It will open on November 09-11, 2022 at Rs.450-474 a share. The IPO issue size is around Rs.1,960.01 crores. The minimum bid will be for 31 shares and in its multiples thereafter.

Overview

Five Star Business Finance Limited was incorporated in 1984. It is an NBFC-ND-SI providing secured business loans to micro-entrepreneurs and self-employed individuals. Each of them are largely excluded by traditional financing institutions. The company is headquartered in Chennai, Tamil Nadu with a strong presence in south India and all of its loans are secured by borrowers’ property.

The company has developed a business model that is predicted on arriving at an appropriate risk framework, with the optimal installment to income ratio to ensure that customers have the necessary means to repay the loan. It primarily offers customers small loans for business purposes. Additionally, it also provides loans for asset creation such as home renovation or improvement, or for meeting expenses for significant economic events such as marriage, healthcare and education.

Five Star Business Finance has 2,30,175 accounts, 311 branches & 19,793 no. of loans disbursed. On June 30, 2022, it had 6,077 no. of employees and Rs.52,965.35 millions Gross Term Loans.

Website – https://fivestargroup.in/

Promoters

Lakshmipathy Deenadayalan – 10.49%	Hema Lakshmipathy – 7.14%
Shritha Lakshmipathy – 0.07%	Matrix Partners India Holdings – 12.46%
SCI Investments V – 8.79%

Promoter Holding

Pre-Issue Shareholding – 40.07%

Post-Issue Shareholding -33.65%

Strength & Weakness

Strengths	Weaknesses
Fastest Gross Term Loans growth	Require substantial capital for business
Significant potential addressable market	Volatility in interest rates
Strong “on-ground” collections infrastructure lending	The risk of non-payment or default by our borrowers
Calibrated expansion strategy	Negative net cash flows in the past
Robust risk management	Highly competitive industry
Access to diversified and cost-effective long-term financing	Company is involved in certain legal proceedings
Experienced promoter & professional management team	Primarily focused in the states of Tamil Nadu, Andhra Pradesh, Telangana and Karnataka
Comprehensive credit assessment	Dependent on a number of Key Managerial Personnel

Competitors

Shriram City Union Finance Ltd	Vistaar Financial Services Pvt Ltd
Aavas Financiers Ltd	Aye Finance
Lendingkart Technologies Pvt Ltd	Digikredit Finance Pvt Ltd
AU Small Finance Bank	Aavas Financiers Ltd
Home First Finance Company India	Aptus Value Housing Finance India

Company Financials

Year	Revenue (in Crore)	Profit (in Crore)
31-Mar-2020	787.35	261.95
31-Mar-2021	1051.26	358.99
31-Mar-2022	1256.17	453.54
30-Jun-2022	339.06	139.43

Object of Issue

1) To carry out the Offer for Sale.

2) To achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Five Star Business Finance IPO Lot Size

Application	Lot	Shares	Amount
Retail (Min)	1	31	Rs.14,694
Retail (Max)	13	403	Rs.1,91,022
S-HNI (Min)	14	434	Rs.2,05,716
B-HNI (Max)	69	2,139	Rs.10,13,886

Five Star Business Finance IPO Details

IPO Opening Date	November 09, 2022
IPO Closing Date	November 11, 2022
Face Value	Rs.1 per Equity Share
IPO Price	Rs.450-474 per share
Market Lot	31 shares
Minimum Order Quantity	31 shares
Listing At	NSE, BSE
No. of shares offered (OFS)	4,13,51,266 shares
Issue Size	Up to Rs.1,960.01 Crore
QIB Shares Offered	50% of the offer
Retail Shares Offered	35% of the offer
NII/HNI Shares Offered	15% of the offer

Five Star Business Finance IPO Timetable

IPO Date	November 09-11, 2022
Allotment Date	November 16, 2022
Initiation of Refunds	November 17, 2022
Credit of share to Demat a/c	November 18, 2022
IPO Listing Date	November 21, 2022