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Five-Star Business Finance IPO

Five Star Business Finance has filed its preliminary papers with SEBI in order to raise Rs.2,752 crore through an initial public offer...

  • Status: Closed
  • RHP:
  • ₹ 13,950 / 31 shares

    Minimum Investment

IPO Details

  • Open Date

    09 Nov 2022

  • Close Date

    11 Nov 2022

  • IPO Price Range

    ₹ 450 to ₹474

  • IPO Size

    ₹ 2751.95 Cr

  • Listing Exchange

    BSE, NSE

  • Listing Date

    21 Nov 2022

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IPO Timeline

Last Updated: 16 November 2022 11:37 AM by 5Paisa

Five Star Business Finance IPO opens on 9th November and closes on 11th November. The issue consists of an Offer for Sale aggregating to Rs. 2,751.95 crores.

The price band is set at 31 per share and the lot size is Rs. 450 – Rs. 474 per share. The shares will be allotted on 16th November while the issue will be listed on 21st November.

For the OFS, SCI Investments is to offload shares worth Rs.257.10 crore, shares worth Rs.568.92 crore by Matrix Partners India Investments II Extension LLC, Norwest Venture Partners X- Mauritius are to offload Rs.385.65 crore, TPG Asia VII SF Pte Ltd is to offload Rs.1,349.78 crore. Currently TPG Asia holds a stake of 20.99%, Matrix partners holds a 14% stake and Norwest holds 10.22% stake. The book running lead managers to this issue are ICICI Securities, Kotak Mahindra Capital Company, Edelweiss Financial Services and Nomura Financial Advisory and Securities Pvt ltd. 

 
Objectives of Five Star Business Finance IPO

The main objective of the issue is to gain from the company being listed on the stock exchanges.

Five Star Business Finance IPO Video

About the company


Five Star Business Finance, founded in 1984, is a Chennai based company that provides small loans and small mortgages to self-employed individuals and small entrepreneurs, who are excluded by the large financial institutions. All of the loans given by the company are secured by the borrower’s property. As of September 30, 2021, the company has an extensive network of 268 branches spread across 8 states and 1 union territory. 92% of the branches are located in cities and towns with a population of more than 1 million. Their live accounts increased from 15,803 in FY17 to 1,92,000 in September 2021. Tamil Nadu, Andhra Pradesh, Telangana and Karnataka account for 95% of the total portfolio of the company. The company has the largest Asset Under Management worth Rs.3,000 crore, as compared to its peers.

Since the customers usually do not have income proof, the whole underwriting process requires a long and detailed personal discussion with the person taking the loan, his/her family and relatives and neighbours to gain some perspective regarding the cash inflows and outflows, income pattern and behavioural aspects of the person. 
 

Profit and Loss

Balance Sheet

Particulars (in Rs. Crores) FY21 FY21 FY20
Revenue 1254.1 1049.7 786.7
EBITDA 917.1 813.0 576.3
PAT 453.5 359.0 262.0

 

Particulars (in Rs. Crores) FY22 FY21 FY20
Total Assets 6343.1 5793.6 4353.2
Share Capital 29.1 25.6 25.6
Total Borrowings 2558.8 3425.2 2363.7

 

Particulars (in Rs. Crores) FY22 FY21 FY20
Net cash generated from/(used in) operating activities -277.2 -157.3 -1523.3
Net cash from / (used in) investing activities -383.9 102.1 -131.9
Net cash flow from / (used in) financing activities 7.0 1032.5 1725.3
Net increase (decrease) in cash and cash equivalents -654.0 977.4 70.1

Peer Comparison

Name of the Company Total Revenue (in Rs. crores) Basic EPS NAV Rs. per share PE RoNW %
Five-Star Business Finance Limited 1,256.17 16.09 127.35 NA 13.86%
Aavas Financiers 1,305.65 45.1 355.53 46.02 12.66%
Aptus Value 840.22 7.58 58.68 43.29 12.69%
Au Small Finance Bank 6,915.43 18.03 119.31 33.19 15.04%


Strengths

1. Five Star Business Finance has witnessed the fastest AUM growth among its peers, with more than Rs.3,000 crore in AUM and has also witnessed strong growth and returns
2. One of the few institutions in the country that has developed an underwriting model where the cash flows of small business owners and self-employed individuals are analyzed in order to provide them with loans
3. The company has the ability to expand to un- penetrated geographical areas through its calculated approach
4. They have experienced and qualified promoters and a very professional management team with the backing of marquee investors
 

Risks

1. A substantial amount of capital is needed to run the business and the company derives it from various external sources and thus the whole business wholly depends on the timely availability of these funds
2. The main, inherent risk is of the borrowers not paying back the loans and the risk is higher in this case as the customer group is primarily the middle- and lower-income group and there is a high possibility of default among these small business owners and self-employed people
3. Adding to the point above, a large part of the borrowers are first time borrowers which further increases the risk of default
4. The volatility in interest rates could adversely affect the Net interest income
 

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FAQs

The Five Star Business Finance IPO lot size is 31 shares per lot.  A retail-individual investor can apply for up to 13 lots (403 shares or ₹191,022). 

The price of the Five Star Business Finance IPO is set at Rs. Rs. 450 – Rs. 474 per share.

The Five Star Business Finance IPO opens on 9th November and closes on 11th November.

The Five Star Business Finance IPO issue consists of an Offer for Sale aggregating to Rs. 2,751.95 crores.

Five Star Business Finance is promoted by Lakshmipathy Deenadayalan, Hema Lakshmipathy, Shritha Lakshmipathy, Matrix Partners India Investment Holdings II, LLC and SCI Investments V.

The Five Star Business Finance IPO allotment date is set for 16th November. 

The Five Star Business Finance IPO issue will be listed on 21st November.

ICICI Securities, Kotak Mahindra Capital Company, Edelweiss Financial Services and Nomura Financial Advisory and Securities Pvt ltd. is the book running lead managers to the issue.

The main objective of the issue is to gain from the company being listed on the stock exchanges

To apply for the IPO, follow the steps given below
•    Login to your 5paisa account and select the issue in the current IPO section
•    Enter the number of lots and price at which you wish to apply for
•    Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange
•    You will receive a mandate notification to block funds in your UPI app