Five Star Business Finance gets SEBI nod for Rs 2,752 cr-IPO

Five Star Business Finance, backed by TPG, Matrix Partners and Norwest Ventures, has received approval from markets regulator SEBI to raise Rs 2,752 crore through an initial public offering (IPO).

The Chennai-headquartered NBFC provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions.

The IPO is entirely an offer for sale. The Five Star Business Finance company will not receive any proceeds from the offer.

Currently, TPG Asia VII SF Pte. Ltd. holds 20.99 per cent, Matrix Partners India Investments Holdings II, LLC, holds 14.09 per cent, Lakshmipathy Deenadayalan and Norwest Venture Partners X – Mauritius own 13.01 per cent and 10.22 per cent stake in the company, respectively. They comprise selling shareholders list.

The NBFC has grown from 173 branches in 2019 to almost 268 branches as on September 30, 2021 across 126 districts in eight states and one union territory. Its AUM grew 86 per cent CAGR over fiscal 2016-21, third fastest among compared peers, the company said.

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In terms of absolute size of portfolio, AU Small Finance Bank, Shriram City Union Finance and Five-Star are the largest players in the small business loans segment.

Target customers of Five Star Business Finance are mostly everyday cash and carry businesses with a focus on services, it also provides secured loans to small business owners and self-employed individuals, as well as small mortgage loans to meet certain personal needs of the customers, in urban and semi-urban locations, as well as rural markets.

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

FIVE STAR BUSINESS FINANCE IPO:

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

The company headquartered in Chennai, Tamil Nadu with a strong presence in south India and all of their loans are secured by the borrowers’ property, predominantly being SORP.

Compared to peers with more than ₹30,000 mn in AUM Five Star Business Finance Limited have the fastest AUM growth, with a compound annual growth rate of 65.0%.

They are among the three best for Gross Non-Performing Assets being NPAs that are 90+ Days-Past-Due as a percentage of AUM.

While they have the best asset quality among lenders identified by CRISIL as engaged in extending MSME business loans, with other lenders Over 95% of their loan portfolio comprises loans from between ₹0.1 mn to ₹1.0 mn in principal amount.

The company has provided loans to more than 185,000 customers in total. They had an active loan base of 176,467 as of March 31, 2021.

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