Non-banking financial company, Five Star Business Finance has filed a draft red herring prospectus (DRHP) with the Securities Exchange Board of India to raise ₹ 2,751.95 crore in an initial public offering (IPO).
The IPO is entirely an offer-for-sale (OFS) from promoters and financial investors.
The company’s largest shareholder TPG, which owns 20.99% stake, will sell shares worth ₹1,349.78 crore, while Matrix Partners, which owns 14.09% stake, through its India Investment Holdings II and India Investments II Extension funds, will sell cumulative shares worth ₹578.48 crore.
Other selling shareholders include Sequoia Capital through SCI Investments V (8.83% stake) and Norwest Venture Partners (10.22% stake).
Promoters Deenadayalan Rangasamy and Varalakshmi Deenadayalan will also sell ₹180.93 crore worth of shares in the offering.
ICICI Securities, Edelweiss Financial Services, Kotak Mahindra Capital and Nomura Financial Advisory and Securities (India) will act as the book running lead managers (BRLM) to the issue.
Cyril Amarchand Mangaldas will serve as the legal counsel to the company, Shardul Amarchand Mangaldas & Co and Sidley Austin LLP will serve as the legal counsel to the BRLMs, and Khaitan & Co and AZB & Partners will be the legal advisors to the promoters and selling shareholders respectively.
The company is aiming for an equity valuation of over $3 billion, as per an Economic Times report.
Chennai-headquartered NBFC raised $234 million (₹1,700 crore) from new and existing investors at a valuation of $1.4 billion in March 2021, the time when it joined the elite unicorn club.
It provides secured business loans to micro-entrepreneurs and self-employed individuals. It has a strong presence in south India, and all loans are secured by the borrowers' property, predominantly being self-occupied residential property.
The company was set up in 1984 by V K Ranganathan. Over 95% of its loan size is between ₹ 1-10 lakh with the average loan size at ₹ 2.6 lakh in FY21.
Five Star has grown from 173 branches in 2019 to 268 branches as on September 2021 across 126 districts in eight states and one union territory.
Its assets under management (AUM) grew 86% CAGR over FY16 to FY21 and stands at ₹.4,445 crore as on March 31, 2021.