Small business and mortgage loans provider, Five Star Business Finance is set to launch its initial public offering (IPO) on November 9. The IPO is purely an offer for sale (OFS) and the shareholders will offload stakes to the tune of ₹1,960 crore. Subscriptions in this IPO will be allowed till November 11. That being said, the company will offer shares to anchor investors on 7 November ahead of the IPO.
Among the selling shareholders are --- promoters SCI Investments V and Matrix Partners India Investment Holdings II, LLC who will offload stakes aggregating ₹166.74 crore and ₹719.41 crore respectively. Other investors like Matrix Partners India Investments II Extension, LLC will offer shares up to ₹12.09 crore, Norwest Venture Partners X – Mauritius to divest stakes worth ₹361.45 crore, and TPG Asia VII SF selling shares worth ₹700.32 crore.
Since the entire IPO is OFS, the proceeds arriving from the issue will not be utilised by Five Star Business Finance but instead will be remitted to the selling shareholders mentioned above.
The equity shares offered under the IPO have a face value of Re 1 each. The price band for the issue is fixed at ₹450 per share to ₹474 per share respectively.
Of the total issue, 50% of the IPO size is reserved for qualified institutional buyers (QIB), while 15% is set aside for non-institutional investors (NII), and the remaining 35% will be allocated to retail individual investors (RII).
Companies like ICICI Securities, Edelweiss Financial Services, Kotak Mahindra Capital Company, and Nomura Financial Advisory and Securities (India) are acting as the book-running lead managers (BRLM) for the IPO. KFin Technologies is the registrar of the offer.
Five Star Business Finance is an NBFC-ND-SI providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom is largely excluded by traditional financing institutions. The company is headquartered in Chennai, Tamil Nadu with a strong presence in south India.
The company has developed a business model that is predicated on arriving at an appropriate risk framework, with the optimal instalment-to-income ratio to ensure that our customers have the necessary means to repay the loan after meeting their regular obligations and other event-based capital requirements.
As of 30 June, 2022, Five Star Business has an extensive network of 311 branches spread across approximately 150 districts, eight states, and one union territory, with Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka being its key states.
Further, as of 30 June, 2022, the company's net profit stood at ₹139.43 crore, while the net profit margin was at 41.12%. Net worth stood at ₹3,856.97 crore in the period.
In FY22, Five Star Business posted a total income of ₹1,256.16 crore versus ₹1,051.25 crore in FY21. Revenue from operations came in at ₹1,254.06 crore in FY22 against ₹1,049.74 crore in FY21. Gross term loans were at ₹5,067.07 crore in FY22 against ₹4,445.38 crore in FY21. Its disbursements rose to ₹1,756.24 crore in FY22 against ₹1,245.05 crore in FY21.
As of June 30, 2022, the company's total assets are around ₹6,471.55 crore.
Among its strategies, Five Star Business plans to increase penetration in existing markets by increasing branch staff numbers, increasing its branch network in the existing geographies, and diversifying to contiguous markets.
The company continues to focus on small business owners and self-employed individuals primarily in the semi-urban and urban markets of India, as well as in rural markets where Crisil expects faster growth in bank credit activity as financial awareness increases.
Also, the company focuses on enhancing its brand recall to attract new customers.
Post the IPO issue, Five Star Business Finance will be listed on BSE and NSE.