Non-banking financial company Five Star Business Finance has filed preliminary papers with capital markets regulator Sebi to raise up to Rs 2,752 crore through an initial public offering (IPO). The IPO is an entirely an offer for sale (OFS) by existing shareholders and promoter group entities, according to the draft red herring prospectus (DRHP).
The NBFC is backed investors like TPG, Matrix Partners, Norwest Ventures, Sequoia and KKR. The OFS will see sale of shares to the tune of Rs 257.10 crore by SCI Investments V, Rs 568.92 crore by Matrix Partners India Investment Holdings II LLC, Rs 9.56 crore by Matrix Partners India Investments II Extension LLC, Rs 385.65 crore by Norwest Venture Partners X- Mauritius, Rs 1,349.78 crore by TPG Asia VII SF Pte Ltd and Rs 180.93 crore by promoter group entities.
At present, TPG Asia holds 20.99 per cent stake, Matrix Partners owns over 14 per cent, Norwest Venture has 10.22 per cent stake and SCI Investments holds 8.83 per cent stake in the company. ICICI Securities, Kotak Mahindra Capital Company, Edelweiss Financial Services and Nomura Financial Advisory and Securities (India) Private Limited are the book running lead managers to the issue. Chennai-headquartered, Five Star Business Finance, provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom is largely excluded by traditional financing institutions.
It has a strong presence in south India, and all loans are secured by the borrowers’ property, predominantly being self-occupied residential property. The NBFC commenced operations in 1984, with a focus on consumer loans and vehicle finance and it changed its business approach in 2005 with a focus on small business loan lending in urban, semi urban markets as well as rural areas with growth potential.
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. Besides, live accounts grew from 15,803 in fiscal 2017 to 1.92 lakh as of September, 2021. Its assets under management (AUM) grew 86 per cent CAGR over fiscal 2016-21. The asset base stood at Rs 4,445 crore as of March, 2021, compared to Rs 3,892 crore as of March, 2020.
As of March 2021, Tamil Nadu, Karnataka, Andhra Pradesh and Telangana accounted for 95 per cent of the overall portfolio. The NBFC posted a 34 per cent growth in total income at Rs 1,051 crore in FY21 from Rs 787 crore in FY20, while its net profit jumped 37 per cent to Rs 359 crore in FY21 from Rs 262 crore in FY20. It also recorded a profit after tax (PAT) of Rs 218 crore for the first half of the current financial year.
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