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All that you should know about the Company before applying for the IPO

November 07, 2022     

The public issue of equity shares of FIVE-STAR BUSINESS FINANCE LIMITED will open for subscription on November 09, 2022 and closes on November 11, 2022. It is expected to list on the stock exchanges on November 21, 2022. What does the company do? Why is the company going public? Who are its key competitors? Its key strengths, and lot more. Here’s everything that you want to know about the company to analyse the IPO.

Company Profile

Incorporated in 1984, the company is an NBFC-ND-SI (Non-Banking Financial Company - Systemically Important Non-Deposit Taking Company) providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded from traditional financing institutions. They are headquartered in Chennai with a strong presence in southern India and all of their loans are secured by their borrowers’ property, primarily Self-Occupied Residential Property.

Within a subset of large peers (with more than ₹3000 crores in Gross Term Loans (GTL)), they had the fastest GTL growth, with a CAGR of 65.0% (FY 2017-21) and they had the highest average return on Gross Term Loans of 7.5%, across the period covering FY 2022, 2021 and 2020.

Their target customers include: people in urban and semi-urban locations, as well as in the rural markets of India; who typically derive income from “everyday” cash and carry businesses with a focus on services; with household net cash-flows of approximately ₹25,000 to ₹40,000 per month; who can provide collateral (typically land and buildings) of approximately ₹10 lakh in value; and whose family will act as co-applicants on the loan.

The company has an extensive network of 311 branches, as of June 30, 2022. These branches are spread across approximately 150 districts, eight states and one union territory. Tamil Nadu, Andhra Pradesh, Telangana and Karnataka are key states for the company's business. These key states collectively accounted for approximately 85% of the company's branch network by number, as of June 30, 2022.

Who are the Promoters of the Company?

Lakshmipathy Deenadayalan, Hema Lakshmipathy, Shritha Lakshmipathy, Matrix Partners India Investment Holdings II, LLC And Sci Investments V

Positives about the Company

  • Fastest Gross Term Loans (GTL) growth among compared peers with more than ₹3,000 crore in GTL, with strong return and growth metrics and a significant potential addressable market.
  • Among the select institutions to develop an underwriting model that evaluates the cash-flows of small business owners and self-employed individuals in the absence of traditional documentary proofs of income.
  • Strong on-ground collections infrastructure leading to their ability to maintain a robust asset quality.
  • Ability to successfully expand to new underpenetrated geographies through a calibrated expansion strategy.
  • 100% in-house sourcing, comprehensive credit assessment and robust risk management and collections framework, leading to good asset quality.
  • Access to diversified and cost-effective long-term financing with a conservative approach to asset liability and liquidity management.
  • Experienced, cycle-tested leadership with an experienced longstanding promoter, and a professional management team and supported by marquee investors.

Who are its listed peers?

  • Aavas Financiers Limited
  • Aptus Value Housing Finance Limited
  • Au Small Finance Bank Limited

Why is the Company going public?

Given below are the objectives of the Company –

  • To achieve the benefits of listing the Equity Shares

The Offer is a 100% Offer for Sale issue. The Company will not receive any proceeds from the Offer for Sale and all proceeds from the Offer will go to the Selling Shareholders.

IPO Details

IPO Size ₹ 1,960 Crore*
Offer Mix 100% Offer For Sell
Price Band ₹ 450 - ₹ 474
Lot Size 31 Shares (& in multiples thereof)
Face Value ₹ 1
Application Amount Min. ₹ 14,694 (1 lot) | Max. ₹ 1,91,022 (13 lots) [at upper price band]
Listing on NSE & BSE
Registrar KFin Technologies Limited
Cut-off time for UPI Mandate Confirmation 11-November-2022 (up to 05:00 PM)
* at upper price band

Category Wise Availability*

QIB ₹ 980 Crore
(50% of the Issue Size)
NIB ₹ 294 Crore
(15% of the Issue Size)
Retail ₹ 686 Crore
(35% of the Issue Size)
* at upper price band

Indicative Issue Timeline

Activity Date
IPO Opens November 09, 2022
IPO Closes November 11, 2022
Finalization of the basis of allotment November 16, 2022
Unblocking of funds / Initiation of refunds November 17, 2022
Credit of equity shares to Demat accounts November 18, 2022
Listing of equity shares November 21, 2022
Source: Company RHP  Alternate Text


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