Chennai based Five Star Business Finance IPO would open for subscription on 9th November, 2022. Company is a NBFC providing secured business loans to micro-entrepreneurs and self-employed individuals. Should you invest in Five Star Business Finance IPO? This article would provide IPO details, Dates, Listing Date and conclusion on whether this is good or bad for investment.
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About Five Star Business Finance Limited
Five Star Business Finance Limited is a Non-Banking Finance Company providing secured business loans to micro-entrepreneurs and self-employed individuals. It has an extensive network of 311 branches, spread across eight states and one union territory and approximately 150 districts across India, with Tamil Nadu, Andhra Pradesh, Telangana and Karnataka being the key states.
Five Star Business Finance IPO Details
| IPO Opening Date | 09-Nov-22 |
| IPO Closing Date | 11-Nov-22 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 1 per equity share |
| IPO Price band | Rs 450 to Rs 474 per equity share |
| Lot Size | 31 Shares |
| Min Order Quantity | 31 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 1960 Crores |
Five Star Business Finance IPO RHP
What are the strengths of Five Star Business Finance Limited?
1) Company has fastest Gross Term Loan growth among comparable peers with more than Rs 30,000 million in Gross Term Loans, with strong return and growth metrics and a significant potential addressable market
2) It is 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
3) It has strong โon-groundโ collection infrastructure leading to its ability to maintain a robust asset quality
4) It has ability to successfully expand to new underpenetrated geographies through a calibrated expansion strategy
5) It has 100% in-house sourcing, comprehensive credit assessment and robust risk management and collections framework, leading to good asset quality
6) Access to diversified and cost-effective long-term financing with a conservative approach to asset liability and liquidity management
7) It has experienced, cycle-tested leadership with a longstanding promoter, professional management team and supported by marquee investors
What are the Objects of the IPO Offer?
Five Star Business Finance IPO Size is Rs 1,960 Crores which is only for OFS. Under OFS, selling shareholders would sell their shares and the company would not get any money from this IPO proceeds.
Who are the promoters of Five Star Business Finance Limited?
Lakshmipathy Deenadayalan, Hema Lakshmipathy, Shritha Lakshmipathy, Matrix Partners India Investment Holdings II, LLC and SCI Investments V are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 3 months.
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Particulars | FY20 | FY21 | FY22 | 30-Jun-22 |
|---|---|---|---|---|
| Total Assets | 4,353.2 | 5,793.6 | 6,343.1 | 6,471.6 |
| Revenues | 787.4 | 1,051.3 | 1,256.2 | 339.1 |
| Profit After Tax | 262.0 | 359.0 | 453.5 | 139.4 |
| Profit % | 33.27% | 34.15% | 36.10% | 41.12% |
Why to invest in Five Star Business Finance IPO?
Here are the positive factors in this company.
1) Five Star Business Finance Ltd is the NBFC providing secure business loans to micro-entrepreneurs and self-employed individuals. Company has fastest Gross Term Loan growth among comparable peers.
2) Company has strong revenue growth in the last 3 years.
3) Company has generated strong margin growth in the last 3 years.
Risk Factors of investing in Five Star Business Finance IPO
1) Company IPO Proceeds would go only for selling shareholders and company would not benefit out of this.
2) Company requires substantial capital for its business and any disruption in its sources of capital could have an adverse effect on its business, results of operations and financial condition.
3) The risk of non-payment or default by its borrowers may adversely affect its business, results of operations and financial condition.
4) Its inability to meet obligations, including financial and other covenants under its debt financing arrangements, could adversely affect its business, results of operations and financial condition.
5) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Frequently Asked Questions (FAQs)
What is Five Star Business Finance IPO date?
This IPO would open on 9th November, 2022 and closes on 11th November, 2022.
What is Five Star Business Finance Share Price?
The IPO share price band is Rs 450 to Rs 474 per share.
How much portion allocated to each group of investors in this IPO?
1) QIB – Not less than 50% of the offered shares
2) NII / HNI – Not less than 15% of the offered shares
3) Retail – Not less than 35% of the offered shares
Is it good or bad for investment?
An investor should always invest in a company that has strong financial track record. This company has generated strong revenue growth in the last 3 years and 3 months. Its margins are good and improving year on year.
Five Star Business Finance IPO Valuation
Five Star Business Finance IPO price band is Rs 450 to 474 per share.
If we consider FY2022 EPS, the P/E ratio works out to be 30x.
If we consider last 3 years weighted EPS, the P/E ratio works out to be 33x.
If we annualize Q1 FY23 EPS, the P/E ratio works out to be 25x.
Means company is asking for the issue price in P/E of 25x to 33x. There are listed peers like AU Small Finance Bank trading at P/E 33x (Lowest) and Aavas Financiers trading at P/E 46x (Highest) and industry average P/E is 41x. Hence Five Star Business Finance IPO share price is underpriced.
Five Star Business Finance dates – subscription, Allotment and Listing
| Offer Open | 09-Nov-22 |
| Offer close | 11-Nov-22 |
| Finalization of Allotment | 16-Nov-22 |
| Initiation of Refunds | 17-Nov-22 |
| Credit to Demat Account | 18-Nov-22 |
| IPO Shares Listing Date | 21-Nov-22 |
How to buy Five Star Business Finance IPO online through Zerodha?
If you do not have Zerodha account, sign-up here and proceed to the next step.
If you have a demat account with Zerodha, you can apply this IPO online using the UPI as a payment gateway. Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to the console.
2) Go to Portfolio and click the IPOs link.
3) Visit โFive Star Business Finance Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on โSubmitโ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
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Five Star Business Finance IPO Review โ Should you invest?
After going through all these points, you might be wondering whether Five Star Business Finance IPO is good or bad for investment?
Five Star Business Finance Limited is a NBFC providing secured business loans to micro-entrepreneurs and self-employed individuals. It has generated strong revenue growth in the last 5 years. Its margins are high and increasing year on year. Its issue price is also attractively priced.
On the other side, the IPO proceeds would be only OFS. Means company would not get benefitted with this IPO issue except of listing benefits.
After a long time, I could see lots of positive factors in an IPO that too, where the IPO price is attractively priced. Investors who are willing to invest for a medium to long term, can invest in this IPO.
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