Five Star Business Finance IPO - 7 Things to Know

Chennai based Five Star Business Finance Ltd has filed its DRHP with SEBI for its proposed IPO. The Rs.2,752 crore IPO will entirely be an offer for sale by the existing shareholders.

Hence, there will be no fresh funds coming and no dilution of equity. The intent of the IPO is to list the stock for greater visibility and also as a potential future currency.
 

Here are seven things to know about the Five Star Business Finance IPO

1. The Five Star Business Finance IPO consist of Rs.2,752 crore and will entirely be by way of offer for sale. Five Star Business Finance was originally set up as an NBFC in the year 1984 and caters to the small lending segment in the market, with focus on entrepreneurs and self-employed persons.

2. Currently, over 54% of Five Star Business Finance is held by 4 major PE investors. For instances TPG Asia holds 20.99% while Matrix Partners holds 14%.

Among other key investors, Norwest Venture owns 10.22% in Five Star Business Finance while SCI Investments holds a significant 8.83% stake in the company.

3. Most of the large holders will participate in the OFS to partially monetize their stake. Out of the total Rs.2,752 crore OFS, TPG Asia will sell Rs.1,350 crore, Matrix Partners will sell Rs.568 crore, Norwest Ventures Rs.386 crore and SCI Investments Rs.257 crore.

Promoters entities will sell around Rs.181 crore between them in the OFS.

4. Five Star Business Finance is based out Chennai and has leadership focus in South India. Since 2005, it provides secured business loans to small entrepreneurs and self-employed individuals, outside the purview of existing banks and financial institutions.

Most loans are secured by self-occupied residential property to reduce chances of default.

5. Five Star witnessed enviable growth . It has growth in last 2 years from 173 branches to 268 branches. Over last 4 years, live accounts have grown 12-fold to 1.92 lakhs.

While Five Star has presence in 8 states and 126 districts, nearly 95% of its portfolio is located in the 4 states of Tamil Nadu, Karnataka, Andhra Pradesh and Telangana.

6. Financial numbers have also been impressive for Five Star. For FY21, total income grew 34% at Rs.1,051 crore while net profits were up 37% at Rs.359 crore. Its assets under management or AUM currently stands at Rs.4,445 crore and has grown at a CAGR of 86% in last 5 years.

7. The IPO will be lead managed by ICICI Securities, Kotak Mahindra Capital, Edelweiss Financial and Nomura Financial Advisory, as book running lead managers.

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