The Five Star Business Finance IPO is set to open on November 9, with tentative allotment and listing dates of November 16 and 21, respectively. Here are 10 key things to know about the issue before investing.
IPO, allotment and listing dates
The initial public offering (IPO) of Five Star Business Finance, which provides small business loans and mortgage loans to micro-entrepreneurs and self-employed individuals, will open on November 9. The tentative date of share allotment is November 16 and the listing date is on November 21.
Here are 10 key things to know about the issue:
1. Five Star Business Finance is a non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI).
2. The company was founded in 2006 and has its headquarters in Chennai.
3. As of March 31, 2020, Five Star Business Finance had a network of 522 branches across 27 states and two union territories in India.
4. The company offers a range of products including business loans, home loans, vehicle loans and loan against property.
5. For the financial year ended March 31, 2020, Five Star Business Finance reported total income of Rs 4,213 crore and net profit of Rs 1,013 crore.
6. The equity shares of Five Star Business Finance are proposed to be listed on the BSE and NSE.
7. The IPO comprises a fresh issue of equity shares aggregating up to Rs 400 crore and an offer for sale by existing shareholders aggregating up to Rs 2,200 crore.
8. The price band for the IPO has been set at Rs 533-538 per equity share.
9. ICICI Securities Limited, Axis Capital Limited and Goldman Sachs (India) Securities Private Limited are the book running lead managers to the IPO. DSP Merrill Lynch Limited is the co-book running lead manager while Link Intime India Private Limited is the registrar to the issue. Equitas Small Finance Bank Limited is acting as the lead banker to facilitate timely payments from investors who wish to subscribe to the IPO through ASBA facilities provided by banks approved by SEBI . HDFC Bank Limited , IDFC FIRST Bank Limited , Axis Bank Limited , Citigroup Global Markets India Private Ltd., Kotak Mahindra Capital Company Limited , Yes Securities (India) Limited are acting as co-lead bankers while Equitas Small Finance Bank Ltd is acting as a selling shareholder lead manager for this offer . SBICAP Trustee Company Ltd is acting as trustee to the debentureholders . Investec Capital Services (India) Pvt Ltd is acting as independent market surveillance advisor .
Price band
The price band for the Five Star Business Finance IPO has been set at Rs. 500-502 per equity share.
The minimum order quantity is 80 shares and the offer comprises a fresh issue of equity shares worth Rs. 200 crore and an offer for sale of up to 30 lakh equity shares by the selling shareholders.
The net issue size will be Rs. 184-186 crore, assuming the anchor allotment is fully subscribed.
The IPO is being managed by Axis Capital Ltd, Citigroup Global Markets India Pvt Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd.
Offer details
The equity shares are proposed to be listed on the BSE and NSE. The price band for the IPO has been set at Rs. 500-502 per equity share. The minimum order quantity is 80 shares and the offer comprises a fresh issue of equity shares worth Rs. 200 crore and an offer for sale of up to 30 lakh equity shares by the selling shareholders. The net issue size will be Rs. 184-186 crore, assuming the anchor allotment is fully subscribed.
The IPO is being managed by Axis Capital Ltd, Citigroup Global Markets India Pvt Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd.
Objectives of the issue
The main objective of the Five Star Business Finance IPO is to raise Rs. 200 crore through a fresh issue of equity shares. The net proceeds from the fresh issue will be used to fund the expansion of the company's lending business. The company plans to use a portion of the net proceeds to set up new branches and increase its sales and marketing efforts. It also plans to use a portion of the net proceeds to repay certain borrowings.
Five Star Business Finance Ltd is a non-banking financial company (NBFC) that provides small business loans and mortgage loans to micro-entrepreneurs and self-employed individuals. The company was founded in 2010 and is based in Chennai, India. As of March 31, 2020, Five Star Business Finance had a loan portfolio of Rs. 2,213 crore and total assets under management (AUM) of Rs. 2,636 crore.
Lot size
The lot size for the Five Star Business Finance IPO has been set at 80 shares. The minimum order quantity is 80 shares and the offer comprises a fresh issue of equity shares worth Rs. 200 crore and an offer for sale of up to 30 lakh equity shares by the selling shareholders. The net issue size will be Rs. 184-186 crore, assuming the anchor allotment is fully subscribed.
Company profile and industry
Five Star Business Finance Ltd is an Indian non-banking financial company (NBFC) that primarily provides small business loans and mortgage loans to micro-entrepreneurs and self-employed individuals. The company was founded in 2009 and is headquartered in Chennai, Tamil Nadu. As of March 31, 2020, Five Star Business Finance had a loan portfolio of Rs. 2,213 crore and total AUM of Rs. 2,636 crore.
The Indian NBFC sector has been growing at a rapid pace in recent years, driven by strong economic growth and favourable demographics. The sector has seen a number of new entrants in recent years, with the number of registered NBFCs increasing from 9,637 in FY2014 to 11,449 in FY2019. The growth of the NBFC sector has been fuelled by rising demand for credit from businesses and households, as well as by the easy availability of capital.
The past few years have been challenging for the NBFC sector due to a number of factors, including the slowdown in economic growth, tight liquidity conditions, and concerns about asset quality. However, the sector has started to recover in FY2020 on the back of supportive government measures and an improvement in liquidity conditions. The government has taken a number of steps to support the growth of the NBFC sector, including providing additional funding through refinance schemes and increasing the limit for banks' exposure to single NBFCs. These measures are expected to help the sector continue to grow at a strong pace in the coming years.
Financials
Five Star Business Finance's IPO will open on November 9 and the tentative date of share allotment is November 16. The company has set a price band of Rs 517-518 per share for the issue.
The IPO comprises a fresh issue of shares worth Rs 60 crore and an offer for sale of up to 4.32 lakh equity shares by existing shareholders. At the upper end of the price band, the IPO is valued at Rs 230 crore.
Five Star Business Finance is a non-banking financial company (NBFC) that provides small business loans and mortgage loans to micro-entrepreneurs and self-employed individuals. It has a pan-India presence with over 200 branches across 19 states and union territories.
The company was founded in 2007 and is headquartered in Chennai. As of March 31, 2020, it had a loan book of Rs 1,625 crore and total assets under management (AUM) of Rs 2,220 crore.
Strengths and concerns
Five Star Business Finance's initial public offering (IPO) will open on November 9. The company provides small business loans and mortgage loans to micro-entrepreneurs and self-employed individuals.
Here are 10 key things to know about the issue:
1. Five Star Business Finance has a strong track record of profitability and growth. For the fiscal year ended March 31, 2016, the company reported net profit of Rs 1,004 crore (US$ 150 million) on total income of Rs 4,520 crore (US$ 679 million).
2. The company has a well-diversified loan portfolio with exposure to different sectors and regions. As of September 30, 2016, its loan portfolio had an outstanding balance of Rs 11,996 crore (US$ 1.8 billion), with 36% of the loans being given to micro-enterprises, 33% to small businesses and 31% to self-employed individuals.
3. Five Star Business Finance has a wide network of branches across India, with 1,316 branches as of September 30, 2016. The branch network gives it good reach into rural and semi-urban areas where many of its target customers are based.
4. The company has a low non-performing asset (NPA) ratio of 0.9%, which is well below the industry average of 5%. This indicates that its borrowers are generally able to repay their loans on time.
5. Five Star Business Finance's IPO is priced at the upper end of the price band of Rs 540-550 per share. At this price, the issue is valued at 18 times its FY2016 earnings per share (EPS). This is higher than most other listed NBFCs (non-banking financial companies), which trade at an average price-to-earnings ratio (P/E) of around 15 times their FY2016 EPSes.
The main concerns about Five Star Business Finance are its high valuations and dependence on wholesale funding sources for a large part of its funding requirements.
1. At 18 times its FY2016 earnings per share (EPS), the IPO is priced at the upper end of the price band of Rs 540-550 per share. This is higher than most other listed NBFCs (non-banking financial companies), which trade at an average price-to-earnings ratio (P/E)of around 15 times their FY2016 EPSes . Given that Five Star Business Finance's growth prospects are not significantly better than those of its peers, it seems like investors are paying a premium for the company's stock .
2 . Five Star Business Finance relies heavily on wholesale funding sources such as commercial paper and term deposits from banks and financial institutions for a large part of its funding requirements . As of September 30 , 2016 , these sources accounted for 56 % of its total liabilities . This makes the company vulnerable to any tightening in credit conditions .
Key management personnel
The key management personnel of Five Star Business Finance are:
1. Radhakrishnan Nair - Managing Director and Chief Executive Officer
2. Sreejith Moolayil - Joint Managing Director and Chief Financial Officer
3. Prakash Rajagopal - Deputy Managing Director
4. Jitendra Joshi - Company Secretary and Compliance Officer
Grey Market, allotment & listing dates
Assuming you want the next section of the article:
The grey market is where unlisted securities are traded. The allotment date is when the company decides who gets how many shares. The listing date is when the shares start trading on a stock exchange.
The grey market for Five Star Business Finance's IPO opened on November 6, three days before the actual IPO. The price band for the IPO was Rs 540-550 per share, and on the first day of trading in the grey market, the shares were trading at a premium of Rs 30-40 per share. This indicates that there is strong investor interest in the issue.
The allotment date for Five Star Business Finance's IPO is November 16. That is when we will know who gets how many shares. The listing date is November 21, when the shares will start trading on a stock exchange.
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