Five Star Business Finance files DRHP for an IPO

New Delhi: Non-bank finance company (NBFC) Five Star Business Finance (FSBFL) plans to raise capital through the initial sale of its stake. It has filed its draft prospectus on red herring (DRHP) with the capital markets regulator Sebi.

The NBFC is considering a valuation of more than $ 3 billion. Five Star Business Finance is backed by private equity players such as TPG Capital, Sequoia, Matrix Partners, Norwest Venture, KKR and TVS Capital.

According to the DRHP, the company will increase to Rs 2,751.95 crore through a sale of main stake. The issue will be entirely an offer for sale (OFS), where its promoters and existing shareholders will discharge the participation.

The promoters and shareholders participating in the OFS include SCI Investments V, Matrix Partners India Investment Holdings, Norwest Ventures Partners X-Mauritius, TPG Asia VII SF PTE, Deendayalan Rangasamy and Varalakshmi Deendayalan, among others.

As of March 2021, Chennai-based Five Star Business had raised around $ 234 million (Rs 1,700 crore) from new and existing investors.

The company has a strong presence in the southern states, primarily in Tamil Nadu. From 103 branches in 2017, the company has grown to nearly 260 branches and more to date in 120 districts in 8 states.

The company provides secured business loans of around Rs 2-10 lakh against the security of independent residential properties to micro-entrepreneurs.

Its consolidated portfolio grew at a CAGR of 81% in FY16-20, while it grew at a moderate pace of 14% in FY2021 due to the impact of the pandemic of Covid-19.

FSBFL’s assets under management stood at Rs 4,445 crore as of March 31, 2021, compared to Rs 3,892 crore as of March 31, 2020. The NBFC posted 34% revenue growth to 1,051 crore of Rs in fiscal year 21, while its net profit jumped 37%. at Rs 359 crore.

The company has reserved 50 percent of the issue for qualified institutional buyers, while non-institutional investors will be allocated 10 percent of the shares. The remaining 35 percent will be allocated to retail bidders.

The company has appointed ICICI Securities, Edelweiss Financial Services, Kotak Mahindra Capital Company and Nomura Financial Advisory and Securities (India) as lead managers of the issue, while KFin Technologies is the registrar of the issue.

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