Can you tell me about the proposed IPO of Five Star Business Finance based in Chennai? What is the IPO size and when will it hit the IPO market?

Five Star Business Finance is an NBFC which has been around for nearly 37 years now although it fully changed its business model in 205. Now it focuses only on giving small ticket loans to the self-employed and to small entrepreneurs. Typically, these loans are backed by residential property owned by such persons so that reduces the default risk substantially as nobody really wants to lose out on their owned home.

Now Five Star Business Finance is approaching the IPO market with an issue of Rs.2,752 crore. The entire issue is an offer for sale, so there will be no equity dilution or fresh funds coming in. Early investors selling in the OFS include TPG Asia selling Rs.1,350 crore, Matrix Partners selling Rs.568 crore, Norwest Ventures selling Rs.386 crore and SCI Investments Rs.257 crore. Promoters entities will sell Rs.181 crore in the OFS combined.

Five Star caters to the segment that is normally not eligible for bank loans. Its loan accounts grew 12-fold to 1.92 lakhs at present. Nearly 95% of its loan portfolio is located in across Tamil Nadu, Karnataka, Andhra Pradesh and Telangana. If you look at FY21, total income grew 34% while the profits grew 37%. Its AUM is currently at Rs.4,445 crore and has been growing at over 80% in the last five years.