Nov 9, 2022
By: Bhakti MakwanaThe IPO of non-banking financial corporation Five Star Business Finance is set to open on November 9 and close on November 11. The price band of the IPO is set at ₹450-474 a share.
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The grey market premium (GMP) for the company’s shares are currently at ₹10 per share. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges.
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Five Star Business Finance raised ₹588 crore from anchor investors ahead of the IPO by allocating 1.24 crore shares to 16 anchor investors at the upper price band of ₹474 per share.
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The Chennai-based lender’s IPO is a complete offer for sale by its promoters and existing shareholders, worth ₹1,960 crore.
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The non-banking lender provides secured loans to micro-entrepreneurs and self-employed individuals.
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The company will not receive any funds raised from the IPO as all the shares are being sold by promoters.
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The company has a strong presence in south India with assets under management (AUM) of ₹5,100 crore as of March 31, 2022 compared to ₹4,400 crore a year ago. Tamil Nadu, Karnataka, Andhra Pradesh and Telangana account for 85 percent of its overall portfolio.
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“Considering the business profile of the company, intense competition and mounting risk around (the) microfinance sector, we assign ‘Subscribe with Caution’ rating to the issue,” said analysts at Choice Broking.
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The net profit of the company increased by 26 percent from a year earlier to ₹453 crore in FY22.
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Some of Five Star Business Finance’s peers include AU Small Finance Bank, Aavas Financiers, and Aptus Value Housing Finance India. It also competes with unlisted companies like Lendingkart Technologies and Digikredit Finance.
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The company’s shares are scheduled to be allotted on November 16 and will be listed on November 21 on the BSE and the NSE.
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