Shares of non-banking finance company (NBFC) Five-Star Business Finance made a muted market debut today. The stock listed at ₹468.80 per share vs its issue price of ₹474 per share, a discount of 1 percent on the NSE. Meanwhile, on BSE, it listed at ₹449.95, a discount of 5 percent. The ₹1,960-crore initial public offering opened for subscription on November 9 and closed on November 11. The company had fixed the IPO price band at ₹450-474 per share.
The stock hit a high of ₹474 on NSE in intra-day deals, same as its issue price.
Five Star Business Finance IPO was subscribed 0.70 times. The shares which were to be allocated for the qualified institutional buyers (QIBs) were subscribed 1.77 times, while the portion for non-institutional investors (NII) was subscribed 0.61 times and that of retail individual investors (RIIs) was subscribed around 11 percent, the data showed.
The issue was entirely an offer for sale (OFS) by the promoters and existing shareholders of the company, aggregating to ₹1,960 crore. The South-India-based shadow lender has trimmed its issue size from ₹2,752 crore earlier.
The individual promoter is not selling any shares as part of the OFS. SCI Investments, Matrix Partners India Investment Holdings and Norwest Venture Partners are the key shareholders participating in the OFS of the company.
Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions. The NBFC has a strong presence in South India and all of its loans are secured by borrowers’ properties. Incorporated in 1984, the company provides secured business loans to micro-entrepreneurs and self-employed individuals, operating with 311 branches in 8 states and one union territory as of June 2022.
The NBFC posted a 19.49 percent growth in total income at ₹1256.16 crore in FY22 from ₹1051.25 crore in FY21, while its net profit stood at ₹453.54 crore in FY22 from ₹358.99 crore in FY21.
Ahead of its issue, the Chennai-based NBFC raised ₹588 crore from 16 anchor investors. The Chennai-based NBFC said it had allocated 12.4 million shares at 474 apiece to anchor investors. They included Capital Research, Fidelity Investments, ADIA, Norges Bank, Carmignac Gestion, White Oak, Malabar Investments, Bay Capital and Segantii, Enam, SBI Life, HDFC MF, Baroda BNP, Edelweiss MF, Mirae, and Gee Cee Ventures among others.
Brokerages had mixed views on the issue. Some were bullish on the back of its presence in an underpenetrated and fast-growing segment while the high competition, expensive valuation and the complete OFS nature of the issue were flagged as key concerns.
"At the higher price band of ₹474, the issue is valued at P/BV 3.6x which seems expensive. It has the fastest gross term loan growth among its compared peers, said Choice Broking. Considering the business profile of the company, intense competition and mounting risk around the microfinance sector, it had assigned a ‘Subscribe with Caution’ rating to the issue.