Five Star Business Finance lists at 5% discount to issue price, m-cap at Rs 13,110 crore

Five Star Business Finance made a poor market debut on Monday, as the scrip fell 5.07 per cent to Rs 449.95 a piece on NSE over its issue price of Rs 474 apiece. At this price, the stock commanded a market capitalisation of Rs 13,110.02 crore.

On NSE, the stock debuted at Rs 468.80, down 1.10 per cent.

The IPO, which ran from November 9 to November 11, had received poor investor response, with the issue subscribing a mere 70 per cent. The quota reserved for qualified institutional buyers (QIB) was 1.77 times. The portion for retail investors was subscribed 11 per cent of the reserved quota while the portion set aside for non-institutional investors was subscribed 0.61 times. Due to this, Five Star commanded a discount of Rs 2 on Friday. 

Parth Nyati, Founder at Tradingo said, "The firm has debuted at Rs 468.80, i.e., (-1.10%) against its issue price. The company's muted listing can be attributed to unexciting investor subscription levels, high competition, and rising interest rates, which are big threats. Some of its peers are available at a better price in the secondary market; those who applied for listing gains can keep a stop loss of Rs. 460 in place."

Five Star Business Finance is an NBFC providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions. It is headquartered in Chennai, Tamil Nadu with a strong presence in south India and all of its loans are secured by its borrowers’ property, predominantly being SORP.

Over 95 per cent of Five Star Business Finance's loan portfolio comprises loans from between Rs 1 lakh to Rs 10 lakh in principal amount, with an average ticket size of Rs 2.90 lakh. Samco Securities had a ‘subscribe’ rating on this issue; SMC had given it 1.5 out of 5 stars.

Five Star's was purely an offer for sale (OFS) by existing institutional investors. The individual promoter did not sell shares as part of the OFS. Analysts were largely mixed on the issue. While a presence in underpenetrated and fast growing segment is a positive, geographic concentration, high competitive intensity in small business finance industry and substantial portion of customers being first time borrowers were seen as key risks.

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