Smallcap NBFC stock falls 10% in 2 days; should you buy the dip?

Five-Star Business Finance share price today: Shares of non-banking finance company (NBFC), Five-Star Business Finance, declined over 4 per cent on Wednesday, July 30, 2025, logging an intraday low of ₹619.

 

At 01:15 PM, shares of Five-Star Business Finance were trading at ₹619.70, down by 4.57 per cent on the National Stock Exchange. In comparison, Nifty50 was trading in green, up by 31 points or 0.13 per cent, quoting 24,852.90 level. 

 

The NBFC stock extended losses for the second consecutive trading session. The sell-off on the counter came after the company released its earnings for the first quarter of the financial year 2025-2026 (Q1FY26).  CATCH STOCK MARKET LIVE UPDATES TODAY

Five-Star Business Finance Q1FY26 earnings

The company's profit after tax (PAT) for the quarter ended June 30, 2025, stood at ₹266 crore, up by 6 per cent from ₹252 crore reported in the corresponding quarter of the previous fiscal year. However, on a sequential basis, PAT declined by 5 per cent. Total income for the quarter under review stood at ₹791 crore, marking a year-on-year (Y-o-Y) rise of 18 per cent.

 

However, margins came under pressure during the April-June quarter. The NBFC's net interest margin (NIM) declined to 16.43 per cent in Q1FY26, as against 16.84 per cent reported in the previous quarter (Q4FY25), indicating a decline of 41 basis points. The company's total assets under management (AUM) stood at ₹12,458 crore during the first quarter of FY26, marking a 20 per cent Y-o-Y rise. On the asset quality front, the company experienced upsetting numbers. Net stage 3 assets stood at 1.25 per cent in Q1FY26, as against 0.88 per cent reported in the previous quarter.  ALSO READ | Varun Beverages shares rise 10% in 2 days post Q2 results; upside left?

Time to buy the dip?

D-street analysts pointed out that the subdued quarter was largely owing to the company's overleveraging challenges, especially for borrowers below ₹3 lakh ticket size. However, the management is anticipating improvement in the second half of FY26 with a larger focus on higher ticket sizes of ₹5 lakh to ₹10 lakh. The NBFC will also bring in stringent credit filters, eventually resulting in higher rejection rates. 

"Management is cognisant of rising delinquencies, and hence, it already initiated corrective measures to enable recovery in H2FY26. (We) retain 'Hold' with a revised target price of ₹650 (₹720 earlier), as we trim our FY26E/FY27E earnings by 3 per cent/1 per cent and lower the multiple to 2.25x (2.5x earlier) on Sep’26E BVPS," ICICI Securities stated in its report.  

JM Financial has taken a more optimistic stance, maintaining a 'Buy' rating on the stock with a revised target price of ₹750. "We believe that with its strong execution capabilities, its collection-first approach and shift towards less risky customer segments, Five-Star will be the first one to come out of the on-going stress. We expect Five-Star to continue to deliver healthy RoAs/RoEs of 7.5 per cent/18 per cent over FY26E/FY27E," the brokerage firm said.