Five Star Business Finance makes a weak debut, lists at 5% discount on BSE

Shares of Five Star Business Finance opened at Rs 468.8 on the NSE and at Rs 449.95 on the BSE.

Five Star Business Finance Ltd (FSBF) made a muted debut as shares got listed below its issue price of Rs 474 per share on the bourses. On the National Stock Exchange (NSE), the stock opened at Rs 468.80, down 1 per cent, whereas it was listed at 5 per cent discount of Rs 449.95 per share on the BSE.

Post listing, the stock hit a high of Rs 474 apiece and low of Rs 448.20 on the BSE and NSE. At 10:20 am; it traded at Rs 468 per share, as against nearly 1 per cent lower in the S&P BSE Sensex and Nifty. A combined 5.5 million equity shares changed hands on the counter on the NSE and BSE.

The company provides secured business loans to micro-entrepreneurs and self-employed individuals in urban, semi urban, and rural markets. FSBF primarily offers small loans for business purposes, which accounted for Rs 3290.3 crore (62.12 per cent of total loans) as of Q1FY23. Growth was primarily volume was driven by higher customer base while keeping the ATS stable.

In FY22, the proportion of NTC customers in small business loans segment was estimated to be around 27 per cent for NBFCs. Stage 3 assets as percentage of gross loans were at 1.12 per cent in Q1FY23 and 1.05 per cent in FY22. NIMs, on the other hand, stood at 19.17 per cent in Q1FY23 and 17.68 per cent in FY22.

FSBF IPO was subscribed 70 per cent or 0.70 times. The qualified institutional buyers (QIBs) category was subscribed 1.77 times. The non institutional investors (NIIs) category was subscribed 61 per cent and retail individual investors (RIIs) category was subscribed 11 per cent.

"FSBF is a player with healthy fundamental performance and robust growth in fast growing small business finance market. At the upper end of the price band, the company is valued at ~3.7x FY22 BV (post issue)," analysts at ICICI Securities said.

According to analysts at Anand Rathi Share and Stock Brokers, FSBF has a fastest gross term loan among peers with a strong on-ground collections infrastructure, which led their ability to maintain a robust asset quality and access to diversified and cost effective long term financing.

"FSBF is available at the upper price of the band at 3.7x P/BV with market cap of Rs 1.38 trillion post issue of shares and return on net worth of 13.86 per cent and ROA is 7.5 per cent," the brokerage firm said.