At a Glance
Five-Star Business Finance (FSBF) just dropped its Q1 FY26 report, and investors got a mix of sweetness and spice. Revenue surged 18% YoY to ₹787 crore, PAT clocked ₹266 crore (up 6% QoQ), and AUM ballooned by 20%. Sounds dreamy, right? Not quite. Asset quality showed pressure with NPAs creeping up, and the stock is down 12% YoY. Still, with an ROE near 19% and one of the fattest margins in NBFC town, FSBF remains the micro-loan king of the South. But is it enough to outrun rising competition and regulatory overhangs? Let’s decode.
Introduction
Imagine a lender who specializes in giving money to those with big dreams and tiny balance sheets. That’s Five-Star – a Tamil Nadu-bred NBFC handing out secured business loans to mom-and-pop shops and hustlers across South India. They’ve ridden the micro-lending wave like pros, clocking 30%+ profit CAGR over five years. But with rising interest costs, regulatory heat, and borrowers feeling the economic pinch, even stars can flicker. This quarter’s results were solid, but cracks are visible.
Business Model (WTF Do They Even Do?)
FSBF is an NBFC-ND-SI (non-deposit-taking, systemically important – fancy words for “big and watched by RBI”) that:
- Provides secured business loans to micro-entrepreneurs (think kirana store owners, small traders).
- Targets South India – their home turf where they know the borrowers better than their families.
- Secures loans with property collateral, keeping NPAs relatively low.
- Keeps average ticket size small (₹3–5 lakh), spreading risk.
- Plays the margin game well, boasting 45–50% financing margins – fat by NBFC standards.
Financials Overview
- Revenue: ₹787 Cr (↑18% YoY)
- Net Profit: ₹266 Cr (↑6% QoQ, flat YoY)
- Financing Profit Margin: 46% (down from 50% last year)
- AUM Growth: 20% YoY – expansion mode is on.
- EPS: ₹9.04 for Q1 (TTM ₹37)
- NPA: Gross NPA up to 1.79% (from 1.62%) – small, but trending the wrong way.
Valuation
- P/E: 18.2 – cheaper than Bajaj (31x), but pricier than Shriram (14x).
- P/B: 3.1 – market is paying up for quality.
- Fair Value Range: ₹600–₹750.
Market at ₹670 is fair, with upside only if growth stays 25%+ and NPAs stay in check.
What’s Cooking – News, Triggers, Drama
- 19 new branches opened this quarter – aggressive expansion continues.
- No deviation in usage of ₹31.57 Cr warrant proceeds (good compliance).
- FII holding is massive at 58% – they love the growth story.
- Regulatory risks remain: RBI tightening norms could squeeze margins.
Balance Sheet
| (₹ Cr) | Mar 2025 |
|---|---|
| Assets | 14,421 |
| Liabilities | 14,421 |
| Net Worth | 6,304 |
| Borrowings | 7,922 |
Healthy balance sheet, with rising borrowings supporting AUM growth.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Operating | -1,123 | -2,122 | -1,045 |
| Investing | 162 | 210 | -585 |
| Financing | 1,688 | 2,106 | 1,593 |
Operating cash flow is negative – normal for an expanding NBFC, but funding growth heavily via borrowings.
Ratios – Sexy or Stressy?
| Metric | Value |
|---|---|
| ROE | 18.6% |
| ROCE | 16.3% |
| P/E | 18.2 |
| PAT Margin | 34% |
| D/E | 1.25 |
Commentary: Ratios scream efficiency. ROE and ROCE are industry-beating, though rising leverage needs monitoring.
P&L Breakdown – Show Me the Money
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 1,521 | 2,183 | 2,848 |
| EBITDA (Fin Profit) | 814 | 1,128 | 1,443 |
| PAT | 604 | 836 | 1,072 |
Consistent growth, though FY26 Q1 showed slower profit momentum.
Peer Comparison
| Company | Revenue (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| Bajaj Finance | 73,107 | 17,425 | 31.4 |
| Cholamandalam | 25,846 | 4,263 | 29.4 |
| Muthoot | 20,214 | 5,333 | 19.9 |
| Five-Star | 2,968 | 1,087 | 18.2 |
Commentary: FSBF is a minnow among NBFC giants but punches above its weight on margins.
Miscellaneous – Shareholding, Promoters
- Promoters: 21.47% – diluted heavily, but still present.
- FIIs: 58% – love affair with foreign investors continues.
- DIIs: 9.5% – decent support.
- Public: 11% – retail participation low.
EduInvesting Verdict™
Five-Star is still a high-margin NBFC star, growing fast in a niche segment. Q1 FY26 shows strong AUM growth but hints at asset quality stress. With foreign investors betting big, the company is in expansion overdrive.
Final Line: A solid compounder, but keep an eye on NPAs – even stars can burn out when the economy sneezes.
Written by EduInvesting Team | 28 July 2025
SEO Tags: Five-Star Business Finance, NBFC, Q1 FY26, stock analysis, micro lending, financial results
