At a Glance
Secured-lending specialist Five-Star Business Finance has scaled its AUM from ₹4,353 cr in FY20 to ₹14,421 cr in FY25, kept GNPA below 2%, and minted ₹1,072 cr FY25 PAT — yet pays zero dividends. ROE at 19% and P/E near 20 beg one question: still value for small borrowers across South India today?
1️⃣ TL;DR (because attention spans ≈ EMI due dates)
- Loan book x3.3 in five years; profit x4.1
- Asset quality: GNPA crept to 1.79% but still healthier than college canteen cutlery
- ROE 19% keeps investors smiling; dividend payout 0% wipes the grin
- Promoter stake down to 21.5%, FIIs now own ~59% — Wall Street loves Masala Dosa
- Trading at P/E ~20 & P/B ~3.4 versus peer median 25 & 4
- Fair-Value range: ₹590 – ₹750 (math below)
- Verdict: ★★★★☆ business, ★★★ valuation, ☆ on dividends
2️⃣ What’s Cooking? 🍲 — Micro-Entrepreneur Masala
| Metric | Detail |
|---|---|
| Product | Secured loans (₹1 – 10 lakh tickets, up to 7 years) |
| Borrower | Kirana owners, street-food wizards, small workshops |
| Collateral | Residential/commercial property on city outskirts |
| Geography | 90% South India (TN, AP, Telangana, Karnataka) |
| Branches | 400+ across 9 states (FY25) |
| USP | Low ticket yet fully secured, tech-light collections |
The moat? A credit team that can smell fake property titles faster than you can say “khaali chai”.
3️⃣ Five-Year Scorecard 📊
| ₹ crore | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|---|
| AUM / Assets | 4,353 | 5,794 | 6,343 | 8,703 | 11,689 | 14,421 |
| Net Interest Income | 569 | 723 | 952 | 1,219 | 1,471 | 1,780 |
| PAT | 262 | 359 | 454 | 604 | 836 | 1,072 |
| ROE % | 16 | 17 | 15 | 15 | 18 | 19 |
| GNPA % | 1.1 | 1.3 | 1.4 | 1.5 | 1.62 | 1.79 business-standard.com |
Narrative 👀: CAGR 29% sales, 33% earnings, with NIMs > 12% and opex/avg AUM inching down to 3%. COVID who?
4️⃣ Meet the Humans Behind the Money 🧑💼
- Lakshmipathy Deenadayalan – Founder-Chairman & MD, started by lending against gold in 80s
- Rangarajan Krishnan – CEO & Joint MD, ex-ICICI, calls the disbursal shots
- Srikanth Gopalakrishnan – CFO & Joint MD, crunches numbers & cost of funds
- Shalini Baskaran – Company Secretary, gatekeeper of board minutes
No celebrity board seats, just battle-scarred lenders who can price risk better than your local chai-wala prices ginger.
5️⃣ Green Flags 🚀 vs Red Flags 🛑
☘️ Green
- 100% secured portfolio → loss-given-default historically < 25%
- Sticky customers: 75% repeat-loan rate
- Niche → avoids wage-earner segments that fintechs fight over
- ROE > Cost-of-Equity (estimated 14%) for 8 straight years
🌶️ Red
- Geography risk: 90% South; one cyclone could dampen collections
- Promoter dilution: Down from 35% to 21% in 2 yrs — exit ramp?
- Rising leverage: Debt/Equity shot to 1.3× (FY20) → 2.7× (FY25)
- Dividend Desert: Management says “we prefer compounding”; investors say “hmm”.
6️⃣ Valuation Roast & Peer Table 🔥
| Company | P/E | P/B | ROE % | GNPA % | Fwd Growth % |
|---|---|---|---|---|---|
| Five-Star | 19.8 | 3.4 | 19 | 1.8 | 25 |
| Bajaj Fin | 33.8 | 6.6 | 17 | 0.9 | 24 |
| Cholamandalam | 30.7 | 4.4 | 17 | 3.0 | 23 |
| Shriram Fin | 15.1 | 1.6 | 13 | 6.0 | 15 |
| Muthoot | 19.6 | 3.5 | 14 | 1.7 | 12 |
With ROE similar to Bajaj but half the P/E, Five-Star isn’t nose-bleedingly pricey. Yet its single-region focus and lower scale justify a 10–25% valuation haircut versus all-India giants.
7️⃣ Fair-Value (FV) Range Calculator 🧮
Justified P/B = (ROE – g) / (r – g)
- ROE = 19%
- Sustainable growth (g) = 8-12% (history 28% but gravity exists)
- Cost-of-equity (r) = 14%
| Scenario | g | Justified P/B | FV (P/B × BV ₹214) |
|---|---|---|---|
| Bear | 8% | 2.75 | ₹590 |
| Base | 10% | 3.2 | ₹685 |
| Bull | 12% | 3.5 | ₹750 |
Current price ₹722 sits near the top-end of intrinsic math. Pay-up only if you believe ROE > 20% & GNPA ≤ 2% will last another cycle.
🏁 EduInvesting Verdict
“Five-Star keeps serving A-grade sambhar loans, but the chef still refuses to send free papad (dividends). At ₹700-plus, upside is limited to how much spice South India’s kiranas can handle. We’d rather wait for a 10% market tantrum or a dividend announcement — whichever comes first.”
Tags: five-star business finance, nbfc, micro-entrepreneur loans, 5-year recap, eduinvesting, fair-value
✍️ Written by Prashant | 📅 22 June 2025
