Five-Star Business fell over 5% after huge block deal

The buyers and sellers were not known but CNBC-TV18 reported that private equity investors Matrix Partners, TPG Asia, and Norwest Ventures are looking to sell up to 8.8 percent stake in Five Star Business Finance

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Five Star Business Finance Ltd declined over 5 percent in the morning trade on September 1 after around 2.48 crore shares, or 8.5 percent stake, in the company changed hands in two bunch trades.

The details of the buyers and sellers were not known, Bloomberg said. On August 31, CNBC-TV18 reported that private equity investors Matrix Partners, TPG Asia, and Norwest Ventures were likely to sell up to an 8.8 percent stake in Five Star Business Finance via block deals.

The floor price for the block deals would likely be at Rs 724 a share, a 6.25 percent discount to the current market price, the report said.

The total size of Five Star Business Finance, including base size, would be up to Rs 1,860 crore.

In the first quarter of this fiscal,  the non-bank lender logged a 31.8 percent jump in net profit at Rs 183.7 crore. The company’s net profit stood at Rs 139.4 crore in the corresponding period of the previous year FY23.

One of the fastest-growing companies in the segment, Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals (secured by self-occupied residential property) with a strong presence in south India.

“Five Star delivered a fourth straight quarter of strong earnings with Q1FY24 PAT growing 32 percent YoY/9 percent QoQ, AUM grew 43 percent YoY/10 percent QoQ…AUM growth is led by branch expansion and increase in average ticket size due to inflation,” Nuvama Institutional Equities said in a note.

Five Star added 75 branches year-on-year (YoY) and 13 branches quarter on quarter (QoQ). Portfolio yield and cost of funds remained stable, leading to a stable QoQ spread but the net interest margin declined sharply by 73 basis points due to high leverage.

One basis point is one-hundredth of a percentage point.

At 9.30 am, the stock was trading at Rs 734 on BSE, down 5.1 percent from its previous close, while the benchmark Sensex rose 0.2 percent to 64,949 points.

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