Blog Disclaimer ; Message as Received . Please Recheck All Details
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We
had first invested in Five-star Business Finance Ltd. in October 2020
at around Rs 200/sh, since then this is how the price graph has moved: March 2021 - Rs 345/sh June 2021 - Rs 485/sh
October 2021 - Rs. 630/sh December 2021 - Rs. 730/sh This translate to a CAGR of roughly around 47.28%+ ***All the prices has been adjusted for split (Split = 1:10, on 8th Oct'2021)*** Shares of Five Star are available with us in the range of 637-643/share. You can see further details at :trade.altiusinvestech.com or reach out to us at +919830271248. |
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Founded in 1984, Five Star is an NBFC with AUM of Rs45bn catering to a business community of 177k customers with an average outstanding ticket size of Rs250k. - It has created a niche in lending to ‘underserved’ business owners and
self-employed segment in tiers 3-6 cities, thereby commanding IRRs of ~24% and spreads of ~12%. The execution excellence helps it manage opex/AUM at 6-7%. - It contain credit cost, thereby generating RoAUM of 8-9% and RoE of 16-18%.
- The scale-up all through past couple of decades was led purely by customer addition (not increased average ticket size).
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What has Five Star done differently from other NBFCs? |
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1). Fully backed by hard collateral with right sizing of loan amount: | |
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- 100% of FiveStar’s lending portfolio is backed by hard collateral, of which ~95% is self-occupied residential property (SORP).
- Loans are right sized within its internal parameters of LTV and IIR of about 50%.
- the loans are structured with relatively longer tenures (maximum seven years and minimum two years) to reduce the EMI burden (average behavioral tenure is of about 5 years).
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| ![](https://blogger.googleusercontent.com/img/proxy/AVvXsEi9GWNnKC0Y756gGiPQaS5aYN6bhnajJ9qSdb3ZGHNt53MX91epHAXFoG5SIbQOmHy1v9OhfLuGIUQ_AsB8JxJxsLr1IwCixyHlZr3a-7evPs-z1rcmH5dFKO6OShcg4lSSFpyZ67cEOL1gXIdR7AE6GPNLxOS_hrpB90J5z8VgvmKjRFbJE3D4q6JiOAK1_OAOySBDsMCuhTEE9RyALRi_qzLp6DFMjL_kvJZ9XJuuMTFPf7cEqGND9T3THBXmuEteFdnsWlEbeqxVo6TEn_cN6taJ60ZGcVpRmJOARlXi94_xEeMxCuMep0m2FNkLxkyZ5xH1hcWwFdO5VG7CytEOB8bohr4nEAp8hIPjuSZhqYUdpRkIqQNj28cjCkX6lfhi2worRoGO8g5yiYCC4M0-FD0dwTpzc-c_FEJCFjEJSD2-_7NvN9oqRSV4J5Qtfvt6Uzs8lwZ1ndHODyPJ-x8msSAUCX48GyUPD7NICG-PfPq832pCO9hHpVvdUQQpWkGg6lquTm-lfpFm4OViU0dzKIW3OI4qVRMX6gDL6Jl9tEi2bR1XaAAIiejz_1pdKA=s0-d-e1-ft) |
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| 2). Carving out niche in lending to small businesses: |
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- Company has created its niche in lending to small business owners and self-employed individuals.
- Businesses to whom lending is targeted are usually businesses with cyclical experience, running successfully for few years and profitable too, but are outside the credit map
- Also, the loan is given in the name of several members of the family to
ensure family’s collective loan decisioning. - The family cashflows generally range between Rs25k-40k per month and typical collateral value is Rs1mn (no vacant land or commercial property).
- The end use of the loans provided (of ticket size of Rs0.1mn-1.0mn) is primarily for business purposes, but there might be some asset creation as well (home renovation / improvement and other mortgage purposes).
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| 3). Investing into technology for efficiency: |
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- Five Star has made considerable investments in technology and operates on a core banking, ERP platform and facilitates paperless loan journey.
- Further, it believes, digitization will act as a business enabler to improve efficiency and productivity.
- Company is building digital capabilities through senior hires.
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| 4). Marquee investor backing and professional management team: |
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- Five Star has raised over Rs19bn (US$260mn) in equity till date and is backed by marquee private equities including TPG, Matrix, Norwest, Sequoia, KKR and TVS Capital.
- Also, it is run by a professional team (15 department heads with banking background) and stands up to high governance standards.
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| ![](https://blogger.googleusercontent.com/img/proxy/AVvXsEj6WbuZCMdfI9lJF5Ys-hoHY9V-a3ZE7arXLdWR-gr5CvS21Rn2cz7nB74skEOC2aG08mT6cNw9yGImMKeIO2MdUKRFW33wM8OkrfQggV2EXdVQ-RNzlhFlD3Ro3kSjR3F7wSQnCppWMhGkDI3T1kUq5HhdlxYspJ6BQLwXAFXq6vWecceeJPOcoCOuboJX4SluTsCHuJabAFC1CoGSb6xK1gaJ6cR89qDqRVwL2-YCNMsYPrOoe6rWRtpWD2PcRUt6JjrHGOeldkEGdCSaUGu9S7H6WOdXFThzM-olKJ6qtKX7eCjCfLlTTYJNcQN20m_-subzj92n1-xj9rJGV_PSN5L7eSMQaJK0RKfWK-4Wo9wntV0yzJjAOMrHhlLBdWQRD5HmWpNtRL08LWBt8unrsDnfP9L0Z-G5EqHa2_XHAmFiTnHHy3N5macGekUkUVU6C926m2XGRdVbv4d4pzdBCQncLUu9-JNC3Mqg7efF7WSZmOyK17P2BSwGRCVp77bwfrt5bQTgE_q0qX7wOXiS4TwC0rbx86X_oHxU9svK0xeC3AjMKWHvOFrcDP4_Ig=s0-d-e1-ft) |
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| ![](https://blogger.googleusercontent.com/img/proxy/AVvXsEgZCD4qJZkQRoJYbavYcfxxUbim4Uqsb9kLpxaFRE2OGguz6TUt544651m1nP6zxVKHHyQAGOCSaw6GjfpDPcPzMSJOl5ry0TanjqJxZHcEMRNUHUyuSywX8_35ml5KKVAgVCAWCSrAbZ43bCddHUwkpXSJZV6fH1Oj5i7qvBODqhoEu4Zb2zLD_N7s3Wi2P0SZkrKwIWMlMNsZfjm64vjv6wpAn0bujvcaPIo3XnjGsIsxezXQ0tXlaRBF1bgwQqZkILF5Zhc4mFLpAGj5Rvv4OO79oaYzYXEv8L3G4r2PDdf2qqmoG-aHwFu4N8DnDOaZtTPZTW2ndLOTu0HlG5HffvkNHqGOvQr_L-HQJosAFqXycNHz71Q_yWmrbXBJbQqzF4ZNDOHWta4OJDFpTD7vN_y0xbilvgP5ykLQ-WPOJhNaM-1SuG8iMU3nTj0mYIoZras01-CPA0e2FSNvNke7QZ-8EOSphetXbQjm1i5pdFxFTrQlf_F_meQp-2htBz1Xhyphenhyphen8pV5wBAtgMxRq9Wk5UgMxIVbmhYlpbIhCtRpZDBx5TyOEnL9ghCL65oCt0nA=s0-d-e1-ft) |
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| ![](https://blogger.googleusercontent.com/img/proxy/AVvXsEga5oG_tamPUyHwfKLzmDm5WKRvP8vVygAR6qIzyFUH1rkzTIORmdLZi390OslgubM9OW_JUgIJ_ju5waWpIqoa6PcMgNi_EusIpLlDSsPYnuK2By2HmN_kGy7jDs-u96_86MQubGEEdPLs8Cqt0Am0ooSyGjHOWuTweaxKV23g5O9cd3QIFRDaU9XvQ44xDgBiZxsaaiN1bXF_7hsuBHZdmqZiXfcbzD4FSmkLUTctRg14yAUcDkPfFfhfJLUCreUaMM9xoyxa6xloQpTg-BBHMvb7bYbHCJvb7rpTYIiss0_sIdJ0UCGBr1SffRxCl1IbpD1mhzzhBiOZ2FO5GhZzuADftS_0OYvJswfpCmcp1jfUR20Egy1GIJeR4Yos5CPmggnDfWn0tFD0QyPnbte0ikg97kaQgXoxiyKFSHiexp9PxDEv4NO7o2LeOPHcui4kBjepZJrd5kz4IEcKFYz3lIYygdhyNqod6YBdb6625ppC3bcGpFPPwyX6eLPJUZ8E0DwDWSIrhdhOKhwvdxs8TfXnfMUy3wJZuP0hDbu1Zdl-RWHwtw8u-4voEJ0z6w=s0-d-e1-ft) |
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| ![](https://blogger.googleusercontent.com/img/proxy/AVvXsEh1SqVThsAwgmbD3CiOKE3F837iD3HwdNpYsXvfy1SURqtw8kGb1s2JQSQfTN9KQYVVtOWNRirs54aNA94gZ3-j89goEXDaCLHuQ6PxbLB7YEVYAjJA3m3uZ5TvX20N3AZkzDne3OX-AjW3a6GQ4kvV3d6hKxp-nTT2x1du84Y_z6XBX2x3PDR_TXbhFN8PXbJIwLHFnF5Raj0SZnOhHRLgu2MGi5LxrgzzmPaj1j2bUjTKOyNDclz5OHvuIhJTD-UYGTG62C4VGnByI3AO6Az8OrUkeb1m1zRZh_cPcgl_0O4mAP9zgrN2yDZZo1PINcx8PrU17Fm89kLodqc2iRQ0AnUrhW-QmXVfEPIf39btQj0xoWliXFdx6bTx9PYcV1hSr_aknw6AExWNuRullChuYisyph7_76249AFMf0_Iq2JvNczm9fDem23NVvQgIc6lMcjm00GABsXXJ0GNsaCPp8IPuXZNkU-JA3KNh3WgQT0CKrgXOaQBK8TZN3zfkdKbuLA3xdOmWh4007cjOUe4XnhG49rQzPzxZXzNsTjZxrHp7qbRzs7iA9EB27Jbiw=s0-d-e1-ft) |
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