The IPO is entirely an offer for sale (OFS) of shares to the tune of Rs 1,960 crore by existing shareholders and promoter group entities, according to the red herring prospectus (RHP).
The NBFC is backed by various investors like TPG, Matrix Partners, Norwest Ventures, Sequoia and KKR.
The OFS will see the sale of shares to the tune of Rs 166.74 crore by SCI Investments V, Rs 719.41 crore by Matrix Partners India Investment Holdings II LLC, Rs 12.08 crore by Matrix Partners India Investments II Extension LLC, Rs 361.44 crore by Norwest Venture Partners X- Mauritius and Rs 700.31 crore by TPG Asia VII SF Pte Ltd.
At present, TPG Asia holds a 21.45 per cent stake, Matrix Partners owns 12.67 per cent, Norwest Venture has a 10.17 per cent stake and SCI Investments holds an 8.79 per cent stake in the company.
Capital Company, and Nomura Financial Advisory and Securities (India) Private Limited are the book-running lead managers to the issue.
Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom is largely excluded by traditional financing institutions.
It has a strong presence in south India, and all loans are secured by the borrowers’ property, predominantly being self-occupied residential property.
The NBFC commenced operations in 1984 with a focus on consumer loans and vehicle finance and it changed its business approach in 2005 towards small business loan lending in urban, semi-urban markets and rural areas with growth potential.
As of June 2022, Tamil Nadu, Andhra Pradesh, Telangana and Karnataka accounted for 85 per cent of the overall portfolio.
Five Star has grown from 252 branches in 2020 to 311 branches in June 2022, across eight states and one Union territory. Its live accounts grew from 1.43 lakh to 2.3 lakh during the period.
The NBFC’s total income rose to Rs 1,256 crore in FY22 from Rs 787 crore in FY20, while profit increased to 453.5 crore against Rs 262 crore a year back.