FIVE- STAR BUSINESS FINANCE LTD

Company Overview:

Despite the numerous advancements that India has achieved over the last few decades and the significant strides that we as a country have made in the domain of financial services, a large portion of our country is still un-banked/ under-banked.

We passionately believe in the fact that “un-banked” does not necessarily mean “un-bankable”. In a country as large and as diverse as ours, it take efforts to access, understand and extend appropriate and responsible credit services to this segment. Over the last two decades, Five Star have been working as a specialized financial services company in addressing the needs of this segment, funding the people who were perceived to be unfundable. The businesses that we work with can be touched and felt in our everyday lives and are businesses that create real impact on the ground. Our customers include all the way from small shop owners, flower vendors, maids, masons to small and medium enterprises that form the backbone of India’s economy.

We are a registered Non Banking Finance Company (NBFC-ND-SI) with the Reserve Bank of India (RBI).

Our Partners:

Matrix Partners India is an investment firm with INR 3,000 crore under management. The firm has invested in several market leading companies. Matrix Partners has a global network of funds investing in the US, China and India with US $4.5 billion under management.

Norwest Venture Partners is a global, multi-stage investment firm that manages approximately $6 billion in capital and has funded more than 600 companies since inception. Norwest India is an advisor to Norwest’s Mauritius subsidiary.

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Formed in the year 1982, Five Star is non-Banking Finance Company (NBFC) with the Reserve Bank of India (RBI), specialized in providing financial services to address the needs of unbanked, and unserved segment, funding the people who were perceived to be non-fundable. The customers include all the way from small shop owners, flower vendors, maids, masons to small and medium enterprises that form the backbone of India’s economy.

The focus area of the company is to strike its operations to more and more under-served self-employed and Small Business customers and help them access credit on reasonable terms by opening more number of branches in the semi-urban/rural areas.
The company has one wholly-owned subsidiary called Five-Star Housing Finance Private Limited which was incorporated on 28th September 2015, registered with the National Housing Bank (NHB) as a non-deposit taking Housing Finance Company (HFC).

Five Star provides Small business loans to meet borrower requirements for commencing new businesses, expansion of his/ her existing businesses and to settle any unorganized dues he/ she has taken to further their businesses. The loans are given based on the company’s evaluation of the borrower household cashflows coupled against the security of the borrower’s house collateral. The typical loan ticket ranges between Rs 1 lakh to Rs 10 lakhs for a tenure between 24 and 84 months. The repayments are to be made on a monthly equated basis.

The company follows a business model, where lending to potential borrowers is secured by the twin factors of strong business income and emotionally attached property. The income of the borrower secures the loan during good times while the property mortgaged secures the loan during difficult times. The right combination of income and property has helped and continues to help the company maintain its asset quality even during difficult times like demonetization, implementation of GST, recent liquidity challenges, etc.

Robust Capital Structure:-Five Star has manageable leverage, leading to a healthy D/E ratio. Despite regulatory guidelines allowing for a much higher cap, the company never crossed 3.5 – 4x of leverage, which gives a lot of comfort to lenders. The company over the years has maintained a steady Asset-liability mismatch. Many time to increase the Net Interest Margin of the company, the management tries to get loans for a shorter duration- which means at a lower cost and lend for long-term. This creates a problem during difficult times, and the perfect example is DHFL, where due to the Asset-liability mismatch, the NBFC with more than 1 Lakh Crores of loan book got burst.