Five-Star Business Finance Limited Company Profile: Products, Promoters and Clients

Five-Star Business Finance Limited Company Description:

Five-Star Business Finance Limited is a prominentNon-Banking Financial Company( NBFC- ND- SI) registered with the Reserve Bank of India( RBI). With over two decades of experience, the company specializes in furnishing secured fiscal results to small business guests and tone- employed individualities who are frequently barred from the formal lending ecosystem. Five- Star Business Finance has developed a deep understanding of client geste and indigenous request dynamics, enabling them to effectively serve underbanked and unbanked parts of the population. The company's operations have grown significantly, with a presence in 520 branches across nine countries and one union home in India.

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Q1. What are the Product and service offerings of the company?

Five Star offers a variety of loan products tailored to meet the diverse needs of its clients. The primary product features include:

  • Term Loans: With an average tenure of 5-7 years, term loans are designed to support business expansion, home renovation, and other economic purposes.
  • Loan Sizes: Loans range from ₹0.2 million to ₹1 million, secured by property, typically self-occupied residential property.
  • Interest Rates: Loans come with an interest rate range of 24%-26%.
  • Use Cases: Loans are provided for various purposes including business expansion, asset creation, and other mortgage needs such as marriage, education, and emergencies.

Q2. Who are the Promoters/Management of the company?

Mr. Lakshmipathy Deenadayalan, Chairman & Managing Director an engineering graduate from Madras University, comes from a business family background. Before joining Five-Star, he served as Managing Director of RKV Finance Limited, an RBI-registered NBFC. Following RKV's amalgamation with Five-Star in 2002, he joined Five-Star's Board as Joint Managing Director. Leveraging his extensive experience in lending to small business customers, he successfully developed a similar portfolio at Five-Star. He is also a Director at the Finance Companies Association of India and a Management Committee member of the South India Hire Purchase Association.

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Rangarajan Krishnan, Chief Executive Officer, is a finance professional with 15 years of experience in commercial banking, private equity, project finance, and advisory. He began at HDFC Bank in Corporate Banking, then moved to Standard Chartered Bank's Mid-Market Commercial Banking. He later led equity and debt investments at the International Finance Corporation, World Bank, and headed advisory and investment banking at Spark Capital before joining Five-Star in August 2015 as Chief Operating Officer. Rangarajan holds a commerce degree and two MBAs, one from Sri Sathya Sai Institute of Higher Learning and another from the Indian School of Business, specializing in Analytical Finance and Leadership. At Five-Star, he oversees business, credit, and operations.

Q3. Who are the Clients of the company?

Five Star's typical clients are small business owners and self-employed individuals engaged in everyday cash and carry businesses, with a preference for service-oriented enterprises. These businesses are usually family-run, with collective loan decision-making and typical family cash flows ranging from ₹25,000 to ₹40,000 per month. The collateral value for these loans generally amounts to around ₹1 million, comprising land and buildings.

The company's customer-centric approach includes:

  • In-house Sourcing and Processing: Handling 100% of sourcing and processing internally, ensuring a focus on service-oriented businesses.
  • Comprehensive Credit Assessment: Credit assessment based on the three Cs: Character, Cash flow, and Collateral, ensuring a robust and reliable evaluation process.
  • Collection Infrastructure: A strong on-ground collection infrastructure, with multiple modes of collection available to borrowers, including digital payment options.

Geographical Distribution

Five Star has a strong presence in South India, with plans for cautious expansion into other regions. The geographical distribution of its branches and loan portfolio is as follows:

  • South India: 433 branches, accounting for 94% of the total AUM.
  • Rest of India: 87 branches, accounting for 6% of the total AUM.

State-wise Portfolio Break-up (FY24)

  • Tamil Nadu: 128 branches - 31% of the total portfolio
  • Andhra Pradesh: 172 branches - 37% of the total portfolio
  • Telangana: 92 branches - 19% of the total portfolio
  • Karnataka: 41 branches - 6% of the total portfolio
  • Madhya Pradesh: 63 branches - 5% of the total portfolio
  • Others: 24 branches - 1% of the total portfolio

Five Star continues to focus on growth in mature branches while making strategic investments in technology to manage the lending process more efficiently and expand its reach​.

Written By: Khush Kothari

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