Feb'25 View on Five-Star Business Finance Ltd

Five Star Business Finance Limited is an NBFC-ND-SI providing secured business loans to micro-entrepreneurs and self-employed individuals across South India. After falling from 940 levels, the stock has taken support at 633 levels and is now consolidating at 690 levels and looks to go past 900 again in next 3-6 months on back of the following • Co. reported PAT of Rs270 crore in Q3FY25, up 26% yoy. • NII was up 28% yoy, driven by 25% AUM growth. • NIM expanded 13 bps qoq to 19.5%, driven by a 19 bps qoq rise in yields. • The credit cost was moderate at 0.8%. • Five Star drastically slowed down new businesses in Q3 in pursuit of capping loan growth at 25%. • Collection trends suggest moderate delinquencies across buckets, not alarming against the backdrop of stress elsewhere in the sector. • We continue to monitor the trends; the liquid/funding side appears strong.