In an NBFC-dominated market where size often overshadows efficiency, Five Star Business Finance Ltd. (Five Star Share) has quietly built a name for itself through hyper-local lending and best-in-class return metrics. With a Return on Assets (ROA) consistently over 5%, negligible NPAs, and zero reliance on flamboyant marketing, this Chennai-headquartered lender is fast becoming a case study in quiet compounding.
As of April 15, 2025, investors are increasingly asking: Is Five Star Share just another small lender or a hidden gem in India’s financial landscape?
Let’s unpack the data.
1. What Does Five Star Business Finance Actually Do?
Founded in 1984 and based in Chennai, Five Star Business Finance is a registered NBFC-ND-SI (Non-Deposit taking, Systemically Important NBFC). The company focuses on secured loans to self-employed individuals and small business owners who typically fall outside the formal banking system.
Business Characteristics:
- Average ticket size: ₹2–5 lakhs
- Loans backed by self-occupied residential property
- Tenure: 5–7 years
- Geographic Focus: South India (especially Tamil Nadu, Andhra Pradesh, Telangana, Karnataka)
As of FY24, the company operates through 415 branches across 10 states, with a customer base exceeding 2.5 lakh borrowers.
Source: Five Star Annual Report FY23, Screener
2. How Has the Stock Performed Recently?
| Date | CMP (₹) | Market Cap (₹ Cr) | YTD Change (%) |
|---|---|---|---|
| April 15, 2025 | ₹799.10 | ₹22,800 Cr | +6.8% |
The stock, which listed in November 2022, has stayed below the radar but maintained healthy institutional interest, including stakeholdings by TPG, Sequoia Capital, and Matrix Partners.
Source: Moneycontrol, Groww
3. What Do the Financials Say?
| Metric | FY21 | FY22 | FY23 | 9MFY24 |
|---|---|---|---|---|
| AUM (INR Cr) | 4,445 | 5,067 | 6,369 | 7,590 |
| Revenue from Ops (INR Cr) | 796 | 1,049 | 1,277 | 1,149 |
| Net Profit (INR Cr) | 358 | 453 | 603 | 561 |
| ROA (%) | 6.7 | 6.5 | 5.8 | 5.5* |
| ROE (%) | 13.4 | 14.2 | 15.1 | 14.8* |
| Gross NPA (%) | 1.1 | 1.0 | 0.8 | 0.7 |
| Net NPA (%) | 0.6 | 0.5 | 0.3 | 0.2 |
*Annualized based on 9MFY24
Key takeaway: Very few NBFCs can boast ROAs above 5% and NPAs under 1% — making Five Star a rarity in the Indian lending space.
Source: Tijori by Zerodha, Screener
4. How Does It Compare with Industry Peers?
| Company | AUM (₹ Cr) | ROA (%) | ROE (%) | GNPA (%) | P/E | P/B |
|---|---|---|---|---|---|---|
| Five Star | 7,590 | 5.5 | 14.8 | 0.7 | 24x | 3.2x |
| Aavas Financiers | 15,108 | 3.3 | 12.9 | 0.99 | 26x | 3.6x |
| Shriram Finance | 2,20,000 | 2.6 | 17.8 | 6.3 | 10x | 1.7x |
| Muthoot Finance | 61,000 | 4.2 | 17.2 | 1.3 | 11x | 2.4x |
| Manappuram Finance | 30,000 | 3.9 | 14.2 | 1.7 | 9x | 1.3x |
Five Star’s USP: It has the highest ROA among all listed NBFC peers and maintains pristine asset quality — with no loss of collateral since inception.
5. What Makes the Business Model Unique?
- 100% Secured Lending: All loans backed by residential property
- Offline-Only Model: No digital sourcing — all customer acquisition happens through on-ground teams
- Self-Employed Focus: Cooks, shopkeepers, mechanics, and small traders form the borrower base
- No Top-Up Loans or Refinancing: This reduces overleveraging of borrowers
This is an ultra-conservative business by NBFC standards, but it works.
6. What Are the Risks You Should Be Aware Of?
- Geographic Concentration: ~85% of AUM lies in South India
- No Digital Model: Could limit scalability compared to tech-enabled lenders
- Interest Rate Sensitivity: Being a high-yield lender, margins are sensitive to funding cost changes
- Competition Rising: New-age lenders and fintechs entering tier-2 lending
- Liquidity Risk: Being an NBFC-ND, dependent on refinancing and market borrowing
Despite these, the firm’s focus on quality over growth gives it insulation.
7. How Is the Stock Valued Right Now?
| Metric | Value (As of Apr 15, 2025) |
|---|---|
| CMP | ₹799.10 |
| Market Cap | ₹22,800 Cr |
| P/E Ratio (TTM) | 24x |
| P/B Ratio | 3.2x |
| Dividend Yield | 0.65% |
While not “cheap,” Five Star trades at reasonable valuations given its return profile and risk management discipline.
Source: Moneycontrol, Groww
8. What’s New in the Company Lately?
- Branch Expansion: Opened 37 new branches in Q3FY24
- Credit Rating Upgrade: CRISIL upgraded long-term rating to A+ (Stable)
- Co-Lending Pilots: In discussion with private sector banks to launch co-lending structures
- Employee Headcount: Crossed 9,000 as of March 2025, with new training programs
9. What Are Their Plans for the Future?
- Expand to Northern and Western states (Uttar Pradesh, Maharashtra, Gujarat)
- Invest in analytics and credit score-based risk profiling
- Maintain GNPA below 1% across cycles
- Introduce affordable housing loans in FY26
- Retain a ROA > 5% and ROE > 14% as strategic targets
According to their investor call, the company has no immediate plans to go digital, citing customer comfort with in-person onboarding.
A Quiet Compounder in the Making?
Five Star Share doesn’t scream for attention. It doesn’t offer flashy tech. But what it does offer is consistent compounding, best-in-class asset quality, and one of the highest ROAs in Indian finance.
If you’re looking for a high-quality, low-volatility NBFC that runs tight operations and focuses on fundamentals, Five Star might just be that hidden gem.
It won’t make headlines every quarter. But it just might quietly grow your capital — one loan at a time.
Disclaimer: This article is for informational purposes only. Investors should conduct their own research or consult a financial advisor before making any investment decisions.
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