TPG, Sequoia, KKR-backed Five Star Business Finance files draft papers to raise Rs 2,752 crore via IPO

© Shweta Mungre
TPG, Sequoia, KKR-backed Five Star Business Finance files draft papers to raise Rs 2,752 crore via IPO

Non-banking financial company, Five Star Business Finance (FSBFL) has filed preliminary draft papers with capital markets regulator Sebi for fund raising via initial public offering.

The company intends to garner Rs 2,751.95 crore through offer for sale by several marquee investors.

SCI Investments V will offload shares worth Rs 257.10 crore. Matrix Partners India Investment Holdings II and Matrix Partners India Investments II Extension will sell Rs 568.92 crore and Rs 9.56 crore worth of shares, respectively.

Among others, Norwest Venture Partners X – Mauritius will offload Rs 385.65 crore worth of shares, and TPG Asia VII SF Pte Ltd will sell Rs 1,349.78 crore of shares, while Deenadayalan Rangasamy and Varalakshmi Deenadayalan, who are part of promoter group, will also sell Rs 180.93 crore worth of shares via offer for sale (OFS).

The company will not receive any proceeds from the offer since it’s completely an OFS. Promoter & promoter group own 44.31 percent shareholding in the company, and the remaining is held by investors.

Currently, TPG Asia VII SF Pte Ltd is the largest shareholder in the company, owning 20.99 percent stake, followed by Matrix Partners India Investments Holdings II, LLC (14.09 percent), promoter Lakshmipathy Deenadayalan (13.01 percent), Norwest Venture Partners X – Mauritius (10.22 percent).

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Among others, SCI Investments V has 8.83 percent shareholding, Hema Lakshmipathy 7.18 percent, Sirius II Pte Ltd 6.04 percent, SCI Growth Investments III, and Sequoia Capital Global Growth Fund III – Endurance Partners LP 3.49 percent.

The company will not receive any proceeds from the offer.

Chennai-headquartered NBFC, Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals. It has a strong presence in south India, and all loans are secured by the borrowers’ property, predominantly being self-occupied residential property (SORP).

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The company was set up by V K Ranganathan and commenced operations in 1984, with a focus on consumer loans and vehicle finance. D Lakshmipathy changed the business approach in 2005 with a focus on small business loan lending in urban, semi urban markets as well as rural areas with growth potential.

Over 95 percent of company’s loan portfolio comprises loans from between Rs 1 lakh to Rs 10 lakh in principal amount, with an average ticket size of Rs 2.7 lakh and Rs 2.6 lakh in the six months ended September 2021 and FY21 respectively.

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Its assets under management (AUM) has grown to Rs 4,639.29 crore as of September 2021, increasing from Rs 4,445.38 crore as of March 2021. The AUM grew at a CAGR of 86 percent over FY16-FY21.

Five Star has grown from 173 branches in 2019 to 268 branches as on September 2021 across 126 districts in eight states and one union territory.

ICICI Securities, Kotak Mahindra Capital Company, Edelweiss Financial Services and Nomura Financial Advisory and Securities (India) are the book running lead managers to the issue.