Five Star Business finance -
Q4 and FY 25 results and concall highlights -
FY 25 outcomes -
No of branches @ 748 as on 31 Mar 25 vs 520 as on 31 Mar 24
AUM @ 11.87 k cr, up 23 pc
Gross NPAs @ 1.79 vs 1.38 pc
Net NPAs @ 0.88 vs 0.63 pc
PCR @ 51.31 vs 54.27 pc
Capital Adequacy @ 50.10 pc !!!
30 DPD + @ 9.65 vs 7.9 pc YoY ( includes 90 DPD + @ 1.79 pc )
PAT - 1072 cr, up 28 pc
NIMs @ 16.75 pc
RoA @ 8.18 pc
RoE @ 18.9 vs 17.8 pc YoY
Company is present across 11 states and UTs
100 pc of company’s loan book is secured. 95 pc is against self owned residential property
Avg ticket size @ 3.9 lakh. LTV @ 40 pc - indicating conservative lending practices
Restructured book @ 0.30 pc. Holding 45 pc provisions on restructured book
Active loans as on 31 Mar 25 @ 46 vs 39 lakh YoY
Company added 19 branches in Q4
Total employee count @ 11934 vs 9327 as on 31 Mar 24
**FY 25’s cost of borrowing @ 9.64 vs 9.71 pc **
**Portfolio yeild @ 24.03 vs 24.27 pc **
Spreads @ 14.39 pc
Geography wise breakup of AUM -
TN - 29 pc
AP - 38 pc
Telangana - 19 pc
Karnataka - 6 pc
MP - 7 pc
Others - 2 pc
Tier wise breakup of AUM -
Tier - 1 and 2 - 1 pc
Tier - 3 - 8 pc
Tier - 4 - 14 pc
Tier - 5 - 32 pc
Tier - 6 - 45 pc
AUM breakup by ticket size -
< 3 Lakh - 32 pc
3-5 Lakh - 53 pc
5-10 Lakh - 13 pc
10-15 Lakh - 1 pc
AUM breakup by vintage -
Less than 1 yr - 39 pc
1-3 yr - 48 pc
3-5 yr - 8 pc
More than 5 yr - 5 pc
Trend of 30 DPD + over last 5 Qtrs -
Mar 24 @ 7.89 pc
Jun 24 @ 8.11 pc
Sep 24 @ 8.44 pc
Dec 24 @ 9.16 pc
Mar 25 @ 9.65 pc
Trend of 30 DPD + over last 5 yrs -
Mar 20 - 11.82 pc
Mar 21 - 12.36 pc
Mar 22 - 16.78 pc
Mar 23 - 10.5 pc
Mar 24 - 7.89 pc
Mar 25 - 9.65 pc
Stage wise breakup of current AUM -
Current ( stage 1 ) - 10009 cr @ 84.92 pc of AUM
1-30 DPD ( stage 1 ) - 720 cr @ 6.07 pc of AUM
Total stage 1 @ 10730 cr
31 - 60 DPD ( stage 2 ) - 487 cr @ 4.1 pc of AUM
61 - 90 DPD ( stage 2 ) - 446 cr @ 3.76 pc of AUM
Total stage 2 @ 934 cr @ 7.87 pc of AUM
90 DPD + ( stage 3 ) - 212 cr @ 1.79 pc of AUM
Total provisions @ 194 cr ( out of which 85 cr are against stage 1 + 2 assets, 109 cr are against stage 3 loans )
Q4 P&L statement -
Interest Income - 734 vs 599 cr, up 23 pc
Fee and Other inc - 25 vs 19 cr
Interest expenses - 175 vs 138 cr, up 27 pc
NII - 584 vs 481 cr, up 21 pc
Operating expenses - 188 vs 149 cr, up 26 pc
Provisions + loan losses - 25 vs 19 cr
PAT - 277 vs 236 cr, up 18 pc
FY 25 P&L statement -
Interest Income - 2766 vs 2116 cr, up 31 pc
Fee and Other income - 100 vs 79 cr
Interest expenses - 668 vs 468 cr, up 43 pc
NII - 2198 vs 1726 cr, up 27 pc
Operating expenses - 678 vs 555 cr, up 22 pc
( yearly operating expenses @ 5.74 pc of AUM )
Provisions + loan losses - 89 vs 56 cr
PAT - 1069 vs 834 cr, up 28 pc
Comments from Q4 concall -
If the disruption in Karnataka had not happened in Q4, company would have grown its AUM by 25 pc ( instead of reported growth of 23 pc ). The bump up in gross NPAs to 1.79 is also partially attributable to the new Bill passed in Karnataka assembly. Things have now started to improve
Distributed a dividend of Rs 2 / share for FY 25
Massive branch addition in FY 25 is mainly due to split up of bigger branches into smaller branches to improve coverage and efficiencies with minimal additional expenses
Cost of incremental borrowings has fallen further to 9.3 pc
As the interest rates keep falling, credit demand should pick up further
The over leveraging by retail customers ( specially lower income groups - which are company’s customers ) - also played a role in worsening of credit quality through FY 25. The same is now getting reversed. Should take another 2 Qtrs for situation to normalise completely
Still the company is much better off vs MFIs as their nature of lending is 100 pc secured. Customer behaviour is completely different while dealing with Five Star finance vs MFIs as the company holds their residential property as collateral
Should be able to grow their AUM by another 25 pc in FY 26
Similar bill has now been passed in TN. But the disruption levels in TN are far lower and the situation is completely under control
Should see a sizeable drop in cost of funds ( 20-40 bps ) both on the existing borrowings and on incremental borrowings as the RBI has started cutting rates and the banks have also stared passing on the cuts
Company believes that a PCR of 1.65 pc of AUM ( 194 cr of provisions on a loan book of 11.8 k cr ) is more than adequate for a 100 pc secured loan book
Company is deliberately trying to lend more in 3-5 and 5-10 lakh ticket size bracket. They believe, the stress in this segment of customers is far lesser vs the customers with loan size < 3 lakh. Also as the cost of borrowing is falling and the company is also willing to lending at lower rates, the profile of customers that the company is getting ( incrementally ) is also improving. These ( supposedly ) better customers generally have ticket sizes > 3 lakh
Out of 228 branches added in FY 25, 150 branches were added because of split up of bigger branches. Any branch servicing > 1500 customers, company is happy to split it. Most of branch splitting is behind. As and when reaches > 1500 customers, company shall keep splitting them. New branches + Splitting combined - should be able to add 75-100 / yr going forward
Aim to bring the < 3 lakh ticket size loans down to 20 pc of AUM from 32 pc currently. There shall be a corresponding 12 pc gain in the 3-5 lakh + 5-10 lakh ticket size books ( combined ). Primary focus shall be on the 3-5 lakh bracket - that’s their sweet spot
Because of stress in the system wrt retail lending to low income customers, the MFIs have sharply pulled back their lending over last 2 Qtrs. The over indebtedness at retail level is now getting abating on a QoQ basis - this augurs well for the Industry. Also the cash flows in Rural India are showing descent signs of recovery
Looking to get into affordable housing segment - as it’s an adjacent product for the company. Should start rolling it out wef Q3/Q4 FY 26
Company aspires per employee AUM to be around 1.25 cr
In Q4, Avg new loan disbursements per employee per month was 2.6 loans / employee / month which corresponds to aprox 31 loans / employee / Yr
Company’s avg customer has a CIBIL score profile of 500-550 or is completely new to credit vs bigger NBFC’s / Banks which lend to customers with CIBIL score > 700
For the incremental loans, company is lending @ rates between 21.5 - 23 pc with an avg yeild of about 22.5 pc - which is aprox 150 - 200 bps lower than their previous lending rates ( basically they are now passing on the reduced rates to the customers ). This drop is yeild is also attracting better customers for the company
Expansion in employee count should moderate going forward as company intends to now ramp up AUM per employee
Expecting growth rates in TN and Karnataka to pick up wef Q1 FY 26 ( should be closer to 30 pc growth in these 2 states )
Intend to keep paying dividends every year from now on
State wise spread of branches -
TN - 208
Karnataka - 59
AP - 234
Telangana - 115
Maharashtra - 25
MP - 94
Gujarat - 1
Rajasthan - 5
UP - 6
Chattishgarh - 3
When company enters a new state, they open a small number of branches ( < 5-6 branches ) and study the mkt closely for 18-24 months. Only once they r confident, they then ramp up quickly
FY 26, earnings growth should be moderate at 12-15 pc despite 25 pc AUM growth because the company is now lending ( wef Nov 24 ) @ 200 BPS lower than their historical lending rates. RoA should be between 7.5 - 8 pc
End use of company’s loans include - Business loans ( 60 pc of loans ), construction related expenses ( 20 pc of loans ) , personal consumption like medial, educational etc ( 15 pc of loans )
Disc: hold a tracking position, studying, not a buy/sell recommendation, biased, not SEBI registered, posted for educational purposes