Everything You Need to Know About Five Star Business Finance IPO
Initial public offerings (IPOs) can be an exciting and lucrative investment opportunity for many investors. An IPO is when a private company sells shares of their stock to the public for the first time. This allows the company to raise capital to fund their growth plans and gives investors a chance to own a piece of the company. Five Star Business Finance is the latest company to go public and offer investors a chance to own shares of their stock. Let’s explore everything you need to know about the Five Star Business Finance IPO.
The Company
Five Star Business Finance is a non-banking financial company (NBFC) based in Chennai, India. The company was founded in 1984 and offers a range of financial products and services to small and medium-sized enterprises (SMEs) across various industries. Five Star has a strong presence in South India and has expanded rapidly over the years, with over 650 branches across 13 states in India.
The IPO
Five Star Business Finance plans to raise up to Rs. 10,000 crores ($1.3 billion) through its IPO. The company will offer shares at a price band of Rs. 750-760 per share. The IPO will consist of a fresh issue of Rs. 9,375 crores ($1.25 billion) and an offer for sale of Rs. 625 crores ($83 million) by existing shareholders. The IPO opens on 29th June and will close on 1st July. The shares will be listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
The Financials
Five Star Business Finance has shown steady growth over the years. In the fiscal year 2020, the company’s revenue increased by over 37% to Rs. 1,118 crores ($149 million) compared to the previous year. The net profit also increased by over 27% to Rs. 271 crores ($36 million) in the same period. The company has a strong asset base of over Rs. 5,000 crores ($670 million) and a healthy loan book of over Rs. 4,300 crores ($575 million).
The Industry
The SME sector is a crucial driver of economic growth in India, and financial services companies like Five Star Business Finance play a vital role in helping them access funds. The SME sector accounts for over 45% of India’s total industrial output and employs over 110 million people. However, the sector has struggled to access credit from traditional banking institutions, creating a gap that NBFCs like Five Star have filled.
The Risks
Like any investment, there are risks associated with investing in Five Star Business Finance’s IPO. The COVID-19 pandemic has had a significant impact on the Indian economy, and the SME sector has been particularly hard hit. There is a risk that the company may face an increase in non-performing assets (NPAs) and defaults from their loan book. Additionally, there is a risk that the valuation may be too high, making the IPO overpriced.
Conclusion
The Five Star Business Finance IPO offers investors a chance to own shares in an established NBFC that has shown steady growth over the years. The SME sector is a crucial driver of economic growth in India, and Five Star Business Finance is well-positioned to benefit from the sector’s growth. However, investors must also weigh the risks associated with the investment, including the impact of COVID-19 on the Indian economy and the risks associated with investing in any IPO. Overall, the Five Star Business Finance IPO is an exciting opportunity for investors, but they must do their due diligence before investing.
