Five-star Business Finance Limited · NSE:FIVESTAR
Five-star Business Finance — Q3 FY2023 Earnings Presentation
39 slides from Five-star Business Finance's earnings presentation, Jan 28, 2023
Slide 1: Stock exchange filing letter for investor presentation
Date: January 28, 2023 The National Stock Exchange of India Limited, BSE Limited Exchange Plaza, Listing department, Bandra-Kurla Complex, First floor, PJ Towers, Bandra (E), Mumbai 400 051 Dalal Street, Fort Mumbai 400 001 Symbol: FIVESTAR Scrip code: 543663 Sub: Investor Presentation on the Unaudi
Slide 2: Five-Star Business Finance Limited Investor Presentation Q3 FY2023
Five-Star Business Finance Limited Investor Presentation Q3 FY2023 STRICTLY PRIVATE AND CONFIDENTIAL
Slide 3: Safe Harbour
Safe Harbour This presentation and the accompanying slides (the “Presentation”) which have been prepared by Five-Star Business Finance Limited (the “Company”) have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for
Slide 4: Presentation Path
Presentation Path Section 2 Section 1 Executive Summary – Company Overview Q3FY2023 Section 3 Section 4 Financial Performance, Asset Liability & ALM Quality & ECL – Q3FY2023 2
Slide 5: Five-Star Business Finance Limited – Overview
Section 1 Five-Star Business Finance Limited – Overview
Slide 6: Built to address large market opportunity and achieve scale
Built to address large market opportunity and achieve scale Proprietary Underwriting & Registered as NBFC-ND-SI with 2 decades of lending to Small Collections model fine-tuned the Reserve Bank of India Business Loan customers over 2 decades of experience Built to take advantage of the large addressa
Slide 7: The Five Star Journey
The Five Star Journey ₹62 bn AUM (Dec-22) ₹39 bn AUM (Mar-20) ₹5 bn AUM ₹1.3 bn AUM (Mar-17) ₹0.3 bn AUM (Mar-15) High Growth Phase (Mar-10) Setting the base 2017 Onwards Strengthening the for High Growth Building the Business Model 2015 – 2017 Business Model 2010 – 2015 Initial Phase 2005 – 2010 19
Slide 8: Transformational Journey
Transformational Journey FY15 FY22 Number of Branches 39 >7x 300 Loans to borrowers (‘000) 5 >40x 218 Relationship Officers 59 >50x 3,176 Disbursements (₹ Mn) p.a. 793 30x 24,0821 Assets Under Management (AUM) (₹ Mn) 1,315 >35x 50,671 Total Income (₹ Mn) 336 >35x 12,562 Profit After Tax (₹ Mn) 99 >4
Slide 9: Key Success Factors
Key Success Factors Deep Understanding of Customer Compelling Economics & Best in Class Segment & Conservative Lending Industry Leading Asset Quality Return Metrics Practices Gross Stage 3 Assets of < 1.5% Yields of ~24%; Spreads of ~12-13% 20 years of operations Net Stage 3 Assets of <1% Industry l
Slide 10: Unique Value Proposition – Product, Underwriting & Collections Strategy
Unique Value Proposition – Product, Underwriting & Collections Strategy Customer centric model underpinned by calibrated sourcing and distribution strategy and robust underwriting and collections practices Customer centric business model Comprehensive credit assessment and robust risk management Pro
Slide 11: Distribution Strategy
Distribution Strategy Maharashta Geography Total AUM % of AUM South India 58,873 94% Chhatisgarh Non-South 3,551 6% Uttar Pradesh Vintage-wise average AUM per branch (as of December 2022) 10 ₹497 mn Branch Vintage No of branches Average AUM <=1 year 89 22 1 – 3 years 43 106 3 – 5 years 123 182 Madhy
Slide 12: Strategic Technology Focus
Strategic Technology Focus Robust investments in technology to efficiently manage the lending process, increase productivity and decrease costs 1 Augmentation of team for next ▪ Manual underwriting process with minimal technology involvement level of development 2 ▪ Significant investments in techno
Slide 13: Resilience through Crisis – Gross Stage 3 Assets
Resilience through Crisis – Gross Stage 3 Assets Demonetization GST Implementation 2.22% 2.24% 3.30% 2.80% 2.52% 1.45% Q2FY17 Q3FY17 Q4FY17 (Pre- (Demon (Post- Q1FY18 Q2FY18 Q4FY18 Demon Quarter) Demon (Pre- (GST Implementation (Post- Quarter) Quarter) GST Quarter) GST Quarter) Implementation) Covid
Slide 14: Consistent Financial Performance over the years
Consistent Financial Performance over the years1 Particulars (₹ Mn) FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Operational Information Number of branches 39 64 103 130 173 252 262 299 Loan disbursals 793 1,319 3,830 7,072 14,822 24,087 12,450 17,562 AUM 1,315 1,981 4,834 10,084 21,128 3
Slide 15: Strong ESG Focus
Strong ESG Focus Sustainable Business Model Built Around Societal Impact ₹ ₹ Corporate Social Financial Inclusion Majority of AUM from LIG Responsibility ◼ Caters to the underserved market 72% 75% ◼ CSR Committee is focused on 66% of small business loans 58% improving education, health and 47% livel
Slide 16: Strong ESG Focus
Strong ESG Focus Social Impact achieved through… Significant Branch presence in Tier 3 to Tier 6 towns - semi-urban and fast-growing rural geographies 1% 2% Branch Presence • Significant branch presence in Tier 3 to Tier 6 towns 13% 26% • Low income borrowers 21% Customers ignored by • Customers wit
Slide 17: Strong Governance framework
Strong Governance framework Board of Directors 4 Independent Directors (Incl 1 Woman) 1 Executive Director Committees Chaired by Other Committees Independent Directors 3 Non-Executive Directors Audit Committee Business Resource Committee Corporate Responsibility Risk Management Committee Committee N
Slide 18: Distinguished Board of Directors
Distinguished Board of Directors Lakshmipathy Deenadayalan Anand Raghavan T T Srinivasaraghavan Bhama Krishnamurthy Chairman & Managing Director Independent Director Independent Director Independent Director Chair – Audit Committee Chair – Risk Management Committee Chair – Nomination & Remuneration
Slide 19: Experienced Management team
Experienced Management team Rangarajan Krishnan Srikanth Gopalakrishnan Vishnuram Jagannathan Parthasarathy Srinivasan Sathya Ganesh Chief Executive Officer Chief Financial Officer Chief Operating Officer Chief Credit Officer Chief Business Officer Vanamali Sridharan Jayaraman Sankaran Ramesh Kannah
Slide 20: Executive Summary – Q3FY2023
Section 2 Executive Summary – Q3FY2023
Slide 21: Five-Star Business Finance – At a glance
Five-Star Business Finance – At a glance Scale of Distribution Granular Book Asset Quality Liability Profile Profitability Operations ₹62.4bn / ₹47.7bn 369 100% Secured 1.45% 49 ₹4.3bn / ₹3.4bn AUM in Q3FY23 / Q3FY22 Number of Branches Loan Book Q3FY234 Lender relationships PAT for 9MFY23 / 9MFY22 3
Slide 22: Executive Summary
Executive Summary • Five Star continued to witness a strong quarter in Q3FY2023 across Growth, Profitability and Quality. • Business & Disbursal momentum back to pre-COVID levels and collections continue to be robust. • Y-o-Y growth of 31% on AUM and Gross Stage 3 Assets of 1.45%1 AUM Profit After T
Slide 23: Balance Sheet indicators
Balance Sheet indicators Net Worth All amounts in ₹ Mn Disbursals AUM 114% 16% 31% 9,103 41,652 8,028 62,424 40,076 57,324 35,801 47,676 4,260 9% 4% 13% Borrowings Expected Credit Loss Liquidity 1% 17% 31,785 1,037 15,082 1,029 1,016 27,158 10,130 25,231 7,949 2% 26% Liquidity Q3FY22 Q2FY23 Q3FY23 2
Slide 24: P&L indicators
P&L indicators All amounts in ₹ Mn Income Interest expense Other expenses 22% (63%) 13% 3,887 723 1,194 3,619 996 3,177 631 609 733 7% (20%) (4%) Credit Cost PBT PAT 28% 29% 153 70% 1,510 2,015 1,442 1,928 1,181 85 45% 1,568 5% 5% 47 Q3FY22 Q2FY23 Q3FY23 22
Slide 25: Financial Summary
Financial Summary 1. Net Q-o-Q AUM growth of ₹5,100 Mn in Q3FY23 as against ₹1,283 Mn in Q3FY22. AUM was up 31% Y-o-Y at ₹62,424 Mn as against ₹47,676 Mn as of 31 December 2021. 2. Disbursements during the quarter was at ₹9,103 Mn as against ₹4,260 Mn during Q2FY22. 3. Active loans at almost 0.27 Mn
Slide 26: Asset Quality & ECL
Section 3 Asset Quality & ECL FIVE STAR Business Finance Limited
Slide 27: Asset quality indicators
Asset quality indicators Collections Efficiency (%) 30+ (%) 98.2 101.5 99.2 95.6 100.196.6 100.1 97.0 92.6 93.9 19.36 16.78 15.71 13.62 12.10 Dec'21 Mar'22 Jun'22 Sep'22 Dec'22 Dec'21 Mar'22 Jun'22 Sep'22 Dec'22 Total amount of EMI received during the month (including arrears of previous months) div
Slide 28: Asset quality indicators
Asset quality indicators Amount in ₹ Mn As at Dec 20221 As at Sep 20222 As at Dec 20212 Bucket AUM % AUM AUM % AUM AUM % AUM Current (Stage-1) 50,484 80.87% 44,888 78.31% 32,126 67.38% 1-30 (Stage-1) 4,385 7.02% 4,630 8.08% 6,322 13.26% 31-60 (Stage-2) 3,384 5.42% 3,575 6.24% 4,070 8.54% 61-90 (Stag
Slide 29: Asset quality indicators
Asset quality indicators Amount in ₹ Mn As of December 31, 20221 Stage 1 Stage 2 Stage 3 Total Loans Outstanding (Gross) 54,869 6,648 907 62,424 ECL Provision 149 481 406 1,037 Loans Outstanding (Net) 54,720 6,166 501 61,387 ECL Provision % 0.27% 7.24% 44.78% 1.66% As of September 30, 20222 Stage 1
Slide 30: Financial Performance – Q3FY2023
Section 3 Financial Performance – Q3FY2023
Slide 31: Balance Sheet
Balance Sheet Particulars (₹ Mn) Q3FY2023 Q3FY2022 Q2FY2023 Assets Cash & Cash equivalents 7,317 7,598 3,438 Bank balances other than cash & cash equivalents 2,365 3,899 2,299 Loans1 61,542 47,664 57,635 Investments 1,446 3,379 1,644 Other financial assets 452 57 226 Non-Financial Assets 1,197 1,077
Slide 32: Quarterly & Half yearly Profit & Loss Statement
Quarterly & Half yearly Profit & Loss Statement Particulars (₹ Mn) Q3FY2023 Q3FY2022 Q2FY2023 Y-o-Y Q-o-Q 9MFY2023 9MFY2022 Y-o-Y Loan Portfolio 62,424 47,676 57,324 31% 9% 62,424 47,676 31% Interest Income 3,828 3,037 3,573 10,753 8,901 Net Gain on Fair value changes 18 55 14 47 187 Fee & Other inc
Slide 33: RoA Tree
RoA Tree Particulars Q3FY2023 Q3FY2022 Q2FY2023 9MFY2023 9MFY2022 Interest Income (as a % of average portfolio) 24.05% 23.91% 24.19% 24.11% 24.05% Interest Expenses (as a % of average borrowings) 10.26% 10.45% 10.48% 10.35% 10.56% Net Interest Income % 13.79% 13.46% 13.71% 13.76% 13.49% Total Income
Slide 34: Liability & ALM
Section 4 Liability & ALM FIVE STAR Business Finance Limited
Slide 35: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix Number of lenders in each category 54 53 49 42 14 11 Increased number of lending relationships 8 6 13 from 30 + FY19 to ~50 as of Dec 2022 30 11 24 16 23 12 20 2 9 8 Deepened relationships in the PSU and 16 1 1 7 8 9 4 9 p
Slide 36: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix 100% 3% 3% 0% 19% 14% 21% 80% 18% 30% 60% 5% 45% 4% 40% 56% 7% 50% 20% 26% 0% Dec'22 Sep'22 Dec'21 Bank Term Loans Other Term Loans NCD Securitisation ECB Cost of incremental borrowings Cost of funds on the book 11.37% Red
Slide 37: ALM Position as of Dec’22 – Cumulative
ALM Position as of Dec’22 – Cumulative Particulars Up to 1M 1-2 M 2-3 M 3-6 M 6M – 1Y 1-3 Y 3-5 Y >5 Y Opening Liquidity 11,283 Add: Inflows from advances 744 809 655 2,394 5,348 22,567 21,126 8,374 Less: Outflows on borrowings 671 927 1,388 5,373 4,747 12,114 5,901 299 Add: Other inflows 388 82 11
Slide 38: Strong Liquidity Position as of Dec’22
Strong Liquidity Position as of Dec’22 Amount in ₹ Mn Liquidity buffer as of Dec 2022 Unencumbered cash & cash equivalents 10,130 Unavailed sanction from banks / FIs 3,200 Total Liquidity 13,330 Projected Cashflow Schedule Q4FY23 Q1FY24 Q2FY24 Q3FY24 Opening Liquidity 13,330 13,839 11,949 12,740 Add
Slide 39: Thank You
FIVE STAR KA Business Finance Limited FIVE STAR WN Business Finance Limited Thank You 37
Five-Star Business Finance — Q3 FY2023 Earnings Presentation on 6ix