Five-star Business Finance Limited · NSE:FIVESTAR
Five-star Business Finance — Q1 FY2024 Earnings Presentation
55 slides from Five-star Business Finance's earnings presentation, Jul 29, 2023
Slide 1: Letter to stock exchanges on Investor Presentation
FIVE STAR Business Finance limited ~ Date: July 29, 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: I
Slide 2: Investor Presentation Q1 FY2024
FIVE STAR IB usin,ess a 'i nance, l im 1ted Five-Star Business Finance Limited Investor Presentation Q1 FY2024 STRICTLY PRIVATE AND CONFIDENTIAL
Slide 3: Safe Harbour
Safe Harbour FIVE STAR e Business Finance Limited 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 in
Slide 4: Presentation Path
Presentation Path FIVE STAR e Business Finance Limited Section 1 Business Highlights Section 3 Section 2 Executive Summary – Company Overview Q1FY2024 Section 4 Section 5 Financial Performance, Asset Liability & ALM Quality & ECL – Q1FY2024 2
Slide 5: Business Highlights
Section 1 Business Highlights FIVE STAR ~ !B usiness Finance Umited
Slide 6: Business Highlights – Q1FY2024
Business Highlights – Q1FY2024 FIVE STAR Business Finance Limited e Number of Branches Loan Disbursement Loan Portfolio 386 ₹ 11,318 Mn ₹ 75,833 Mn +13 +75 2% 99% 10% 43% Gross Stage 3 90+ Assets2 30+ DPD Assets1 1.08% 9.68% 1.41% +5 bps +29 bps +4 bps -4 bps -83 bps -6.03% NIM Profit After Tax Retu
Slide 7: Company Overview
Section 2 Company Overview FIVE STAR ~ !B usiness Finance Umited
Slide 8: Five Star – Who we are
Five Star – Who we are FIVE STAR e Business Finance Limited NBFC providing secured financial solutions to Small Business customers and Self-employed Individuals lnd1v1duals who are largely cut-off from formal lending ecosystem Target Customer Segment Customers with informal income derived from every
Slide 9: Built to address large market opportunity and achieve scale
Built to address large market opportunity and achieve scale FIVE STAR e Business Finance Limited 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
Slide 10: The Five Star Journey
The Five Star Journey FIVE STAR e Business Finance Limited Listed Entity ₹76 bn AUM Unlisted Entity (Jun-23) ₹39 bn AUM ₹69 bn AUM ₹5 bn AUM (Mar-20) (Mar-23) ₹1.3 bn AUM (Mar-17) ₹0.3 bn AUM (Mar-15) High Growth (Mar-10) Phase Setting the base Strengthening the for High Growth 2017 Onwards Building
Slide 11: Transformational Journey
Transformational Journey FIVE STAR Business Finance Limited e FY15 FY23 Number of Branches 39 ~10x 373 Loans to borrowers (‘000) 5 ~60x 294 Relationship Officers 59 ~70x 4,0031 Disbursements (₹ Mn) p.a. 793 >40x 33,914 Assets Under Management (AUM) (₹ Mn) 1,315 >50x 69,148 Total Income (₹ Mn) 336 >4
Slide 12: Shareholding as of June 30, 2023
Shareholding as of June 30, 2023 FIVE STAR e Business Finance Limited Institutional Promoters Individual Promoter & Promoter Group 15.44% 18.48% Others 9.64% AIF & QIB 3.53% Employees 1.31% 50.49% Mutual Funds 1.11% Foreign Corporates1 % holding computed on a fully diluted basis, including unvested
Slide 13: Large Market Opportunity
Large Market Opportunity FIVE STAR e Business Finance Limited Overall MSME Credit Gap Target Addressable Market for Five Star I I I ,, ,, ; ... -------------------------------------------- ... ... ... '' ' \ \ I I , , ". ; ; -----------------------------------------------------------------, ... ' 1
Slide 14: Growth Strategy
Growth Strategy FIVE STAR e Business Finance Limited r Large Market Strong Infrastructure of Five Star Ability to Demonstrate 30%+ Growth Opportunity INR 22 Trillion1 Physical infra (386 branches) & Human infra (7,538 employees) - Potential for strong growth in the years to come Growth Lever Growth
Slide 15: Challenges in Lending to Small Business Customers & Self-Employed individuals
Challenges in Lending to Small Business Customers & Self-Employed individuals FIVE STAR Business Finance Limited ~ - - - - - ~ ~ - - - - - - ~ ~ - - - - - - r-----------------------------------------------------------; I I I Institutionalized Lenders I I Small Business Owners and Self Medium Enterpr
Slide 16: Five Star approach to Small Business Lending
Five Star’ approach to Small Business Lending FIVE STAR e Business Finance Limited Customers targeted by Five Star Rationale for customer selection Customers from semi-urban and fast-growing rural geographies Good potential & easier reach; fewer legal issues on collateral Customers with income deriv
Slide 17: Key Strengths
Key Strengths FIVE STAR e Business Finance Limited Deep Understanding of Customer Segment & Compelling Economics & Best in Class Industry Leading Asset Quality Conservative Lending Practices Return Metrics Gross Stage 3 Assets of < 1.5% 20 years of operations Yields of ~24%; Spreads of ~12-13% Net S
Slide 18: Targeted Customer Focus & Product Offering
Targeted Customer Focus & Product Offering FIVE STAR e Business Finance Limited Customer Selection Typical Customer Profile Product Offering Typical Product Features • Lending to the same segment for • Small business owners and self- • 100% of the book backed by a hard • Loans provided for business
Slide 19: Unique Value Proposition – Product, Underwriting & Collections Strategy
Unique Value Proposition – Product, Underwriting & Collections Strategy FIVE STAR e Business Finance Limited Customer centric model underpinned by calibrated sourcing and distribution strategy and robust underwriting and collections practices I ~ ,-------------------------------------~ ' \ Customer
Slide 20: Distribution Strategy
Distribution Strategy FIVE STAR e Business Finance Limited Maharashtra Geography # branches Total AUM % of AUM Chhattisgarh South India 325 71,443 94% Rest of India 61 4,390 6% Uttar Pradesh Vintage-wise average AUM per branch (as of June 2023) Rajasthan Branch Vintage No of branches Average AUM 12
Slide 21: Branch vs Cluster Strategy
Branch vs Cluster Strategy FIVE STAR e Business Finance Limited A key component of Distribution Strategy is following a Cluster approach to growth. This is achieved through… Taking advantage of the market • When a branch reaches a reasonable size threshold (typically about 500 - 1,000 accounts), an
Slide 22: Cluster Strategy Illustration – Theni Cluster (Tamilnadu)
Cluster Strategy Illustration – Theni Cluster (Tamilnadu) FIVE STAR e Business Finance Limited ~gj[CG Vattavada I Theni n.1'.§0JS Batlagu-n'clu 6ITji;)66\ia;®,m@ Parent Branch: Date Theni Bodi Andipatti PeriyaJular.n_ Cluster Qul]hl.J@>6TTID Annavati c!,16isrAt6lll.9- Theni (Opened in Aug 2014) rhal
Slide 23: Cluster Strategy Illustration – Kakinada Cluster (Andhra Pradesh)
Cluster Strategy Illustration – Kakinada Cluster (Andhra Pradesh) FIVE STAR e Business F1'n ance Limited ~ Narendrapatnam /5009"eJ.)_O Parent Branch: Date Kakinada Jaggampeta Kathipudi Sarpavaram Kakinada Cluster Kakinada (Opened in Jul Jul 2016 - - - - - IT 2016) Oct 2020 1,621 - - - 1,621 Child Br
Slide 24: Strategic Technology Focus
Strategic Technology Focus FIVE STAR e Business Finance Limited Robust investments in technology to efficiently manage the lending process, increase productivity and decrease costs Ongoing Investments to help build a scalable and efficient model… [...______] Till FY2017 ▪ Manual underwriting process
Slide 25: Robust Risk Management Architecture
Robust Risk Management Architecture FIVE STAR e Business Finance Limited Board of Directors ----::::::::::: ==-==- ----::::::::::: ~ Risk Management Audit Committee I Committee I I I Supported by Supported by / I l~ ':::>- / l~ ':::>- ALCO Credit Committee ur Business Resource Internal Internal Stat
Slide 26: Monitoring the Risk Management Architecture
Monitoring the Risk Management Architecture FIVE STAR e Business Finance Limited Monitored by Audit Committee Financial Risk Monitored by Audit Liquidity Fraud Risk Committee as part of audit / Risk Monitored by ALCO ICFR1 process Credit & Collateral Risk Monitored by RMC Monitored by Audit Monitore
Slide 27: Continuing ESG Focus
Continuing ESG Focus FIVE STAR e Business Finance Limited ------------------------------------------------------------------------------------------------ I I Sustainable Business Model Built Around Societal Impact ₹ E!1₹ Corporate Social Financial Inclusion Majority of AUM from LIG Responsibility ◼
Slide 28: Continuing ESG Focus
Continuing ESG Focus FIVE STAR e Business Finance Limited Significant Branch presence in Social Impact achieved through… 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 27% 13% • Low-income borrowers
Slide 29: Strong Governance framework
Strong Governance framework FIVE STAR e Business Finance Limited 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 _
Slide 30: Distinguished Board of Directors
Distinguished Board of Directors FIVE STAR e Business Finance Limited Lakshmipathy Deenadayalan Anand Raghavan T T Srinivasaraghavan Bhama Krishnamurthy Chairman & Managing Director Independent Director Independent Director Independent Director Chair – Audit Committee Chair – Risk Management Committ
Slide 31: Experienced Management team
Experienced Management team FIVE STAR e Business Finance Limited Lakshmipathy D Rangarajan Krishnan Srikanth Gopalakrishnan Vishnuram Jagannathan Parthasarathy Srinivasan Sathya Ganesh Managing Director Chief Executive Officer Chief Financial Officer Chief Operating Officer Chief Credit Officer Chie
Slide 32: Consistent Financial Performance over the years
Consistent Financial Performance over the years1 FIVE STAR Business Finance Limited e Particulars (₹ Mn) FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Operational Information Number of branches 39 64 103 130 173 252 262 299 373 Loan disbursals 793 1,319 3,830 7,072 14,822 24,087 12,
Slide 33: Executive Summary – Q1FY2024
Section 3 Executive Summary – Q1FY2024 FIVE STAR ~ !B usiness Finance Umited
Slide 34: Five-Star Business Finance – At a glance
Five-Star Business Finance – At a glance FIVE STAR Business Finance Limited e Scale of Distribution Granular Book Asset Quality Liability Profile Profitability Operations ....... ft ₹75.8bn / ₹53.0bn AUM in Q1FY24 / Q1FY23 - III 386 Number of Branches 100% Secured Loan Book Q1FY244 1.41% 48 Lender r
Slide 35: Executive Summary
Executive Summary FIVE STAR Business Finance Limited e • Five Star witnessed a very atypical quarter in Q1FY2024 across Growth, Profitability and Quality. Most of the numbers stacked up better than Q4FY2023 • Robust disbursals coupled with strong asset quality showing betterment across various DPD b
Slide 36: Balance Sheet indicators
Balance Sheet indicators FIVE STAR Business Finance Limited e r I Net Worth All amounts in ₹ Mn I Disbursals AUM f- _ _ ___. ------- I I I 99% 43% 17% ----- I I I I I I I I -------- 11,100 11,318 52,965 69,148 75,833 38,570 43,395 45,265 I 10% 4% I 5,684 2% I I I I I I I I I I I I I I Borrowings Exp
Slide 37: P&L indicators
P&L indicators FIVE STAR Business Finance Limited e : r I ------------------, All amounts in ₹ Mn I Income I I Interest expense Other expenses I I - - - - _... , - - - -_ . . . - - - - __. I I (48%) (43%) I 43% I - - - -- - - ~ - - - -~ - - - - 962 _ ____, I II ---- 4,836 1,303 II I 4,393 1,264 I I
Slide 38: Well Diversified Portfolio across Parameters
Well Diversified Portfolio across Parameters FIVE STAR e Business Finance Limited AUM by Geography AUM by Ticket Size1 Q1FY24 1% 1% Q1FY23 Q1FY24 1% 0% 1% 1% Q1FY23 5% 5% 10% 10% 6% 7% 34% 38% ATS for 42% ATS for 20% 20% Q1FY24 Q1FY23 48% 3.36L 2.83L 41% 46% 34% 30% ------ TN AP TS AUM by Branch Tie
Slide 39: Consistent & Best-in-class Spreads
Consistent & Best-in-class Spreads FIVE STAR e Business Finance Limited Portfolio Yield Cost of borrowing Spread 25.0% 12.0% 25.0% 14.0% 24.3% 24.4% 24.5% 24.0% 24.1% • 24.2% 24.2% 24.2% • 24.1% • ... 24.2% 13.5% 13.0% 24.5% 24.0% 24.2% • 24.2% • 24.2% • 24.1% • • • 11.5% No yield increases 23.5% 12
Slide 40: Financial Summary
Financial Summary FIVE STAR Business Finance Limited e 1. Net Q-o-Q AUM growth of ₹6,685 Mn in Q1FY24 as against ₹2,294 Mn in Q1FY23. AUM was up 43% Y-o-Y at ₹75,833 Mn as against ₹52,965 Mn as of June 30, 2022. 2. Disbursements during the quarter was at ₹11,318 Mn as against ₹5,684 Mn during Q1FY23
Slide 41: Asset Quality & ECL
Section 3 Asset Quality & ECL FIVE STAR ~ !B usiness Finance Umited
Slide 42: Asset quality indicators
Asset quality indicators FIVE STAR Business Finance Limited e Collections Efficiency (%) 30+ (%) r--------------------------------------------------------1 ---------------------------------------------------------1 I I I I I 99.2 95.6 100.196.6 100.1 97.0 100.5 97.5 99.6 97.5 15.71 13.62 12.10 10.51
Slide 43: Asset quality indicators
Asset quality indicators FIVE STAR Business Finance Limited e Amount in ₹ Mn As at Jun 20231 As at Mar 20231 As at Jun 20222 Bucket AUM % AUM AUM % AUM AUM % AUM Current (Stage-1) 64,281 84.77% 57,743 83.51% 39,566 74.70% 1-30 (Stage-1) 4,210 5.55% 4,140 5.99% 5,077 9.59% 31-60 (Stage-2) 3,130 4.13%
Slide 44: ECL Provisioning
ECL Provisioning FIVE STAR Business Finance Limited e Amount in ₹ Mn As of June 30, 20231 Stage 1 Stage 2 Stage 3 Total Loans Outstanding (Gross) 68,491 6,270 1,072 75,833 ECL Provision 278 493 474 1,244 Loans Outstanding (Net) 68,214 5,777 598 74,589 ECL Provision % 0.41% 7.86% 44.19% 1.64% As of M
Slide 45: Lag NPA
Lag NPA FIVE STAR Business Finance Limited e Amount in ₹ Mn Q1FY2024 Q1FY2023 Q1FY2022 Q1FY2021 Loan Portfolio 75,833 52,965 45,794 38,674 Gross Stage 3 assets 1,0721 5911 7672 5352 Gross Stage 3 assets % 1.41% 1.12% 1.68% 1.38% Gross Stage 3 assets % - 1 year Lag 2.02% 1.29% 1.98% 2.20% Gross Stage
Slide 46: Financial Performance – Q1FY2024
Section 4 Financial Performance – Q1FY2024 FIVE STAR ~ !B usiness Finance Umited
Slide 47: Balance Sheet
Balance Sheet FIVE STAR e Business Finance Limited Particulars (₹ Mn) Q1FY2024 Q4FY2023 Q1FY2023 Assets Cash & Cash equivalents 8,435 13,404 4,096 Bank balances other than cash & cash equivalents 1,249 2,405 3,036 Loans1 74,776 68,222 54,543 Investments 3,556 1,446 1,892 Other financial assets2 395
Slide 48: Quarterly & Yearly Profit & Loss Statement
Quarterly & Yearly Profit & Loss Statement FIVE STAR e Business Finance Limited Particulars (₹ Mn) Q1FY2024 Q1FY2023 Q4FY2023 Y-o-Y Q-o-Q FY2023 FY2022 Y-o-Y Loan Portfolio 75,833 52,965 69,148 43% 10% 69,148 50,671 37% Interest Income 4,637 3,352 4,235 14,988 12,038 Net Gain on Fair value changes 1
Slide 49: RoA Tree
RoA Tree FIVE STAR e Business Finance Limited Particulars Q1FY2024 Q1FY2023 Q4FY2023 FY2023 FY2022 Interest Income (as a % of average portfolio) 24.44% 24.15% 24.30% 24.23% 24.05% Interest Expenses (as a % of average borrowings) 9.80% 10.53% 9.87% 10.12% 10.51% Net Interest Income % 14.64% 13.62% 14
Slide 50: Liability & ALM
Section 5 Liability & ALM FIVE STAR ~ !B usiness Finance Umited
Slide 51: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile FIVE STAR Business Finance Limited e Well diversified borrowing mix Number of lenders in each category 54 48 53 50 14 11 7 42 6 Increased number of lending relationships from 6 12 11 30 as of Mar 2019 to 48 as of Jun 2024 13 16 - - - 24 30 12 23 8 8 Dee
Slide 52: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile FIVE STAR e Business Finance Limited Well diversified borrowing mix 100% 2% 2% 3% 3% 3% 3% 21% 19% 14% 16% 19% - 23% 80% 6% 5% 12% 18% 30% 60% 6% 5% 38% 39% 4% 40% 6% 66% 6% 56% 56% 50% 20% 37% 32% 0% Jun'23 Mar'23 Dec'22 Sep'22 Jun'22 Mar'22 ■ Bank Ter
Slide 53: Cashflow Position as of Jun’23 – Cumulative
Cashflow Position as of Jun’23 – Cumulative FIVE STAR e Business Finance Limited Particulars Up to 1M 1-2 M 2-3 M 3-6 M 6M – 1Y 1-3 Y 3-5 Y >5 Y Opening Liquidity1 13,431 Add: Inflows from advances2 883 866 875 2,832 6,271 26,991 25,062 11,580 Less: Outflows on borrowings 830 731 1,790 2,792 5,753 1
Slide 54: Strong Liquidity Position as of Jun’23
Strong Liquidity Position as of Jun’23 FIVE STAR e Business Finance Limited Amount in ₹ Mn Liquidity buffer as of Jun 2023 Unencumbered cash & cash equivalents 12,437 Unavailed sanction from banks / FIs 1,600 Total Liquidity 14,037 Projected Cashflow Schedule Q2FY24 Q3FY24 Q4FY24 Q1FY25 Opening Liqu
Slide 55: Thank You
FIVE STAR e Business Finance Limited Thank You For further information, you may please email to: ir@fivestargroup.in 53
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