Five-star Business Finance Limited · NSE:FIVESTAR
Five-star Business Finance — Q2 FY2024 Earnings Presentation
56 slides from Five-star Business Finance's earnings presentation, Oct 31, 2023
Slide 1: Exchange filing cover letter for investor presentation
Date: October 31, 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 Financ
Slide 2: Five-Star Business Finance Limited Investor Presentation Q2 FY2024
Five-Star Business Finance Limited Investor Presentation Q2 FY2024 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 1 Business Highlights Section 2 Section 3 Company Overview Executive Summary Section 4 Section 5 Financial Performance, Asset Liability & ALM Quality & ECL 2
Slide 5: Section 1 Business Highlights
Section 1 Business Highlights
Slide 6: Business Highlights – Q2FY2024
Business Highlights – Q2FY2024 Number of Branches Loan Disbursement Loan Portfolio 456 ₹ 12,043 Mn ₹ 82,644 Mn +70 +104 +6% +50% +9% +44% Gross Stage 3 90+ Assets2 30+ DPD Assets1 1.07% 8.59% 1.35% -6 bps +20 bps -1 bp -8 bps -1.09% -5.03% NIM Profit After Tax Return on Assets 17.68% ₹ 1,994 Mn 8.47
Slide 7: Business Highlights – H1FY2024
Business Highlights – H1FY2024 Number of Branches Loan Disbursement Loan Portfolio 456 ₹ 23,361 Mn ₹ 82,644 Mn +83 +104 +16% +70% +20% +44% Gross Stage 3 30+ DPD 90+ Assets2 Assets1 1.07% 8.59% 1.35% -1 bp +20 bps +3 bps -8 bps -1.92% -5.03% NIM Profit After Tax Return on Assets 17.72% ₹ 3,831 Mn 8.
Slide 8: Section 2 Company Overview
Section 2 Company Overview FIVE STAR Business Finance Limited
Slide 9: Five Star – Who we are
Five Star – Who we are NBFC providing secured financial solutions to Small Business customers and Self-employed Individuals who are largely cut-off from formal lending ecosystem Target Customer Segment Customers with informal income derived from everyday Typical ‘services’ Ticket Size & Income 16 Pr
Slide 10: 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 11: The Five Star Journey
The Five Star Journey Listed Entity ₹83 bn AUM Unlisted Entity (Sep-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 the Business Model 2015 – 2017 Busin
Slide 12: Transformational Journey
Transformational Journey 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 >45x 15,289 Profit After Tax (₹ Mn) 99
Slide 13: Shareholding as of September 30, 2023
Shareholding as of September 30, 2023 Institutional Promoters Individual Promoter & Promoter Group 12.30% 18.29% 11.69% Others AIF & QIB 3.52% Employees 1.30% 49.08% Mutual Funds Foreign Corporates1 3.83% % holding computed on a fully diluted basis, including ungranted, unvested and vested but unexe
Slide 14: Large Market Opportunity
Large Market Opportunity Overall MSME Credit Gap Target Addressable Market for Five Star 1 2 3 Estimated share of Estimated number of Estimated number of self-employed self-employed households in India (Non-agri) on total households with SORP Total MSME households demand of debt FY22 Self-employed S
Slide 15: Growth Strategy
Growth Strategy Large Market Strong Infrastructure of Five Star Ability to Demonstrate 35%+ Growth Opportunity Physical infra (456 branches) & Potential for strong growth in the years INR 22 Trillion1 Human infra (8,261 employees) to come Growth Lever Growth Lever 1 1 Increased Increased branch netw
Slide 16: Challenges in Lending to Small Business Customers & Self-Employed individuals
Challenges in Lending to Small Business Customers & Self-Employed individuals Institutionalized Lenders Small Business Owners and Self Medium Enterprises Small Enterprises - Key Underwriting Parameters Employed Customers Assessed from formal contracts since Typically assessed from VAT, sales tax, Pr
Slide 17: Five Star' approach to Small Business Lending
Five Star’ approach to Small Business Lending 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 derived from ‘every day’ services Resilien
Slide 18: Key Strengths
Key Strengths 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 Stage 3 Assets of <1% ATS of ~ 3-5 lak
Slide 19: Targeted Customer Focus & Product Offering
Targeted Customer Focus & Product Offering 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 35+ years employed individuals collat
Slide 20: 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 21: Distribution Strategy
Distribution Strategy Maharashtra Geography # branches Total AUM % of AUM Chhattisgarh South India 384 77,879 94% Rest of India 72 4,765 6% Uttar Pradesh Vintage-wise average AUM per branch (as of September 2023) Rajasthan Branch Vintage No of branches Average AUM 19 ₹630 mn <=1 year 104 27 1 – 3 ye
Slide 22: Branch vs Cluster Strategy
Branch vs Cluster Strategy 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 opportunity evaluation is made, if it
Slide 23: Cluster Strategy Illustration – Theni Cluster (Tamilnadu)
Cluster Strategy Illustration – Theni Cluster (Tamilnadu) Parent Branch: Theni Date Theni Bodi Andipatti Cluster Theni (Opened in Aug 2014) Aug 2014 - - - - Child Branches: 1. Bodinayakkanur (Bodi) Jul 2018 523 - - 523 2. Andipatti Jul 2018 505 18 - 523 (After transfer to Bodi) Sep 2022 1,638 1,059
Slide 24: Cluster Strategy Illustration – Kakinada Cluster (Andhra Pradesh)
Cluster Strategy Illustration – Kakinada Cluster (Andhra Pradesh) Parent Branch: Date Kakinada Jaggampeta Kathipudi Sarpavaram Kakinada Cluster Kakinada (Opened in Jul Jul 2016 - - - - - 2016) Oct 2020 1,621 - - - 1,621 Child Branches: Oct 2020 1,281 340 - - 1,621 (after transfer to Jaggampeta) 1. J
Slide 25: Strategic Technology Focus
Strategic Technology Focus 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 with minimal technology involvement ▪ Significan
Slide 26: Robust Risk Management Architecture
Robust Risk Management Architecture Board of Directors Risk Management Audit Committee Committee Supported by Supported by ALCO Credit Committee Business Resource External Internal Audit Internal Internal Statutory Audit Liquidity, ALM risks Large ticket sanctions Committee Sundaram & Srinivasan Aud
Slide 27: Monitoring the Risk Management Architecture
Monitoring the Risk Management Architecture 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 Monitored by Audit Operational HR Risk Commit
Slide 28: Continuing ESG Focus
Continuing ESG Focus Sustainable Business Model Built Around Societal Impact ₹ ₹ Corporate Social Financial Inclusion Majority of AUM from LIG Responsibility ◼ Caters to the underserved 66% 72% 73% 71% ◼ CSR Committee is focused on market of small business loans 58% improving education, health and 4
Slide 29: Continuing ESG Focus
Continuing ESG Focus Significant Branch presence in Social Impact achieved through… Tier 3 to Tier 6 towns - semi-urban and fast-growing rural geographies 0.66% 1.97% Branch Presence • Significant branch presence in Tier 3 to Tier 6 towns 11.40% 33.77% 19.52% • Low-income borrowers Customers ignored
Slide 30: 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 31: 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 32: Experienced Management team
Experienced Management team 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 Chief Business Officer Vanamali Sridharan
Slide 33: Consistent Financial Performance over the years
Consistent Financial Performance over the years1 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 12,450 17,562 33,914 AUM 1,315 1,981 4,8
Slide 34: Executive Summary – Q2FY2024
Section 3 Executive Summary – Q2FY2024
Slide 35: 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 ₹82.6bn / ₹57.3bn 456 100% Secured 1.35% 47 ₹2.0bn / ₹1.4bn AUM in Q2FY24 / Q2FY23 Number of Branches Loan Book Q2FY244 Lender relationships PAT for Q2FY24 / Q2FY23 4
Slide 36: Executive Summary
Executive Summary • Q2FY2024 was a strong quarter across Growth, Profitability and Quality. Growth momentum was sustained without any compromise on profitability or quality. • Robust disbursals coupled with strong asset quality showing betterment across various DPD buckets • Y-o-Y growth of 44% on A
Slide 37: Balance Sheet indicators
Balance Sheet indicators Net Worth All amounts in ₹ Mn Disbursals AUM 44% 18% 50% 82,644 47,363 75,833 45,265 11,318 12,043 40,076 8,028 57,324 9% 5% 6% Borrowings Expected Credit Loss Liquidity 91% 33% 48,193 1,350 43,167 12,437 12,669 1,244 9% 7,949 1,016 25,231 12% Q2FY23 Q1FY24 Q2FY24 35
Slide 38: P&L indicators
P&L indicators All amounts in ₹ Mn Income Interest expense Other expenses 44% (74%) (39%) 5,224 1059 4,836 1,389 962 1,264 996 3,619 8% (10%) 609 (10%) Credit Cost PBT PAT (24%) 38% 38% 2,670 1,994 152 2,459 1,837 106 1,442 85 1,928 30% 9% 9% Q2FY23 Q1FY24 Q2FY24 36
Slide 39: Well Diversified Portfolio across Parameters
Well Diversified Portfolio across Parameters AUM by Geography AUM by Ticket Size Q2FY24 1% 1% Q2FY23 Q2FY24 1% 0% 1% 1% Q2FY23 5% 5% 10% 10% 6% 7% 33% 37% ATS for 40% ATS for 20% 20% Q1FY24 Q1FY23 47% 3.39L 2.93L 42% 48% 35% 30% TN AP TS KA MP OTH <=3L 3-5L 5-10L 10-15L >15L AUM by Branch Tier1 AUM
Slide 40: Consistent & Best-in-class Spreads
Consistent & Best-in-class Spreads Portfolio Yield Cost of borrowing Spread 25.0% 12.0% 25.0% 14.0% 24.3% 24.4% 24.2% 24.2% 24.2% 24.2% 24.5% 24.2% 24.2% 24.1% 24.2% 24.5% 24.1% 24.1% 13.5% 11.5% 24.0% 24.0% 13.0% No yield increases 23.5% 12.5% 23.5% 11.0% done even during a 12.1% 23.0% 12.0% 23.0%
Slide 41: Financial Summary
Financial Summary 1. Net Q-o-Q AUM growth of ₹6,811 Mn in Q2FY24 as against ₹4,359 Mn in Q2FY23. AUM was up 44% Y-o-Y at ₹82,644 Mn as of September 30, 2023 as against ₹57,324 Mn as of September 30, 2022. 2. Disbursements during the quarter was at ₹12,043 Mn as against ₹8,028 Mn during Q2FY23. 3. Ac
Slide 42: Section 3 Asset Quality & ECL
Section 3 Asset Quality & ECL FIVE STAR Business Finance Limited
Slide 43: Asset quality indicators
Asset quality indicators Collections Efficiency (%) 30+ (%) 100.1 96.6 100.197.0 100.5 97.5 99.6 97.5 100.3 98.0 13.62 12.10 10.51 9.68 8.59 Sep'22 Dec'22 Mar'23 Jun'23 Sep'23 Sep'22 Dec'22 Mar'23 Jun'23 Sep'23 Amount of EMI received during the month (including arrears of previous months) divided by
Slide 44: Asset quality indicators
Asset quality indicators Amount in ₹ Mn As at Sep 20231 As at Mar 20231 As at Sep 20222 Bucket AUM % AUM AUM % AUM AUM % AUM Current (Stage-1) 71,482 86.50% 57,743 83.51% 44,888 78.31% 1-30 (Stage-1) 4,060 4.91% 4,140 5.99% 4,630 8.08% 31-60 (Stage-2) 3,099 3.75% 3,140 4.54% 3,575 6.24% 61-90 (Stage
Slide 45: ECL Provisioning
ECL Provisioning Amount in ₹ Mn As of September 30, 20231 Stage 1 Stage 2 Stage 3 Total Loans Outstanding (Gross) 75,542 5,984 1,118 82,644 ECL Provision 299 490 561 1,350 Loans Outstanding (Net) 75,243 5,494 557 81,294 ECL Provision % 0.40% 8.19% 50.17% 1.63% As of March 31, 20231 Stage 1 Stage 2 S
Slide 46: Lag NPA
Lag NPA Amount in ₹ Mn Q2FY2024 Q2FY2023 Q2FY2022 Q2FY2021 Loan Portfolio 82,644 57,324 46,393 39,281 Gross Stage 3 assets 1,1181 6602 6672 5032 Gross Stage 3 assets % 1.35% 1.15% 1.44% 1.28% Gross Stage 3 assets % - 1 year Lag 1.95% 1.42% 1.70% 1.80% Gross Stage 3 assets % - 2 years Lag 2.41% 1.68%
Slide 47: Financial Performance – Q2FY2024
Section 4 Financial Performance – Q2FY2024
Slide 48: Balance Sheet
Balance Sheet Particulars (₹ Mn) Q2FY2024 Q2FY2023 Q1FY2024 Assets Cash & Cash equivalents 10,154 3,438 8,435 Bank balances other than cash & cash equivalents 1,341 2,299 1,249 Loans1 81,323 57,635 74,776 Investments 2,216 1,644 3,556 Other financial assets2 372 226 394 Non-Financial Assets 1,391 1,
Slide 49: Quarterly & Yearly Profit & Loss Statement
Quarterly & Yearly Profit & Loss Statement Particulars (₹ Mn) Q2FY2024 Q2FY2023 Q1FY2024 Y-o-Y Q-o-Q H1FY2024 H1FY2023 H2FY2023 Y-o-Y H-o-H Loan Portfolio 82,644 57,324 75,833 44% 9% 82,644 57,324 69,148 44% 20% Interest Income 5,041 3,573 4,637 9,678 6,925 8,063 Net Gain on Fair value changes 106 1
Slide 50: RoA Tree
RoA Tree Particulars Q2FY2024 Q2FY2023 Q1FY2024 H1FY2024 H1FY2023 H2FY2023 Interest Income (as a % of average portfolio) 24.19% 24.19% 24.44% 24.29% 24.15% 24.35% Interest Expenses (as a % of average borrowings) 9.71% 10.48% 9.80% 9.75% 10.56% 9.98% Net Interest Income % 14.48% 13.71% 14.64% 14.54%
Slide 51: Section 5 Liability & ALM
Section 5 Liability & ALM FIVE STAR Business Finance Limited
Slide 52: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix Number of lenders in each category 54 53 50 47 14 11 7 Increased number of lending relationships from 40 5 12 10 25 as of Mar 2019 to 47 as of Sep 2023 13 25 16 12 8 9 Deepened relationships in the PSU and private 9 9 4 9
Slide 53: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix 100% 2% 2% 2% 3% 3% 21% 21% 23% 19% 14% 80% 4% 6% 4% 5% 12% 18% 30% 60% 6% 5% 4% 40% 69% 66% 56% 56% 50% 20% 0% Sep'23 Jun'23 Mar'23 Dec'22 Sep'22 Bank Term Loans Other Term Loans NCD Securitisation ECB Cost of incremental
Slide 54: Cashflow Position as of Sep'23 – Cumulative
Cashflow Position as of Sep’23 – 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 Liquidity1 13,747 Add: Inflows from advances2 945 939 952 3,062 6,758 29,308 27,161 12,958 Less: Outflows on borrowings 897 839 1,212 3,245 6,308 21,878 12,749 1,163 Add: Other inflows
Slide 55: Strong Liquidity Position as of Sep'23
Strong Liquidity Position as of Sep’23 Amount in ₹ Mn Liquidity buffer as of Sep 2023 Unencumbered cash & cash equivalents 12,669 Unavailed sanction from banks / FIs 4,519 Total Liquidity 17,188 Projected Cashflow Schedule Q3FY24 Q4FY24 Q1FY25 Q2FY25 Opening Liquidity 17,188 21,007 24,654 28,186 Add
Slide 56: Thank You
Thank You For further information, you may please email to: ir@fivestargroup.in 54
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