Five-star Business Finance Limited · NSE:FIVESTAR
Five-star Business Finance — Q4 FY2023 Earnings Presentation
52 slides from Five-star Business Finance's earnings presentation, May 9, 2023
Slide 1: Exchange filing cover letter for investor presentation
Date: May 9, 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 Audited Fin
Slide 2: Five-Star Business Finance Limited Investor Presentation Q4 FY2023
Five-Star Business Finance Limited Investor Presentation Q4 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 1 Business Highlights Section 3 Section 2 Executive Summary – Company Overview Q4FY2023 Section 4 Section 5 Financial Performance, Asset Liability & ALM Quality & ECL – Q4FY2023 2
Slide 5: Section 1 Business Highlights
Section 1 Business Highlights
Slide 6: Business Highlights – Q4FY2023
Business Highlights – Q4FY2023 Number of Branches Loan Disbursement Loan Portfolio 373 ₹ 11,100 Mn ₹ 69,148 Mn +4 +73 22% 72% 11% 37% Gross Stage 3 90+ Assets 30+ DPD Assets1 1.04% 10.51% 1.36% -9 bps +31 bps -12 bps -1 bp -1.59% -6.27% NIM Profit After Tax Return on Assets 18.47% ₹ 1,689 Mn ₹ 8.62%
Slide 7: Business Highlights – FY2023
Business Highlights – FY2023 Number of Branches Loan Disbursement Loan Portfolio 373 ₹ 33,914 Mn ₹ 69,148 Mn +73 93% 37% Gross Stage 3 90+ Assets 30+ DPD Assets1 1.04% 10.51% 1.36% +31 bps -1 bp -6.27% NIM Profit After Tax Return on Assets 18.04% ₹ 6,035 Mn ₹ 8.62% +2.95% 33% +1.46% y-o-y Notes: 1.
Slide 8: Section 2 Company Overview
Section 2 Company Overview FIVE STAR Business Finance Limited
Slide 9: 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 10: The Five Star Journey
The Five Star Journey ₹69 bn AUM (Mar-23) ₹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 11: 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 12: Shareholding as of March 31, 2023
Shareholding as of March 31, 2023 Institutional Promoters 15.90% Individual Promoter & Promoter Group 18.48% Others 9.32% AIF & QIB 3.95% Employees 1.29% 50.03% Foreign Corporates1 Mutual Funds 1.03% Notes: 1. Includes Foreign Institutional Promoters, Foreign Corporate Bodies & Foreign Portfolio Inv
Slide 13: Market Opportunity & Growth Strategy
Market Opportunity & Growth Strategy Large Market Strong Infrastructure of Five Star Ability to Demonstrate 30%+ Growth Opportunity Physical infra (373 branches) & Potential growth strongly in the years to INR 22 Trillion1 Human infra (7,347 employees) come Growth Lever Growth Lever 1 1 Increased In
Slide 14: 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 15: Five Star’ approach to Small Business Lending
Five Star’ approach to Small Business Lending Customers targeted by Five Star Rationale for customer selection Urban/semi urban customers Good potential & easier reach; fewer legal issues on collateral Customers with income derived from ‘every day’ services Resilience to business cycles & macro even
Slide 16: Key Strengths
Key Strengths 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 leading
Slide 17: 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 collate
Slide 18: 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 19: Distribution Strategy
Distribution Strategy Maharashta Geography # branches Total AUM % of AUM Chhatisgarh South India 319 65,123 94% Uttar Pradesh Vintage-wise average AUM per branch Non-South 54 4,025 6% (as of March 2023) 10 ₹543 mn Branch Vintage No of branches Average AUM <=1 year 73 57 1 – 3 years 48 105 3 – 5 year
Slide 20: Strategic Technology Focus
Strategic Technology Focus Robust investments in technology to efficiently manage the lending process, increase productivity and decrease costs Augmentation of team for next level of development System based underwriting through ERP solution Plans for the future Manual underwriting FY2017 till date
Slide 21: Strategic Technology Focus
Strategic Technology Focus Plans for the Future… Ongoing Investments to help build a scalable and efficient model… API infrastructure to leverage strengths of third party service Data analytics and Projects Underway Robust customer providers / fintechs machine learning credit scoring model ▪ Salesfo
Slide 22: Robust Risk Management Architecture
Robust Risk Management Architecture Board of Directors Risk Management Audit Committee Committee ALCO Credit Committee Business Resource External Internal Audit Internal Internal Statutory Audit Liquidity, ALM risks Large ticket sanctions Committee Sundaram & Srinivasan Audit Business Units Risk Man
Slide 23: 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 24: Continuing ESG Focus
Continuing ESG Focus Sustainable Business Model Built Around Societal Impact ₹ ₹ Corporate Social Financial Inclusion Majority of AUM from LIG Responsibility 66% 72% 73% ◼ Caters to the underserved market 58% ◼ CSR Committee is focused on of small business loans 47% improving education, health and l
Slide 25: Continuing ESG Focus
Continuing 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% 27% • Low income borrowers 21% Customers ignored by • Customers
Slide 26: 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 27: 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 28: 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 29: 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 30: Executive Summary – Q4FY2023
Section 2 Executive Summary – Q4FY2023
Slide 31: 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 ₹69.2bn / ₹50.7bn 373 100% Secured 1.36% 50 ₹6.0bn / ₹4.5bn AUM in FY23 / FY22 Number of Branches Loan Book Q4FY234 Lender relationships PAT for FY23 / FY22 37% growt
Slide 32: Executive Summary
Executive Summary • Five Star witnessed the best-ever quarter in Q4FY2023 across Growth, Profitability and Quality. • Business & Disbursal momentum back to pre-COVID levels and collections continue to be robust. • Y-o-Y growth of 37% on AUM and Gross Stage 3 Assets of 1.36% AUM Profit After Tax Net
Slide 33: Balance Sheet indicators
Balance Sheet indicators Net Worth All amounts in ₹ Mn Disbursals AUM 72% 37% 17% 69,148 9,103 62,424 43,395 41,652 11,100 50,671 37,104 6,438 11% 4% 22% Borrowings Expected Credit Loss Liquidity 8% 16,374 66% 1,111 42,473 1,037 11,852 1,029 10,130 31,785 25,588 7% 34% Liquidity Q4FY22 Q3FY23 Q4FY23
Slide 34: P&L indicators
P&L indicators All amounts in ₹ Mn Income Interest expense Other expenses 23% (35%) 34% 774 4,393 1,303 3,887 1,194 631 631 968 3,272 13% (9%) 23% Credit Cost PBT PAT 41% 43% 11% 2,015 1,510 83 74 1,689 2,242 1,179 47 1,590 11% 12% (58%) Q4FY22 Q3FY23 Q4FY23 32
Slide 35: Well Diversified Portfolio across Parameters
Well Diversified Portfolio across Parameters AUM by Geography AUM by Ticket Size1 FY2023 1% 1% FY2022 FY2023 1% 1% 1% 1% FY2022 5% 5% 10% 10% 7% 7% 35% 39% 20% 19% ATS for 44% ATS for 48% FY2023 FY2022 3.03L 2.66L 44% 40% 33% 29% TN AP TS KA MP OTH <=3L 3-5L 5-10L 10-15L >15L AUM by Branch Tier2 AUM
Slide 36: Consistent & Best-in-class Spreads
Consistent & Best-in-class Spreads Portfolio Yield Cost of borrowing Spread 25.0% 12.0% 25.0% 14.0% 24.5% 24.1% 24.2% 24.2% 24.2% 24.2% 13.5% 24.5% 24.2% 24.2% 24.2% 24.1% 24.3% 24.1% 23.9% 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 37: Financial Summary
Financial Summary 1. Net Q-o-Q AUM growth of ₹6,724 Mn in Q4FY23 as against ₹2,995 Mn in Q4FY22. AUM was up 37% Y-o-Y at ₹69,148 Mn as against ₹50,671 Mn as of March 31, 2022. 2. Disbursements during the quarter was at ₹11,100 Mn as against ₹6,438 Mn during Q4FY22. 3. Active loans at 0.29 Mn as agai
Slide 38: Section 3 Asset Quality & ECL
Section 3 Asset Quality & ECL FIVE STAR Business Finance Limited
Slide 39: Asset quality indicators
Asset quality indicators Collections Efficiency (%) 30+ (%) 101.5 99.2 95.6 100.1 96.6 100.197.0 100.5 97.5 93.9 16.78 15.71 13.62 12.10 10.51 Mar'22 Jun'22 Sep'22 Dec'22 Mar'23 Mar'22 Jun'22 Sep'22 Dec'22 Mar'23 Amount of EMI received during the month (including arrears of previous months) divided
Slide 40: Asset quality indicators
Asset quality indicators Amount in ₹ Mn As at Mar 20231 As at Dec 20221 As at Mar 20222 Bucket AUM % AUM AUM % AUM AUM % AUM Current (Stage-1) 57,743 83.51% 50,484 80.87% 36,449 71.93% 1-30 (Stage-1) 4,140 5.99% 4,385 7.02% 5,721 11.29% 31-60 (Stage-2) 3,140 4.54% 3,384 5.42% 5,158 10.18% 61-90 (Sta
Slide 41: ECL Provisioning
ECL Provisioning Amount in ₹ Mn As of March 31, 20231 Stage 1 Stage 2 Stage 3 Total Loans Outstanding (Gross) 61,884 6,325 939 69,148 ECL Provision 203 443 463 1,111 Loans Outstanding (Net) 61,681 5,882 476 68,037 ECL Provision % 0.33% 7.01% 49.33% 1.61% As of December 31, 20221 Stage 1 Stage 2 Stag
Slide 42: Lag NPA
Lag NPA Amount in ₹ Mn FY2023 FY2022 FY2021 Loan Portfolio 69,148 50,671 44,454 Gross Stage 3 assets 939 530 452 Gross Stage 3 assets % 1.36%1 1.05% 1.02% Gross Stage 3 assets % - 1 year Lag 1.85%1 1.19% 1.16% Increase in FY2023 is on account of transition to new IRAC norms, which has Gross Stage 3
Slide 43: Financial Performance – Q4FY2023
Section 4 Financial Performance – Q4FY2023
Slide 44: Balance Sheet
Balance Sheet Particulars (₹ Mn) Q4FY2023 Q3FY2023 Q4FY2022 Assets Cash & Cash equivalents 13,404 7,317 6,132 Bank balances other than cash & cash equivalents 2,405 2,365 2,668 Loans1 68,222 61,542 51,024 Investments 1,446 1,446 2,482 Other financial assets2 356 452 180 Non-Financial Assets 1,195 1,
Slide 45: Quarterly & Yearly Profit & Loss Statement
Quarterly & Yearly Profit & Loss Statement Particulars (₹ Mn) Q4FY2023 Q4FY2022 Q3FY2023 Y-o-Y Q-o-Q FY2023 FY2022 Y-o-Y Loan Portfolio 69,148 50,671 62,424 37% 11% 69,148 50,671 37% Interest Income 4,235 3,137 3,828 14,988 12,038 Net Gain on Fair value changes 36 22 18 83 209 Fee & Other income 122
Slide 46: RoA Tree
RoA Tree Particulars Q4FY2023 Q4FY2022 Q3FY2023 FY2023 FY2022 Interest Income (as a % of average portfolio) 24.30% 24.15% 24.05% 24.23% 24.05% Interest Expenses (as a % of average borrowings) 9.87% 10.24% 10.26% 10.12% 10.51% Net Interest Income % 14.43% 13.91% 13.79% 14.11% 13.54% Total Income % (a
Slide 47: Section 5 Liability & ALM
Section 5 Liability & ALM FIVE STAR Business Finance Limited
Slide 48: 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 42 14 11 7 Increased number of lending relationships from 6 13 12 30 as of Mar 2019 to 50 as of Mar 2023 24 30 16 23 12 20 9 8 Deepened relationships in the PSU and private 16 1
Slide 49: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix 100% 2% 3% 3% 3% 3% 23% 19% 14% 16% 19% 80% 12% 18% 30% 60% 6% 5% 38% 39% 4% 40% 6% 6% 56% 56% 50% 20% 37% 32% 0% Mar'23 Dec'22 Sep'22 Jun'22 Mar'22 Bank Term Loans Other Term Loans NCD Securitisation ECB Cost of increment
Slide 50: Cashflow Position as of Mar’23 – Cumulative
Cashflow Position as of Mar’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 17,439 Add: Inflows from advances2 851 801 812 2,628 5,830 24,921 23,164 9,676 Less: Outflows on borrowings 3,365 901 1,450 3,263 5,105 16,711 10,458 928 Add: Other inflows
Slide 51: Strong Liquidity Position as of Mar’23
Strong Liquidity Position as of Mar’23 Amount in ₹ Mn Liquidity buffer as of Mar 2023 Unencumbered cash & cash equivalents 16,374 Unavailed sanction from banks / FIs 1,400 Total Liquidity 17,774 Projected Cashflow Schedule Q1FY24 Q2FY24 Q3FY24 Q4FY24 Opening Liquidity 17,774 15,856 16,419 17,773 Add
Slide 52: Thank You
Thank You For further information, please contact: Ms. Shalini Baskaran, Head – Compliance & Investor Relations Shalini@fivestargroup.in ir@fivestargroup.in 50
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