Five-star Business Finance Limited · NSE:FIVESTAR
Five-star Business Finance — Q4 FY2024 Earnings Presentation
54 slides from Five-star Business Finance's earnings presentation, Apr 30, 2024
Slide 1: Exchange filing cover letter for investor presentation
Date: April 30, 2024 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 Financia
Slide 2: Investor Presentation Q4FY2024
Five-Star Business Finance Limited Investor Presentation Q4FY2024 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: Business Highlights
Section 1 Business Highlights
Slide 6: Business Highlights – Q4FY2024
Business Highlights – Q4FY2024 Number of Branches Loan Disbursement Loan Portfolio 520 ₹ 13,364 Mn ₹ 96,406 Mn +40 +147 +11% +20% +8% +39% Gross Stage 3 30+ DPD Profit After Tax Assets 7.89% ₹ 2,361 Mn 1.38% -2 bps +2 bps -0.46% -2.62% +9% +40% NIM Return on Assets Return on Equity 17.19% 8.43% 18.6
Slide 7: Business Highlights – FY2024
Business Highlights – FY2024 Number of Branches Loan Disbursement Loan Portfolio 520 ₹ 48,814 Mn ₹ 96,406 Mn +147 +44% +39% Gross Stage 3 Profit After Tax 30+ DPD Assets 7.89% ₹ 8,359 Mn 1.38% +2 bps -2.62% +39% NIM Return on Assets Return on Equity 17.39% 8.42% 17.60% -65 bps -20 bps +2.57% y-o-y 5
Slide 8: 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 Profi
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 ₹96 bn AUM Unlisted Entity (Mar-24) ₹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: Strong Financial Performance over the years
Strong Financial Performance over the years1 Particulars (₹ Mn) FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 Operational Information Number of branches 39 64 103 130 173 252 262 299 373 520 Loan disbursals 793 1,319 3,830 7,072 14,822 24,087 12,450 17,562 33,914 48,814 AUM 1
Slide 13: Shareholding as of March 31, 2024
Shareholding as of March 31, 2024 Institutional Promoters 7.68% Individual Promoter & Promoter Group 18.29% Others 10.82% AIF & QIB 3.06% Employees 1.45% 3.77% Mutual Funds 54.93% Foreign Corporates1 % holding computed on a fully diluted basis, including ungranted, unvested and vested but unexercise
Slide 14: Large Market Opportunity
Large Market Opportunity1 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
Slide 15: Growth Strategy
Growth Strategy Factors facilitating Company’s Growth How would the Growth be achieved Increased Large branch market network and opportunity additional FOS Robust Portfolio growth Increase in Strong ticket size infrastructure (inflationary of the Company increases at the least) 13
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, P
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 Resilienc
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 433 90,465 94% Rest of India 87 5,941 6% Uttar Pradesh Vintage-wise average AUM (in ₹Mn) per branch (as of March 2024) Rajasthan Branch Vintage No of branches Average AUM 24 ₹872 mn <=1 year 147 64 1 –
Slide 22: Strategic Technology Focus
Strategic Technology Focus Robust investments in technology to efficiently manage the lending process, increase productivity and decrease costs ▪ Moved to Finn One Neo (ERP solution) ▪ Manual underwriting process with minimal technology with automated workflow and rule engine Till FY2017 involvement
Slide 23: Strategic Technology Focus
Strategic Technology Focus Benefits achieved across various verticals The Company expects to operate around 8-9 days of TAT in a steady state scenario Origination Underwriting 1. Fully rounded view of the borrower income, 17 1. Consistently improving TAT 15 collateral value, title, income proxies av
Slide 24: 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 25: 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 26: 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% 67% ◼ CSR Committee is focused on market of small business loans 58% improving education, health and 4
Slide 27: 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 1% 2% 11% Branch Presence • Significant branch presence in Tier 3 to Tier 6 towns 38% 18% • Low-income borrowers Customers ignored by • Customers
Slide 28: 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 Business & Resource Audit Committee Committee Corporate Social Responsibility Risk Management Committee Co
Slide 29: 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 30: 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 31: Strong Human Capital
Strong Human Capital Function No of employees Proportion of Headcount – Branch vs HO Business & Collections 6,241 5% 386 Supervisors 129 685 Credit - Field Credit 583 - Approval Credit 337 - Credit Support 8 Operations 6,240 95% - Operations Officers 925 759 - Head Office team 185 Accounts Branch HO
Slide 32: Executive Summary – Q4FY2024
Section 3 Executive Summary – Q4FY2024
Slide 33: 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 ₹96.4bn / ₹69.1bn 520 100% Secured 1.38% 45 ₹2.4bn / ₹1.7bn AUM in Q4FY24 / Q4FY23 Number of Branches Loan Book Q4FY24 Lender relationships PAT for Q4FY24 / Q4FY23 39
Slide 34: Executive Summary
Executive Summary • Q4FY2024 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 • Full year growth of 39%
Slide 35: Balance Sheet indicators
Balance Sheet indicators Net Worth All amounts in ₹ Mn Disbursals AUM 20% 20% 39% 13,364 51,962 12,089 96,406 49,562 11,100 89,308 43,395 69,148 8% 5% 11% Borrowings Expected Credit Loss1 Liquidity2 49% 43% 63,158 1,586 17,991 18,793 57,911 16,374 1,452 42,473 9% 1,111 9% Q4FY23 Q3FY24 Q4FY24 Notes:
Slide 36: P&L indicators
P&L indicators All amounts in ₹ Mn Income Interest expense Other expenses 41% (78%) (14%) 6,191 1,377 5,700 1,287 1,488 1,412 1,302 4,393 9% (7%) (5%) 774 Credit Cost PBT PAT 40% 40% 3,132 2,361 194 2,899 2,168 1,689 2,242 102 74 8% 9% Q4FY23 Q3FY24 Q4FY24 34
Slide 37: Well Diversified Portfolio across Parameters
Well Diversified Portfolio across Parameters AUM by Geography AUM by Ticket Size Q4FY24 1% 1% Q4FY23 Q4FY24 1% 0% 1% 1% Q4FY23 5% 5% 11% 10% 6% 7% 31% 35% 37% ATS for ATS for 44% 20% 20% Q4FY24 Q4FY23 3.50L 3.03L 44% 51% 37% 33% TN AP TS KA MP OTH <=3L 3-5L 5-10L 10-15L >15L AUM by Branch Tier1 AUM
Slide 38: 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% 24.3% 24.5% 24.2% 24.2% 24.2% 24.2% 24.3% 13.5% 24.5% 24.1% 24.2% 24.2% 24.1% 11.5% 24.0% 24.0% 13.0% No yield increases 23.5% 12.5% 23.5% 11.0% done even during a 23.0% 12.0% 23.0% diffic
Slide 39: Financial Summary
Financial Summary 1. Net Q-o-Q AUM growth of ₹7,098 Mn in Q4FY24 as against ₹6,724 Mn in Q4FY23. AUM was up 39% Y-o-Y at ₹96,406 Mn as of March 31, 2024 as against ₹69,148 Mn as of March 31, 2023. 2. Disbursements during the quarter was at ₹13,364 Mn as against ₹11,100 Mn during Q4FY23. 3. Active lo
Slide 40: Asset Quality & ECL
Section 3 Asset Quality & ECL FIVE STAR Business Finance Limited
Slide 41: Asset quality indicators
Asset quality indicators Collections Efficiency (%) 30+ (%) 10.51 9.68 100.5 97.5 99.6 97.5 100.3 98.0 99.1 97.5 99.5 97.8 8.59 8.35 7.89 Mar'23 Jun'23 Sep'23 Dec'23 Mar'24 Mar'23 Jun'23 Sep'23 Dec'23 Mar'24 Amount of EMI received during the month (including arrears of previous months) divided by EM
Slide 42: Asset quality indicators
Asset quality indicators Amount in ₹ Mn As at Mar 2024 As at Dec 2023 As at Mar 2023 Bucket AUM % AUM AUM % AUM AUM % AUM Current (Stage-1) 84,247 87.39% 77,434 86.70% 57,743 83.51% 1-30 (Stage-1) 4,555 4.72% 4,415 4.94% 4,140 5.99% 31-60 (Stage-2) 3,462 3.59% 3,311 3.71% 3,140 4.54% 61-90 (Stage-2)
Slide 43: ECL Provisioning
ECL Provisioning Amount in ₹ Mn As of March 31, 2024 Stage 1 Stage 2 Stage 3 Total Loans Outstanding (Gross)1 88,802 6,276 1,328 96,406 ECL Provision2 350 507 721 1,578 Loans Outstanding (Net) 88,452 5,769 607 94,828 ECL Provision % 0.39% 8.08% 54.27% 1.64% As of December 31, 2023 Stage 1 Stage 2 St
Slide 44: Lag NPA
Lag NPA Amount in ₹ Mn Q4FY2024 Q4FY2023 Q4FY2022 Q4FY2021 Loan Portfolio 96,406 69,148 50,671 44,454 Gross Stage 3 assets 1,3281 9391 5312 4522 Gross Stage 3 assets % 1.38% 1.36% 1.05% 1.02% Gross Stage 3 assets % - 1 year Lag 1.92% 1.85% 1.19% 1.16% Gross Stage 3 assets % - 2 years Lag 2.62% 2.11%
Slide 45: Financial Performance – Q4FY2024
Section 4 Financial Performance – Q4FY2024
Slide 46: Balance Sheet
Balance Sheet Particulars (₹ Mn) Q4FY2024 Q4FY2023 Q3FY2024 FY2024 FY2023 Assets Cash & Cash equivalents 15,344 13,404 15,308 15,344 13,404 Bank balances other than cash & cash equivalents 1,373 2,405 1,361 1,373 2,405 Loans1 96,851 68,222 88,887 96,851 68,222 - Loan portfolio 96,406 69,148 89,308 9
Slide 47: Quarterly & Yearly Profit & Loss Statement
Quarterly & Yearly Profit & Loss Statement Particulars (₹ Mn) Q4FY2024 Q4FY2023 Q3FY2024 Y-o-Y Q-o-Q FY2024 FY2023 Y-o-Y Loan Portfolio 96,406 69,148 89,308 39% 8% 89,308 69,148 39% Interest Income (1) 5,992 4,235 5,495 41% 9% 21,166 14,988 41% - Interest on loan portfolio 5,581 3,897 5,179 43% 8% 1
Slide 48: RoA Tree
RoA Tree Particulars Q4FY2024 Q4FY2023 Q3FY2024 FY2024 FY2023 Interest Income (as a % of average portfolio) 24.19% 23.93% 24.25% 24.27% 24.23% Interest Expenses1 (as a % of average borrowings) 9.64% 9.87% 9.64% 9.71% 10.12% Net Interest Income % 14.55% 14.06% 14.61% 14.56% 14.11% Total Income (as a
Slide 49: Liability & ALM
Section 5 Liability & ALM FIVE STAR Business Finance Limited
Slide 50: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix Number of lenders in each category Increased number of lending relationships from 25 as of Mar 54 53 2019 to 45 as of Mar 2024 50 45 14 11 7 40 7 Deepened relationships in the PSU and private bank category 13 12 7 25 16 Bi
Slide 51: Diversified and Cost-Effective Funding Profile
Diversified and Cost-Effective Funding Profile Well diversified borrowing mix 100% 1% 1% 2% 2% 2% 17% 21% 21% 21% 23% 80% 5% 5% 4% 6% 12% 6% 4% 5% 12% 60% 6% 40% 65% 66% 69% 66% 56% 20% 0% Mar'24 Dec'23 Sep'23 Jun'23 Mar'23 Bank Term Loans Other Term Loans NCD Securitisation ECB Cost of incremental
Slide 52: Cashflow Position as of Mar’24 – Cumulative
Cashflow Position as of Mar’24 – 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 19,847 18,756 18,821 18,340 18,088 17,937 21,549 37,525 Add: Inflows from advances2 1,007 1,091 1,109 3,564 7,803 33,898 31,885 15,329 Less: Outflows on borrowings 1,207 1,0
Slide 53: Strong Liquidity Position as of Mar’24
Strong Liquidity Position as of Mar’24 Amount in ₹ Mn Liquidity buffer as of Mar 20241 Unencumbered cash & cash equivalents1 18,793 Unavailed sanction from banks / FIs 4,250 Total Liquidity 23,043 Projected Cashflow Schedule Q1FY25 Q2FY25 Q3FY25 Q4FY25 Opening Liquidity 23,043 24,898 26,458 27,831 A
Slide 54: Thank You
Thank You For further information, you may please email to: ir@fivestargroup.in 52
Five-Star Business Finance — Q4 FY2024 Earnings Presentation on 6ix