ICICI Securities research report on Five-Star Business
Five Star Business Finance’s (Five Star) Q4FY25 asset quality performance broadly reflects industry trends – GNPL rising marginally to 1.79% vs. at 1.62% QoQ and credit cost at 89bps (up 4bps QoQ) owing to a transient disruption in Karnataka (6% of AUM). Further, 30+ DPD inched up to 9.65% during Q4FY25 vs. 9.16% QoQ. However, management pointed to steadily improving collections in Karnataka (KTK), nearing normalised collections.
Outlook
While management appears confident about sustaining business momentum in FY26, the passing of the Tamil Nadu (TN) MFI Bill (similar to KTK Bill) poses a near-term risk to profitability given Five Star’s 29% exposure in TN. Hence, we downgrade to HOLD (earlier Add) with a revised TP of INR 720 (vs. INR 830), valuing the stock now at 2.5x on Sep’26E BVPS (earlier: 3.5x Sep’25E).
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