Hold Five Star Business Finance; target of Rs 650: ICICI Securities

Hold

ICICI Securities research report on Five Star Business Finance

Five Star Business Finance (Five Star)’s management attributes the company’s asset quality deterioration,stage3 assets increasing to 2.5% vs. 1.8% QoQ and 30+ DPD rising to 11.3% vs. 9.65% QoQ, to higher stress in its core product (INR 0.3–0.5mn LAP) in the near term. It further highlighted that borrower’s limited financial literacy has resulted in overleveraging; also, its entry into certain high-risk regions in AP and issues in Karnataka caused stress in small-ticket LAP. However, management is cognisant of rising delinquencies, and hence, it already initiated corrective measures to enable recovery in H2FY26.

Outlook

Retain HOLD with a revised TP of INR 650 (INR 720 earlier), as we trim our FY26E/FY27E earnings by 3%/1% and lower the multiple to 2.25x (2.5x earlier) on Sep’26E BVPS.

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Five Star Business Finance - 29072025 - icici