Five-Star Business Finance Ltd

About the Company

Five-Star Business Finance Limited is an NBFC providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions. The Company is headquartered in Chennai, Tamil Nadu with a strong presence in south India and all of its loans are secured by its borrowers' property, predominantly being self-occupied residential property. The Company has developed a business model that is predicated on arriving at an appropriate risk framework, with the optimal instalment to income ratio to ensure that its customers have the necessary means to repay the loan after meeting their regular obligations and other event-based capital requirements.

Industry Overview

The Company operates in the small business finance industry. Customers in small business finance segment are generally self-employed non-professionals (carpenter, plumber, vegetable vendor, small shop keepers, etc.) and microentrepreneurs, people who may not have income proofs. Given the lack of income proofs, the underwriting process typically requires detailed personal discussion with the borrower as well as acquaintances and neighbours to assess the source of income and pattern of cash inflows and outflows as well as the stability and behavioural aspects of the customer.

Company History

Five-Star Business Finance Limited was incorporated as Five-Star Business Credits Private Limited at Chennai, Tamil Nadu as a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation dated May 7, 1984, issued by the Registrar of Companies, Tamil Nadu at Chennai ("RoC"). The Company was converted from a private limited company to a public limited company pursuant to board resolution dated September 7, 1988 and special resolution passed by the Shareholders at the EGM dated October 3, 1988. Consequently, the name of the Company was changed from `Five-Star Business Credits Private Limited' to `Five-Star Business Credits Limited' and the certificate of incorporation was amended on October 3, 1988. The name of the Company was subsequently changed to `Five-Star Business Finance Limited' pursuant to board resolution dated March 25, 2015 and special resolution passed by its Shareholders at the EGM held on April 12, 2016, and a fresh certificate of incorporation consequent upon change of name was issued by the RoC on May 13, 2016. The Company is registered with the Reserve Bank of India ("RBI") to carry on the business of non-banking financial institution without accepting public deposits (certificate of registration no. B-07.00286).

Products & Services

• The Company is an NBFC-ND-SI providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions.

Growth Strategy

• Increase penetration in existing markets through increasing branch staff numbers, increasing its branch network in the existing geographies and diversifying to contiguous markets;
• Continue to focus on small business owners and self-employed individuals primarily in the semi-urban and urban markets of India, as well as in rural markets where CRISIL expects faster growth in bank credit activity as financial awareness increases;
• Optimize its borrowing costs, reduce operating expenses further and continue to expand and diversify its lender base;
• Continue to invest in technology and data analytics to build a scalable and efficient operating model / to improve customer experience, increase productivity and decrease costs;
• Focus on enhancing its risk management framework;
• Enhance its brand recall to attract new customers.