Five-Star Business Finance Limited Investor Presentation Q2FY2025 PDF

Date: October 29, 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...

Date: October 29, 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 Financial Results for the quarter and half-year ended September 30, 2024 Dear Sir/ Madam In terms of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed herewith a copy of the Investor Presentation of the Company on the financial results for the quarter and half-year ended September 30, 2024. This Investor Presentation is also available on the website of the Company at https://fivestargroup.in/investors/ Kindly take the above on record. For Five-Star Business Finance Limited BASKAR Digitally signed by BASKARAN AN SHALINI Date: 2024.10.29 SHALINI 13:36:56 +05'30' Shalini Baskaran Company Secretary & Compliance Officer  Reaching the Unreached Five-Star Business Finance Limited Investor Presentation | Q2FY2025 STRICTLY PRIVATE AND CONFIDENTIAL  Safe Harbour Five-Star Business Finance Limited | Investor Presentation – Q2FY25 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 any securities and shall not form the basis or be relied on in connection with any contract or binding commitment whatsoever. No offering of securities of the Company will be made except by means of a statutory offering document containing detailed information about the Company. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, the Presentation is expressly excluded. This Presentation contains certain forward-looking statements concerning the Company’s future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, competition (both domestic and international), economic growth in India and abroad, ability to attract and retain highly skilled professionals, time and cost overruns on contracts, our ability to manage our international operations, government policies and action regulations, interest and other fiscal costs generally prevailing in the economy. The Company does not undertake to make any announcement in case any of these forward-looking statement become materially incorrect in future or update any forward-looking statements made from time to time by or on behalf of the Company. 2  Glossary Five-Star Business Finance Limited | Investor Presentation – Q2FY25 ▪ All amounts are given in ₹ Million unless specified otherwise. ▪ Gross NPA or Gross Stage 3 assets represents loans which are more than 90 days past due (till the quarter ended Sep 2022); for the quarters post Sep 2022, this has been computed as per guidelines stipulated by RBI vide their circulars on Prudential Norms on Income recognition and Asset classification dated Nov 12, 2021 and Feb 15, 2022 (wherein implementation of upgradation norms were deferred to October 1, 2022) i.e loans that have crossed 90 days past due any time since October 1, 2022 and not cleared their arrears fully. This is expressed as a percentage of AUM. ▪ Net Stage 3 Assets % or Net NPA % computed as Gross Stage 3 assets reduced by Stage 3 ECL as a percentage of AUM reduced by Stage 3 ECL ▪ Number of loans stated in any of the slides includes securitized loans. AUM is inclusive of securitized portfolio. ▪ Total assets represents the period ending Balance Sheet assets. Total assets used for computations is gross of Impairment allowance on Loan assets. ▪ Average total assets represents the monthly average of Balance Sheet assets. Average Total assets used for computations is gross of Impairment allowance on Loan assets. 3  Presentation Path Five-Star Business Finance Limited | Investor Presentation – Q2FY25 Executive Summary SECTION 1 SECTION 2 Business Updates Asset Quality & ECL SECTION 3 SECTION 4 Liability & ALM Financial Statements SECTION 5 SECTION 6 Company Overview 4 EXECUTIVE SUMMARY  Executive Summary | Q2FY25 Five-Star Business Finance Limited | Investor Presentation – Q2FY25 q-o-q y-o-y Branches Loan Disbursement Loan Portfolio 660 ₹ 12,507 Mn ₹ 109,272 Mn +113 +204 -5% +4% +6% +32% Gross NPA 30+ DPD Profit After Tax 1.47% 8.44% ₹ 2,679 Mn +6 bps +12 bps +33 bps -15 bps +7% +34% Net Interest Margin Return on Assets Return on Equity 16.93% 8.36% 19.02% +21 bps -75 bps +13 bps -11 bps +7 bps +1.94% 6  Executive Summary | H1FY25 Five-Star Business Finance Limited | Investor Presentation – Q2FY25 y-o-y Branches Loan Disbursement Loan Portfolio 660 ₹ 25,689 Mn ₹ 109,272 Mn +204 +10% +32% Gross NPA 30+ DPD Profit After Tax 1.47% 8.44% ₹ 5,195 Mn +12 bps -15 bps +36% Net Interest Margin Return on Assets Return on Equity 16.84% 8.30% 18.99% -88 bps -15 bps +2.14% 7  Q2FY25 Performance – At a glance Five-Star Business Finance Limited | Investor Presentation – Q2FY25 Scale of Distribution Granular Book Asset Quality Liability Profile Profitability Operations ₹109.3bn / ₹82.6bn 660 100% Secured 1.47% 43 ₹2.7bn / ₹2.0bn AUM in Q2FY25 / Q2FY24 Number of Branches Loan Book Q2FY25 Lender relationships PAT for Q2FY25 / Q2FY24 32% growth Y-o-Y (95% against SORP) Gross Stage 3 Assets 34% growth Y-o-Y ₹12.5bn / ₹12.0bn 5,542 ₹0.35mn 0.71% 48.73% 16.93% Amount Disbursed in Business and Collections Average ticket size for loans Q2FY25 Q2FY25 Net Interest Margin for Q2FY25 / Q2FY24 Officers disbursed in Q2FY25 Net Stage 3 Assets Capital Adequacy Ratio Q2FY25 ₹ ₹ 35,914 / 35,572 Presence in 10 430,405 0.68% Borrowing profile 8.36% Number of Disbursements in States / UT across India Live accounts Q2FY25 Credit Cost to Well-diversified profile with Return on Total Assets for Q2FY25 / Q2FY24 (focused on expansion) Average Total Assets fixed rate borrowings of Q2FY25 ~37% ₹ ₹57.2bn 100% In-house 39.3% 0.42% / 70.12% AA- 19.02% Net Worth Sourcing & Collections Average Portfolio LTV Total Restructured Portfolio / Long term credit rating by Return on Avg. Equity for (As of Sep 30, 2024) Provision Coverage on ICRA, CARE and India Q2FY25 restructured book Ratings 8  Strong Financial Performance over the years Five-Star Business Finance Limited | Investor Presentation – Q2FY25 Particulars (₹ Mn) FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 I-GAAP I-GAAP I-GAAP I-GAAP IND-AS IND-AS IND-AS IND-AS IND-AS IND-AS 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 1,315 1,981 4,936 10,084 21,128 38,922 44,454 50,671 69,148 96,406 Number of employees 167 293 737 1,290 1,971 3,734 3,938 5,675 7,347 9,327 Financial Information Total Income 336 473 871 2,082 4,089 7,873 10,513 12,562 15,289 21,951 Interest expenses 104 141 238 578 769 2,156 3,261 2,984 2,636 4,653 Net Interest Income (NII) 232 332 633 1,504 3,320 5,717 7,252 9,578 12,653 17,298 Operating Expenses 76 122 293 625 1,060 1,731 2,136 3,081 4,405 5,585 Loan losses & Provisions 4 7 28 93 76 493 352 455 201 554 Profit Before Tax (PBT) 152 203 312 786 2,184 3,493 4,764 6,042 8,047 11,159 Profit After Tax (PAT) 99 134 196 558 1,567 2,620 3,589 4,535 6,035 8,359 Total Comprehensive Income 99 134 196 558 1,563 2,608 3,582 4,513 6,013 8,341 Ratios Cost to Income 34.48% 38.86% 50.79% 47.74% 34.22% 38.90% 34.31% 36.92% 36.40% 35.49% Return on Total Assets 7.04% 6.87% 4.27% 5.82% 8.78% 7.31% 6.99% 7.16% 8.62% 8.42% Return on Equity 16.65% 16.47% 12.40% 12.97% 15.14% 15.36% 16.85% 13.85% 15.03% 17.60% Gross Stage 3 assets 1.81% 1.82% 2.47% 1.43% 0.89% 1.37% 1.02% 1.05% 1.36% 1.38% Net Stage 3 assets 1.48% 1.53% 2.08% 0.95% 0.68% 1.13% 0.84% 0.68% 0.69% 0.63% Provision Coverage Ratio - overall AUM 0.57% 0.54% 0.79% 0.97% 0.80% 1.58% 1.95% 2.03% 1.61% 1.64% Provision Coverage Ratio - Stage 3 18.40% 16.34% 16.24% 33.89% 22.99% 17.67% 17.92% 34.91% 49.33% 54.27% CRAR 52.17% 39.14% 43.78% 58.82% 64.09% 52.94% 58.86% 75.20% 67.17% 50.50% Debt / Equity ratio 1.24 1.43 2.04 0.92 0.70 1.22 1.48 0.69 0.98 1.22 9  Distinguished Board of Directors Five-Star Business Finance Limited | Investor Presentation – Q2FY25 Promoter Director Lakshmipathy Deenadayalan Chairman & Managing Director Independent / Non- Executive Directors Anand Raghavan T T Srinivasaraghavan Bhama Krishnamurthy Select other Directorships Shriram Life Insurance, Muthoot Sundaram Finance, Sundaram CIFCO, Muthoot Microfin Microfin, SK Finance Home Finance, R K Swamy Ramkumar Ramamoorthy Thirulokchand Vasan CIFCO, Catalincs Partners C K Entertainments Executive Directors Rangarajan Krishnan Srikanth Gopalakrishnan Joint Managing Director & CEO Joint Managing Director & CFO 10  Profile of Board of Directors Five-Star Business Finance Limited | Investor Presentation – Q2FY25 Srikanth Gopalakrishnan Lakshmipathy Deenadayalan Rangarajan Krishnan Joint Managing Director / CFO Chairman & Managing Director Joint Managing Director / CEO Finance professional with over 20 years of experience. Engineering graduate and was the MD of RKV Finance Finance professional with over 20 years of experience in Started his career with Citigroup and was CFO of before joining Five Star. Pivoted the Company towards institutions like HDFC bank, Stanchart, IFC and Spark Asirvad Microfinance before joining Five Star. He has secured business lending and built the Company to its Capital. He is a commerce graduate and has 2 MBA completed his B.Com and MBA from Sri Sathya Sai current size from scratch. Associated with multiple degrees (Sri Sathya Sai Institute of Higher Learning and Institute of Higher Learning with gold medals in both the industry associations Indian School of Business) courses Bhama Krishnamurthy Anand Raghavan T T Srinivasaraghavan Independent / Non-Executive Director Independent / Non-Executive Director Independent / Non-Executive Director She was the Country Head and Chief General Manager Chartered Accountant with over 30 years of experience Graduate in Commerce and holds an MBA degree from of SIDBI. She has closely dealt with Multilateral and occupying senior position in Sundaram Finance and the Gannon University, Pennsylvania. He began his Bilateral Agencies in close co-ordination with the Ernst & Young LLP. His specializations include NBFC career as a banker, before moving to Sundaram Finance Government of India. She was also associated with Regulations, Corporate Tax and Foreign Investment and in 1983, where he spent almost 4 decades including 18 drafting of CSR Policy guidelines for the Bank. She was he is also a director on the Boards of Muthoot years as its Managing Director. He is also on the Boards the Chairperson at CSB Bank and her other Microfinance, Shriram Life and SK Finance of Sundaram Finance, Sundaram Home and RK Swami directorships include CIFCO, and Muthoot Microfinance Chairperson – Audit Committee Chairperson – Risk Management Committee Chairperson – Nomination & Remuneration Committee Ramkumar Ramamoorthy Independent / Non-Executive Director Trilokchand Vasan Associated with Cognizant India for over 22 years, Non-Executive Director before retiring Chairman and MD, responsible for the Thirulokchand is a Hotel Management Graduate with company’s India operations. Prior to joining Cognizant, over 17 years of experience in the Hospitality business. Ramkumar worked for Tata Consultancy Services. He is His areas of expertise include Team Management, now a Partner at Catalincs, a strategic advisory firm that Customer satisfaction and Process Optimization helps small tech companies scale and grow, and is also on the Board of CIFCO Chairperson – IT Strategy Committee 11  Experienced Management Team Five-Star Business Finance Limited | Investor Presentation – Q2FY25 22 22 21 9 22 9 22 7+ Lakshmipathy Deenadayalan Rangarajan Krishnan Srikanth Gopalakrishnan Vishnuram Jagannathan Chairman & MD JMD & CEO JMD & CFO Chief Operating Officer Education: Bachelor of Engineering Education: B.Com, MBA, PGPM (ISB) Education: B.Com, MBA Education: B.Com, MBA Experience: HDFC Bank, Stanchart, Experience: Citibank, Asirvad Experience: HDFC Bank, Deutsche Bank, IFC, Spark Capital Microfinance HSBC 21 6+ 26 7+ 32 3 26 4 Parthasarathy Srinivasan Sathya Ganesh Vanamali Sridharan Jayaraman Sankaran Chief Credit Officer Chief Business Officer Chief Technology Officer Chief Risk Officer Education: B.Com, CA Education: B.Com, M.Com, MBA Education: B.E, MBA Education: B.Com, CA Experience: ICICI Bank, Stanchart, DBS Experience: ICICI Bank, Experience: Stanchart (Dubai), Experience: Redington India Bank Cholamandalam, Shriram Housing Accenture, Equitas SFB, Suryoday SFB 23+ 7 25+ 2+ 18 2+ 28 1+ Prashanth Sreenivasan Ramesh Kannah Naveen Raj Sai Suryanarayana Chief Treasury Officer Chief Legal Officer Chief Audit Officer Chief People Officer Education: B.Com, MBA Education: LLB, MBA, CAIIB Education: B.Com, CA Education: B.Com, PGDPM Experience: TVS Credit, Marg Limited Experience: HDFC Limited, ICICI Bank, Experience: BSR & Co (KPMG), Deloitte, Experience: ITC Limited, Toyota Cholamandalam, Piramal Capital Haskins & Sells Financial Services, ING Vysya Bank, AU SFB, Fincare SFB 12 Total years of experience Years at Five Star BUSINESS UPDATES  Business Updates (1/2) Five Star Business Finance Limited | Investor Presentation – Q2FY25 Operations 1. Net Q-o-Q AUM growth of ₹5,833 Mn in Q2FY25 as against ₹6,811 Mn in Q2FY24. AUM was up 32% Y-o-Y at ₹109,272 Mn as of September 30, 2024 as against ₹82,644 Mn as of September 30, 2023. 2. Disbursements during the quarter was at ₹12,507 Mn as against ₹12,043 Mn during Q2FY24. 3. Active loans at 0.43 Mn as of September 30, 2024 as against 0.34 Mn as of September 30, 2023. 4. The Company added 113 branches during the quarter. Total branch count stood at 660 as against 456 branches as of September 30, 2023. 5. Total Headcount stood at 10,366 as against 8,261 as of September 30, 2023. Collections & Asset Quality 1. Overall Collections efficiency for the quarter stood at 98.4% as against 98.5% for Q1FY25. Unique loan collections % (Due One Collect One or D1C1) stood at 97.0% for the quarter as against 97.2% for Q1FY25. 2. Current portfolio as a % of the overall portfolio stood at 86.00%. 3. Gross & Net Stage 3 assets stood at 1.47% and 0.71% respectively as of September 30, 2024 as against 1.35% and 0.68% as of September 30, 2023. 4. Overall Stage 2 assets stood at ₹7,623 Mn (6.98%) as of September 30, 2024 as against ₹5,984 Mn (7.24%) as of September 30, 2023. 5. The Provision coverage on Stage 3 assets stood at 51.80% and the provision coverage on the overall portfolio stood at 1.65%. 14  Business Updates (2/2) Five Star Business Finance Limited | Investor Presentation – Q2FY25 Liabilities 1. In Q2FY2025, the company received sanctions for incremental debt of ₹4,200 Mn, availing ₹5,750 Mn (inclusive of some un-availed sanctions from previous quarters), at a weighted average rate of interest of 9.28% (all-inclusive cost of 9.57%). For H1FY2025, the company raised incremental debt of ₹12,700 Mn availing ₹14,000 Mn (inclusive of some previous un-availed sanctions) at a weighted average rate of interest of 9.29% (all-inclusive cost of 9.52%). 2. The Company has onboarded Kotak Mutual Fund and Nippon Mutual Fund as lenders during the quarter. 3. As at the end of September 2024, the proportion of funding received from banks has come down to 70% in Q2FY25 from 74% in Q1FY25. 4. Liquidity buffer and Unavailed Sanction lines as of September 30, 2024 stood at about ₹16,994 Mn and ₹2,450 Mn respectively Financials 1. In Q2FY2025, Net total income (Total income less Cost of funds) grew by 30% to ₹5,427 Mn as against ₹4,165 Mn in Q2FY2024 2. PPOP for Q2FY20245 stood at ₹3,800 Mn, an increase of 37% as compared to Q2FY2024 3. As compared to Q2FY2024, PBT and PAT increased by 34% and 34% respectively and stood at ₹3,582 Mn and ₹2,679 Mn respectively for Q2FY2025 4. Cost to income (inclusive of credit cost) stood at 34.18% as compared to 36.03% for Q2FY2024. Excluding credit cost, Cost to income for Q2FY2025 was at 30.17% as compared to 33.49% for Q2FY2024. 5. Return on Average Total Assets was at 8.36% as compared to 8.47% for Q2FY2024 6. Return on Equity increased to 19.02% for Q2FY2025 as compared to 17.08% for Q2FY2024 7. Capital adequacy remained robust at 48.73% 15  Balance Sheet Indicators Five Star Business Finance Limited | Investor Presentation – Q2FY25 Quarterly Data Last 5 years data All amounts in ₹ Mn Disbursements AUM Net Worth Disbursements 4% 21% 48,814 32% 1,09,272 57,233 33,914 13,182 1,03,439 54,498 12,043 12,507 47,363 24,087 82,644 17,562 6% 5% 12,450 (5%) Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 FY20 FY21 FY22 FY23 FY24 Liquidity AUM Borrowings Expected Credit Loss 96,406 43% 34% 18,912 69,148 1,809 16,994 67,239 68,795 1,700 50,671 44,454 12,669 38,922 48,193 1,350 2% 6% FY20 FY21 FY22 FY23 FY24 Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 ECL includes ECL maintained on Inter-Corporate Deposits Liquidity does not include lien-marked FDs 16  P&L Indicators Five Star Business Finance Limited | Investor Presentation – Q2FY25 Quarterly Data Last 5 years data All amounts in ₹ Mn Income Interest Expense Other Expenses Income 35% (17%) 21,951 (54%) 7,058 1,565 1,627 6,694 1,582 1,631 15,289 1,389 12,562 5,224 10,513 7,873 1,059 (3%) (4%) 5% Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 FY20 FY21 FY22 FY23 FY24 PAT Credit Cost PBT PAT 8,359 34% 34% (106%) 218 3,582 2,679 6,035 3,362 2,516 185 4,513 2,670 1,994 3,582 2,608 106 7% 6% (18%) Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 Q2FY24 Q1FY25 Q2FY25 FY20 FY21 FY22 FY23 FY24 17  Consistent & Best-in-class Spreads Five Star Business Finance Limited | Investor Presentation – Q2FY25 Portfolio Yield Cost of borrowing Spread 25.00% 12.00% 25.00% 14.00% 24.44% 24.18% 24.17% 24.23% 24.27% 24.50% 24.19% 24.24% 24.22% 24.50% 24.16% 24.05% 13.50% 24.19% 24.00% 24.18% 11.50% 24.00% 13.00% 23.50% 23.50% 12.50% 12.07% 11.00% 23.00% 23.00% 12.00% 22.50% 11.48% 11.50% 22.50% 10.50% 22.00% 22.00% 11.00% 11.09% 10.51% 21.50% 9.80% 9.71% 10.00% 21.50% 10.12% 10.50% 9.65% 21.00% 10.00% 21.00% 9.65% 9.71% 9.50% 20.50% 9.64% 9.64% 20.50% 9.50% 20.00% 9.00% 20.00% 9.00% FY19 FY20 FY21 FY22 FY23 FY24 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 14.56% 14.58% 14.48% 14.63% 14.55% 14.57% 14.53% 14.11% 13.54% 13.07% 12.69% 12.11% FY19 FY20 FY21 FY22 FY23 FY24 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 18  Well-diversified portfolio cuts Five Star Business Finance Limited | Investor Presentation – Q2FY25 AUM by Geography AUM by Ticket Size Q2FY25 1% 1% Q2FY24 Q2FY25 1% 0% Q2FY24 1% 0% 6% 5% 12% 6% 6% 10% 30% 33% 34% ATS for ATS for 40% 19% 20% Q2FY25 Q2FY24 3.48L 3.39L 48% 53% 38% 35% TN AP TS KA MP OTH 15L AUM by Branch Tier AUM by Vintage of loans Q2FY25 1% 2% Q2FY24 Q2FY25 4% 3% Q2FY24 9% 11% 10% 20% 15% 35% 17% 43% 22% 49% 43% 34% 37% 45% Tier 1 & 2 Tier 3 Tier 4 Tier 5 Tier 6 5Y 19 ASSET QUALITY & ECL  Asset Quality Indicators (1/2) Five Star Business Finance Limited | Investor Presentation – Q2FY25 Collections Efficiency (%) 30+ (%) 8.59 8.35 8.11 8.44 7.89 1.35 1.40 1.47 1.38 1.41 100.3 98.0 99.1 97.5 99.5 97.8 98.5 97.2 98.4 97.0 7.24 6.95 6.51 6.71 6.98 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Amount of EMI received during the month (including arrears of previous months) divided by Stage 2 POS EMI demand for the current month Amount of EMI received during the month, restricted to a max of 1 EMI per loan divided by Stage 3 POS EMI demand for the current month Gross Stage 3 Assets (%) Net Stage 3 Assets (%) 1.35 1.40 1.38 1.41 1.47 0.21 0.68 0.65 0.63 0.68 0.71 0.25 0.26 0.22 0.28 0.10 0.09 0.18 0.14 0.13 1.26 0.51 0.50 0.58 0.62 1.07 1.15 1.12 1.19 0.50 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Sep'23 Dec'23 Mar'24 Jun'24 Sep'24 Loans which are > 90 DPD as at the end of reporting period Loans which are