Chennai, 11.11.2021: TPG Non-Banking Financial Company, Five Star Business Finance Limited (FSBFL) has filed preliminary papers with capital markets regulator Sebi to raise up to Rs 2,752 crore through an Initial Public Offering.
The initial public offer (IPO) is a complete offer for sale of Rs 257.10 crore by SCI Investments V,Rs 568.92 crore by Matrix Partners India Investment Holdings II, LLC, Rs 9.56 crore by Matrix Partners India Investments II Extension, LLC, Rs 385.65 crore by Norwest Venture Partners X – Mauritius, Rs 1349.78 crore by TPG Asia VII SF Pte. Ltd., Rs 180.93 crore by a part of the Promoter Group, draft red herring prospectus (DRHP) filed with Sebi showed on Tuesday.
At present, TPG Asia VII SF Pte. Ltd. holds 20.99 per cent, Matrix Partners India Investments Holdings II, LLC, holds 14.09 per cent, Individual Promoters LakshmipathyDeenadayalan, HemaLakshmipathy and ShrithaLakshmipathy combined at 20.26% and Norwest Venture Partners X – Mauritius own 13.01 per cent and 10.22 per cent stake in the company, respectively.
The TPG company will not receive any proceeds from the offer.
Chennai-headquartered NBFC, Five Star Business Finance, provides secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions. It has a strong presence in south India, and all loans are secured by the borrowers’ property, predominantly being self-occupied residential property (SORP). The Company has had the fastest AUM growth among its peers, according to the CRISIL Report.
FSBFL was set up by V.K Ranganathan and commenced operations in 1984, with a focus on consumer loans and vehicle finance. The current Chairman and Managing Director LakshmipathyDeenadayalan has been associated with the company for the past 20 years and has adeep understanding of customer behaviour and business and operations, which has been critical to developing a profitable and sustainable business model and driving total income and profitability.
D. Lakshmipathy changed its business approach in 2005 with a focus on Small Business loan lending in Urban, Semi Urban Markets as well as Rural Areas with growth potential. He has more 2 decades of experience in the small business loan lending segment.
TPG Five Star has grown from 173 branches in 2019 to 268 branches as on September 30, 2021 across 126 districts in eight states and one union territory. Its AUM grew 86% CAGR over fiscal 2016-21, and has had the fastest AUM growth amongst subset of large peers with over 3,000 Cr of AUM. Live accounts grew from 15,803 in fiscal 2017 to 1,92,270 as of September 30, 2021. In addition, it also has a business and collections team of 2,827 employees including 2,258 Relationship Officers.
Target customers of Five Star Business Finance are mostly everyday cash and carry businesses with a focus on services, it also provides secured loans to small business owners and self-employed individuals, as well as small mortgage loans to fund significant economic events in the lives of the customers like marriage, education requirements, etc, in urban and semi-urban locations, as well as rural markets with a potential for growth.
From April 2018 to September 2021, the TPG, NBFC has made strategic investments of Rs 16 crore in its information technology systems and implemented automated, digitized technology-enabled platforms and proprietary tools, to strengthen its offerings and derive greater operational, cost and management efficiencies.
Asset Under Management stood at Rs. 4,445 crores as of March 31, 2021, compared to Rs. 3,892 crores as of March 31, 2020, with a GNPA of 1.02% as of March 31, 2021. As of March 2021, Tamil Nadu, Karnataka, Andhra Pradesh and Telangana accounted for 95% of the overall portfolio. The TPG, NBFC posted a 34 per cent growth in total income at Rs 1051 crore in FY21 from Rs 787 crore in FY20, while its net profit jumped 37 per cent to Rs 359 crore in FY21 from Rs 262 crore in FY20. The NBFC also recorded a PAT of Rs 218 Crore for the first half of the current financial year.
TPG’s strong collections focus during the Q2FY22 resulted in its average monthly collection efficiency reaching 102.04% (includes collection of arrears instalments dues for the period but without including any prepayments made by the customers). This also resulted in a reduction in its GNPA from 1.68% as of June 30, 2021 to 1.44% as at September 30, 2021.The NBFC has restructured 1.87% of its portfolio, and a large proportion of those borrowers have also started making payments of their dues during the months of August and September, which were moratorium months.
ICICI Securities Limited, Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited and Nomura Financial Advisory and Securities (India) Private Limited are the book running lead managers to the issue.