Five-Star Business Finance Limited (NSE: FIVESTAR, BSE: 543663), a leading Indian specialized lender, reported a 16% year-on-year increase in its loan portfolio for the quarter ended December 31, 2025, reaching ₹129,641 million.
The company, which focuses on providing secured financial solutions to small business owners and self-employed individuals, continues to navigate an underserved market characterized by a massive credit gap.
Company Overview & Market Perspective
- Five-Star Business Finance serves a niche segment of customers with informal incomes who are largely excluded from the formal lending ecosystem. The company addresses a total addressable market (TAM) estimated at ₹22 trillion, targeting the significant MSME credit gap in India.
- The company reported a robust net worth of ₹70.8 billion as of December 31, 2025.
Portfolio & Geographic Presence
- The company’s portfolio is 100% secured, with 95% of loans backed by self-occupied residential property (SORP).
- As of Q3 FY2026, Five-Star operates 835 branches across 11 states and Union Territories. Its presence is most concentrated in Southern India, with Andhra Pradesh (36%), Tamil Nadu (29%), and Telangana (19%) making up the core of its Assets Under Management (AUM).
Target Customers & Latest Metrics
- Five-Star targets households with gross monthly incomes between ₹25,000 and ₹40,000, typically involved in everyday “cash and carry” services. The average ticket size for loans disbursed during the quarter was ₹0.39 million.
Asset Quality & NPA Metrics
- While the portfolio grew, asset quality metrics saw a year-on-year shift. Gross NPA (Stage 3 assets) stood at 3.18%, up from 1.62% in December 2024.
- Net Stage 3 assets were reported at 1.94%. The 30+ Days Past Due (DPD) metric reached 12.81%, compared to 9.16% a year prior. The provision coverage on Stage 3 assets was maintained at 39.84%.
Liability, Cash Flow, & Liquidity
- The company maintains a well-diversified liability profile with 45 lender relationships. In Q3 FY2026, it signed a $100 million facility with the Asian Development Bank (ADB). The incremental cost of borrowings for the quarter stood at 8.19%.
- Five-Star maintains a strong liquidity position with a total buffer of ₹37,164 million, including unavailed sanction lines. Its Capital Adequacy Ratio remains robust at 51.63%.
Management Commentary & Strategy
- Under the leadership of Chairman and Managing Director Lakshmipathy Deenadayalan, the company continues its mission of Reaching the Unreached.
- Management has emphasized a “borrower-led” growth strategy, prioritizing an increase in the number of active loans, which reached approximately 0.49 million over simply increasing ticket sizes.
- The company is also utilizing a “Cluster Strategy” to de-risk operations by splitting branches once they cross specific account thresholds.
Overall Assessment
Five-Star Business Finance demonstrates consistent growth and high profitability, evidenced by a Return on Assets of 7.00% and a net interest margin of 16.04%. While the rise in Gross NPA and 30+ DPD metrics suggests a need for continued focus on collections, the company’s 100% secured lending model and significant capital buffers provide a strong cushion against credit risks.