Five Star Business Finance has set an IPO band of 10.6% below the unlisted market price.
Investors in Five Star Business Finance Ltd are stunned after the company priced its initial public offering (IPO) below its unlisted market price, according to dealers. The unlisted share price of the South-based lender is Rs 525-530 per share, while the IPO price band is fixed at Rs 450-474 per share, which is about 10.6 percent lower than the current unlisted price. The unlisted stock market was down nearly 35% from its recent high of Rs 730 per share in October 2021. The IPO, which is merely a public offering, goes on sale on November 9 and closes on November 11.
Five Star Business Finance is a well-known NBFC in South India that has achieved unicorn status due to the presence of some high-profile investors. Prices for unlisted shares ranged from around Rs 360 to Rs 725. Despite all odds, the company has consistently produced excellent financial results, keeping investors interested in its unlisted shares. However, due to a significant downturn in both the listed and unlisted markets, the shares have dropped nearly 35% in the last year. The stock is valued at about 25 times its annualized FY23 earnings and 3.58x (based on June 2022 figures), which appear to be slightly lower than
its listed competitors. The primary market is gradually gaining traction, and issues that are reasonably priced and offer investors something to gain are receiving a good response.
Grey market IPOs at a discount
Five Star Business Finance is not the only company that has established a price range that is significantly lower than the current unlisted market price. Previously, the IPO price bands for AGS Transact Technologies, UTI Asset Management Co Ltd, and PB Fintech were below grey market levels. AGS Transact debuted on exchanges in January 2022, with a price range of 166-175 per share. Meanwhile, just before the IPO, its unlisted price was around Rs 185-195 per share. The same was true for the IPOs of UTI AMC and PB Fintech. UTI AMC was listed on exchanges in September 2020, with an IPO price range of Rs 552-554 per share and an unlisted market price of around Rs 1,100 per share. Paisabazaar’s parent company, PB Fintech, had set an IPO price band of Rs 940-980 per share, despite the fact that shares were trading around Rs 1,900 just before the IPO.
Five Star Business Finance, founded in 1984, offers secured business loans to microentrepreneurs and self-employed individuals. As of June 30, 2022, the lender had 311 branches spread across approximately 150 districts, eight states, and one union territory, with Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka being its key states. On November 7, the IPO’s anchor investors will begin bidding. The allotment will take place on November 16, the refunds will begin on November 17, and the credit of equity shares to allottees will take place on November 18. On November 21, the shares will be listed. It has reduced the size of its IPO from Rs 2,752 crore to Rs 1,960 crore. The lender reported revenue from operations of Rs 337.97 crore for the June quarter, up from Rs 300.52 crore the previous year. The net profit for the quarter was Rs 139.43 crore, up from Rs 101.57 crore the previous year. Gross term loans totaled Rs 5296.54 crore, up from Rs 4577.51 crore the previous year. Disbursements were Rs 568.43 crore as opposed to Rs 333.16 crore.
Total borrowings fell from Rs 3,121.22 crore to Rs 2,520.32 crore. Gross non-performing assets (NPA) were 1.1 percent in fiscal 2022, up from 1% the previous year. Net NPA fell from 0.8 percent last year to 0.7 percent this year.