Five Star Business Finance IPO subscribed only 70% on last day

  • The NBFC was not fully subscribed even on the last day of the IPO subscription process.
  • The Chennai-based lender had planned to raise ₹1,960 crore through a complete offer for sale by the company’s promoters and existing shareholders.
  • The price band of the IPO is set at ₹450-474 a share.
  • Shares of the company are now commanding a discount of ₹5 in the grey market as compared to a premium of ₹10 earlier.

The initial public offering (IPO) of non-banking financial corporation Five Star Business Finance has received bids only for 70% of the total shares on offer – on the last day of the subscription process.

At the same time, Archean Chemical Industries was subscribed 32.54 times on November 11, its last day. This IPO opened on the same day as that of Five Star Business Finance.

Five Star Business Finance’s IPO received poor demand from retail investors too as this portion was subscribed by 0.11 times – that’s around 11% of the shares on offer.

The Chennai-based lender had planned to raise ₹1,960 crore through a complete offer for sale by the company’s promoters and existing shareholders.

Its shares are now commanding a discount of ₹5 in the grey market as compared to a premium of ₹10 earlier.

The company, which provides secured loans to micro-entrepreneurs and self-employed individuals, will not receive any funds raised from the IPO as all the shares are being sold by promoters.

Category of investors Subscription status
Qualified institutional buyers 1.77 times
Non institutional investors 0.61 times
Retail 0.11 times
Overall 0.70 times

The company has a strong presence in South India with assets under management (AUM) to the tune of ₹5,100 crore as of March 31, 2022 as compared to ₹4,400 crore a year ago. It has a network of 311 branches in 150 districts, eight states and a union territory; and a workforce of 6,077 employees.

Tamil Nadu, Karnataka, Andhra Pradesh and Telangana account for 85% of its portfolio. The company plans to deepen its presence in existing geographies through increasing the number of field officers and setting up new branches.

The NBFC’s total income grew 19.5% from a year earlier to ₹1,254 crore in FY22, while its net profit grew 26.5% to ₹453 crore.

While the pandemic seems to have ended, it impacted the NBFC by reducing disbursements from ₹2,408 crore in FY20 to ₹1,245 crore in FY21.

“The effects of the Covid-19 pandemic on our future results of operations, cash flows and financial condition could adversely impact our ability to service our debt obligations and comply with the covenants in our credit facilities and other financing agreements and could result in events of default and the acceleration of indebtedness, which could adversely affect our results of operations and financial condition and our ability to make additional borrowings,” said the company in its draft red herring prospectus.

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