five star unlisted shares: After multibagger returns in unlisted space, can Five Star pull off the same magic again?
The shadow lender in the unlisted market, also known as the pre-IPO market, has delivered multibagger returns to investors. Its shares jumped to Rs 720-750 from Rs 180 on an adjusted basis after the sub-division of equity shares.
Five Star Business Finance is aiming to raise Rs 1,960 crore via primary stake sale between November 9-11 by selling its stock in the range of Rs 450-474 apiece.
Dealers, who sold this stock in the unlisted market ahead of the IPO, are swearing by the strong fundamentals of the company. However, they also believe that valuations are a bit stretched and a lower price band would have been better.
Dinesh Gupta, Co-founder of UnlistedZone said the company is growing at a CAGR of 30% with the highest net interest margins (NIMs) and lowest non-performing assets (NPAs) in the industry but the valuations are pricey.
“The company has a very strong moat for its business model, eliminating the chances of NPAs. The anchor names in the company are strong as they look at the company for the long run and investors shall follow the same,” Gupta added.
Incorporated in 1984, Five Star Business Finance is an NBFC which provides secured business loans to micro-entrepreneurs and self-employed individuals. Five Star Business Finance has raised Rs 588 crore from 16 anchor investors.
Narottam Dharawat of Mumbai-based Dharawat Securities, which deals in pre-IPO shares, said investors are likely to consider Five Star Business Finance as a portfolio stock as the stock will continue to command premium valuations.
“NBFCs with robust growth and strong prospects continue to trade at higher valuations even in the secondary market and it is among one of them. It is not for short-term investment and one should bet on it for the long run only.”
On the contrary, other experts are not gung-ho on the counter. They believe that NBFCs have a different business model and cannot compete with banks.
Aditya Kondawar, Partner & Vice President of Key Accounts, at Complete Circle Capital, said that NBFCs cannot be judged in a short-term time frame of just 3-5 years. Five Star has robust growth in terms of AUM and PAT but it has come at the cost of asset quality, he said.
“I would prefer to monitor its performance going ahead. All lenders, including NBFCs, are likely to perform well considering the multiyear credit growth. The real test of NBFCs, however, will be in a credit downcycle and bad times,” he added.
“The company, Five Star, might perform well but it needs to pass the litmus test during the tough times.”
Brokerage firms tracking the IPO have mixed views. Anand Rathi,
Securities and Hem Securities have suggested subscribing to the issue, whereas Angel One is neutral on the issue. has an avoid rating.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
