Five-Star Business Finance (FIVESTAR) Q2 24/25 earnings summary

Executive summary

• Achieved PAT of INR 2,679 Mn for Q2 FY25, up 34% year-over-year, with AUM reaching INR 109,272 Mn, a 32% increase year-over-year.

• Loan disbursements for Q2FY25 were INR 12,507 Mn, up 4% year-over-year but down 5% sequentially, reflecting a conscious slowdown.

• Net interest margin for Q2FY25 stood at 16.93%; return on equity improved to 19.02%.

• Gross NPA at 1.47% and net NPA at 0.71% as of Sep 30, 2024, with collection efficiency at 98.4%.

• 113 branches added in Q2, with expansion into new states and a total of 660 branches.

Financial highlights

• Net total income for Q2FY25 grew 30% year-over-year to INR 5,427 Mn; PPOP rose 37% to INR 3,800 Mn.

• Net worth stands above INR 5,700 crore; capital adequacy ratio at 50.50% as of September 30, 2024.

• Cost-to-income ratio (including credit cost) at 34.18%; OpEx to income at 31-32%.

• Cost of funds stable at 9.65%; incremental borrowing cost at 9.52%.

• Liquidity buffer as of Sep 2024 was INR 16,994 Mn, with unavailed sanction lines of INR 2,450 Mn.

Outlook and guidance

• FY25 AUM growth guidance set at 25%; future growth to be revisited based on macro and regulatory trends.

• Lending rates on incremental disbursements to be reduced by 200 bps from November 2024.

• Long-term steady-state spread targeted at 12% and ROA at 6%.

• Focus on expanding branch network and increasing field officer strength to drive growth.

• Large MSME credit gap in India presents significant long-term growth opportunities.