Five Star Business Finance Set for IPO

Chennai-headquartered small business lender plans to raise $400 million (over . ₹2,900 crore) via public list, two people aware of the development said on condition of anonymity.

Five Star has mandated Edelweiss, Nomura and Kotak Securities as the lead merchant banker to conduct the IPO process with ICICI Securities, the two persons said.

He said the IPO is likely to be partially exited by private equity shareholders Matrix Partners India and TPG Asia in the next few months. As of the end of March 2021, TPG Asia owned about 22.5% and Matrix Partners India owned over 15%.

Morgan Stanley’s stake in NHPEA Chocolate Holdings BV was around 13.2%. In addition, Sequoia Capital and Norwest Venture Partners hold a 9.45% stake in Five Star Business Finance.

In March this year, Five Star Business Finance raised $234 million. ₹1,700 crore) from new and existing investors at a valuation of $1.4 billion ( ₹10,300 crores). The funding round was led by Sequoia Capital India, with participation from Norwest Venture Partners and new investors such as KKR and TVS Capital.

Emails sent to Matrix Partners and investment bankers ICICI Securities, Edelweiss, Nomura and Kotak Securities remained unanswered till press time. Five Star CEO K. Rangarajan did not comment. TPG also declined to comment.

Non-bank lender’s assets under management (AUM) were ₹4,445.38 crore by the end of March.

Five Star Business Finance, which started operations in 1984, was founded by VK Ranganathan with a focus on consumer loans and vehicle finance. In 2005, it shifted to small and medium enterprises (SMEs) in urban and semi-urban markets.

The current promoter D. Lakshmipathy is associated with the company since 2002 and has been the Managing Director for almost 10 years. Five Star also offers small housing loans to salaried and self-employed customers. Its operations are spread over 262 branches and the company employs around 4,000 people.

bea.parmar@livemint.com