Five Star Business IPO subscribed 38% on day 3, issue closes today

New Delhi: Investors continued to distance themselves from the Rs 1,960 crore initial public offering (IPO) of Five Star Business Finance during the third and final day of the bidding process.

The company is selling its shares in the range of Rs 450-474 apiece between November 9-11, with a lot size of 31 equity shares. The issue is completely an offer-for-sale (OFS).

According to the data from BSE, the investors made bids for 1,15,33,953 equity shares or 38 compared to the 3,04,88,966 equity shares offered for the subscription by noon on Friday, November 11.

The quota for retail bidders was subscribed to only 7%, whereas the allocation for non-institutional investors fetched just 4% bids. But the portion for qualified institutional bidders was booked 1.17 times.

Incorporated in 1984, Five Star Business Finance is a non-banking finance company (NBFC) which provides secured business loans to micro-entrepreneurs and self-employed individuals. With more than Rs 3,000 crore in assets under management (AUM), the Chennai headquartered company has the fastest AUM growth among the compared peers.

Brokerage firms remain mixed over the issue. Some suggested subscribing to the issue with caution, but a majority of them find the valuations expensive, citing the complete OFS nature of the issue.

Religare Broking remains neutral on the issue, citing operations in a competitive environment and non-payment or default by their borrowers may adversely affect its business as the key risks for the company.

Five Star Business Finance is available at the upper price of the band at 3.7x P/BV and returns on net worth of 13.86%, and ROA is 7.5%. Five Star Business Finance is fairly priced, said Anand Rathi with a 'Subscribe for long term' rating.

ICICI Securities, Edelweiss Financial Services, Kotak Mahindra Capital Company and Nomura Financial Advisory and Securities are the managers of the issue, whereas KFin Technologies has been appointed as the registrar of the issue.

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