Five Star Business IPO subscribed 0.32x on 2nd bidding day

New Delhi: Investors continued to give a cold shoulder to the Rs 1,960-crore initial public offering (IPO) of Five Star Business Finance during the second day of the bidding process on Thursday.

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, investors made bids for 97,81,244 equity shares or merely 0.32x compared to 3,04,88,966 equity shares on offer.

The quota for retail bidders was subscribed 0.06x, whereas the allocation for non-institutional investors fetched 0.02x. While the portion for qualified institutional bidders was booked as much as 1.01 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 3000 crore in assets under management (AUM), the Chennai-headquartered company has the fastest AUM growth among peers.

Brokerage firms remain mixed over the issue. Some have suggested subscribing to the issue but a majority of them find the valuations expensive. They have also flagged the complete OFS nature of the issue as a concern.

The company is going to list at a P/B of 3.6x with a market cap of Rs 13,810.8 crore whereas its peers namely Aavas Financiers and Aptus Value Housing Finance are trading at a P/B of 4.9x and 5.5x, respectively, said Marwadi Financial Services.

"We assign a 'subscribe' rating to this IPO as the company has demonstrated the fastest gross term loans growth among the compared peers while maintaining a strong asset quality," it added. "It is available at reasonable valuations."

Five Star Business Finance raised Rs 588 crore from 16 anchor investors ahead of its IPO. The Chennai-based NBFC said it had allocated 12.4 million shares at 474 apiece to anchor investors.

Religare Broking remains neutral on the issue as it believes that the company operates in a competitive environment and non-payment or default by its borrowers may adversely affect its business.

Five Star Business Finance is available at the upper price of the band of 3.7x P/BV and seems fairly priced, said Anand Rathi with a 'Subscribe- Long term' rating.

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

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