EspressoLogy

Five-Star Business Finance Limited is an NBFC-ND-SI providing secured business loans to micro-entrepreneurs and self-employed individuals, each of whom are largely excluded by traditional financing institutions. They are headquartered in Chennai, Tamil Nadu with a strong presence in south India and all of their loans are secured by their borrowers’ property, predominantly being SORP.

·    They have developed a business model that is predicated on arriving at an appropriate risk framework, with the optimal instalment to income ratio to ensure that their customers have the necessary means to repay the loan after meeting their regular obligations and other event-based capital requirements.

·    They primarily offer their customers small loans for business purposes, as well as loans for asset creation such as home renovation or improvement, or for meeting expenses for significant economic events such as marriage, healthcare and education, their growth is primarily volume led through increasing their customer base while keeping the ATS stable, and they expect this to continue. The interest rates on their loans depend on the underlying tenor (which ranges from two to seven years), with approximately 95% of the loans sanctioned being between the interest rate range of 24% to 26% and between the tenure range of five to seven years.

·    100% of their leads for customers are sourced in-house without any use of direct selling agents to source leads for them; further, all of their loans are fully secured with more than 95% of the collateral being SORP at the time the loan application is approved.  

·    They had an extensive network of 311 branches, as of June 30, 2022, spread across approximately 150 districts, eight states and one union territory, with Tamil Nadu, Andhra Pradesh, Telangana and Karnataka being their key states. Such key states collectively accounted for approximately 85% of their branch network by number, as of June 30, 2022.  

·    They also have a two layered underwriting architecture comprising a field credit team that is “on the ground” and closer to the customer (the “Field Credit Team”); and a file credit team that remotely reviews loan applications and undertakes credit decisioning (the “File Credit Team”). They have implemented a comprehensive and robust credit assessment, risk management and collections framework to identify, monitor and manage risks inherent in their line of business.