Five-Star no 5-star listing

Five-Star Business Finance did not exactly have a five-star listing today. As against the IPO price of Rs.474, it got listed at a discount – at Rs.468.80 on the NSE and at Rs.449.95 on the BSE. It soon bounced back from the low listing, going up to Rs.539.90 and is currently trading at Rs.488 levels.

The company provides term loan to self-employed individuals (non-salaried) with an average ticket size of Rs. 3 lakh, repayable in EMIs, secured against house property, charged at 24% p.a. fixed rate of interest. This is essentially loan against property, even if called by any other name.

The IPO had failed to get fully subscribed – it was at 0.7 times or just 70%. QIBs are the only ones whose quota was subscribed 1.77 times while that of HNIs and retail investors was undersubscribed at 61% and 11% respectively.

In our IPO Analysis, we had concluded, “While company’s financial performance has been good, its business product and shareholding structure are unnerving. Hence, we do not recommend subscribing to the IPO.