Our AUM can grow at 30% for next 3-5 years: Five Star Business CEO

Five Star Business Finance Looking to record 30 percent year-on-year growth in assets under management (AUM) over the next 3-5 years, driven by a combination of branch expansion, staff addition and loan disbursement with higher ticket volume.

The total assets of the Chennai-based non-bank financial company (NBFC) grew by 37 per cent to ₹6,915 crore as of March 2023 from ₹5,067 crore in FY22.

We must be able to maintain this momentum. Our target is to grow our assets by 30 percent in the next 3-5 years,” said Rangarajan Krishnan, CEO of Five Star Business Finance. Business line.

expansion

During the previous financial year, the company added 73 branches, bringing its total branch network to 373. “We will be adding 50-60 new branches every year, which will add to the new business and payments,” Krishnan said.

He added that the company will focus on increasing the number of personnel for each branch, so that it can penetrate deeper into the current geographical areas. Currently, the state of Tamil Nadu accounts for 35 percent of Five Star’s loan portfolio, followed by Andhra Pradesh (33 percent), Telangana (20 percent) and Karnataka (7 percent). Non-southern markets, largely central India, contribute 6 percent of the lender’s current portfolio.

Krishnan said the company will continue to be a south-focused player with 80 percent of its branch additions each year coming from the south and the remainder in non-south geographies including Madhya Pradesh, Maharashtra, Chhattisgarh, Rajasthan and Gujarat.

He said the third layer of asset growth would be from increasing average ticket size. Before Covid, the company’s average ticket size was ₹3.5 lakh, which has dropped to ₹2.5 lakh during the pandemic. “We have moved our average ticket volume to approximately INR 3.3 and expect it to touch pre-Covid levels very soon,” he added.

Five Star mainly provides small loans for business, asset creation, and other economic purposes to small entrepreneurs and self-employed individuals. Despite the riskier sector in which it operates, the lender has been able to maintain the quality of its assets, thanks to its strong branch network and collection efficiency.

NPA recovery strategy

Stage 3 total assets/non-performing assets (NPA) improved to 1.36 percent of total assets in the March quarter from 1.45 percent in the December quarter. However, the NPA was higher than the 1.05 percent recorded at the end of March 2022. Loans that are more than 90 days past due at any time on or after October 1, 2022 and whose arrears are not fully settled are recognized as total assets, the company said. Stage 3 as a percentage of total assets under management.

On the fourth quarter earnings call, Lakshmipathy Deenadayalan, CMD, Five Star Business Finance, said when an account becomes NPA or 90+, the company initiates legal proceedings and has every right to transfer the property to auction and transfer the client and the property to arbitration.

However, Deenadayalan added that by taking the auction route, the value of the property could drop by at least 50-60 percent. He said, the strategy that has been adopted for many years, which has resulted in a very good NPA recovery, both in principle and IRR, is that the company continues negotiating with the client once the legal notice has been sent to them. “We discuss with them the inability to pay and transfer the property to the market by the client himself. He added that this protects the market value of the property.