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Five Star Business Finance set for IPO


Non-banking financial company (NBFC) Five Star Business Finance Ltd, which is backed by private equity firms Sequoia Capital and KKR, is readying to file draft papers for an initial public offering (IPO).

The Chennai-headquartered small business lender plans to raise $400 million (more than 2,900 crore) through the public listing, two people aware of the development said on condition of anonymity.

Five Star has mandated Edelweiss, Nomura and Kotak Securities as the bankers with ICICI Securities as the lead merchant banker to run the IPO process, the two persons said.

The IPO, likely in the next few months, will also see partial exits from private equity shareholders Matrix Partners India and TPG Asia, they said. As of March end 2021, TPG Asia held almost 22.5%, and Matrix Partners India owned more than 15%.

Morgan Stanley’s NHPEA Chocolate Holdings B.V.’s stake was around 13.2%. Also, Sequoia Capital and Norwest Venture Partners owned 9.45% stake each in Five Star Business Finance.

In March this year, Five Star Business Finance had raised $234 million ( 1,700 crore) from new and existing investors at a valuation of $1.4 billion ( 10,300 crore). The funding round was led by Sequoia Capital India, with participation from Norwest Venture Partners and new investors such as KKR and TVS Capital.

Emails sent to Matrix Partners and investment bankers ICICI Securities, Edelweiss, Nomura and Kotak Securities remained unanswered till press time. Five Star’s chief executive officer K. Rangarajan did not comment. TPG, too, declined comment.

The non-bank lender’s assets under management (AUM) were 4,445.38 crore as of March end.

Five Star Business Finance, which started operations in 1984, was set up by V.K. Ranganathan with a focus on consumer loans and vehicle finance. In 2005, it shifted to small and medium enterprises (SMEs) in urban and semi-urban markets.

Present promoter D. Lakshmipathy has been involved with the company since 2002 and has been the managing director for around 10 years. Five Star also makes small housing loans to salaried and self-employed customers. Its operations are spread across 262 branches and the company employs almost 4,000 people.

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