Five Star Secures $50 Million From Existing Investor TPG

Five Star Business Finance, a Chennai-based non-banking finance company that lends to small businesses, has raised $50 million in equity from existing investor TPG Capital Asia to fuel growth plans. This latest round of funding values the firm at $950 million, a tad less than a Unicorn.

This is the second round of investment made by TPG in Five Star. It had participated in the $100-million round in July 2018.

TPG alone is expected to have invested about $100 million in Five Star in its two rounds of funding.

Five Star is one of the few NBFCs that have secured equity funding in the current challenging times, when the general investment climate for NBFCs has been tough.

“This follow-on investment by TPG shows the confidence of investors in Five Star at a time the NBFC market in the country is facing tough times. This money will largely be utilised to support our business growth plans,” said D Lakshmipathy, Chairman and Managing Director, Five Star.

Growth outlook

Five Star is optimistic about the growth outlook and has also spread its wings beyond South India.

“We are not seeing growth slowdown. I think, the slowdown is more for wholesale-based NBFCs. But retail-focussed NBFCs like ours see opportunities to grow. We see more of liability challenges rather than asset or growth challenges,” K Rangarajan, Chief Executive Officer, Five Star Business Finance, told BusinessLine.

Despite tough market conditions, the company has been able to raise debt, too. It recently raised $100 million, in which Franklin Templeton was the lead investor with a large share.

Small loans segment

Five Star is eyeing leadership position in the small business loan segment and is targeting a portfolio of about ₹4,000 crore by the end of this fiscal.

It has about 200 branches spread across eight States and UTs in India.

Its current portfolio stands at about ₹2,500 crore, with a stable asset quality of sub-1 per cent gross NPA.

“We will increase the number of branches to 225 by March 2020. While we intend to consolidate our presence in the south, most of the incremental branches will come in Central and North Indian regions,” he added.

Five Star is backed by marquee investors that include Matrix Partners, Morgan Stanley, Sequoia Capital, Norwest and TPG.