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* Five Star provides secured business loans to unbanked self-employed individuals excluded by most Banks/NBFCs with ATS (avg loan ticket size) of Rs. 3.5 Lac and total AUM of Rs. 10.3k Cr.

* All its loans are secured by borrowers’ property, predominantly self-occupied residential property.

* ATS of < Rs. 5 Lacs is the toughest segment to crack owing to complex operational challenges such as (i) requirement of deep knowledge of local area and customer behaviour, (ii) tricky collateral evaluation (iii) difficulty in assessing volatile informal customer cash flows (iv) ensuring timely collections. Thus, building expertise takes time. With 2 decades of experience & consumer data, Five Star has been able to crack this model. (Other SFBs are shifting focus away from < Rs 5 Lac ticket size)

* Five-Star’s strong return metrics (RoA/RoE of 8%/19% in FY25E) and high earnings growth of 27% CAGR over FY24-27E shall be driven by strong AUM CAGR of 28%; stable NIM and cost/income; and subdued credit cost in 0.6-0.8% range. We recommend ‘BUY’ with a target of Rs. 1165 at 4x Sep 2026 BVPS at 10% premium to fair multiple for Home First on the back of higher return ratios of Five Star.

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