Earnings Outlook
Five-Star's PAT seen slightly down QoQ on low loan growth
This story was originally published at 16:17 IST on 28 July 2025
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By Muskan Lodhi
MUMBAI – Five-Star Business Finance Ltd. is expected to post a mild sequential decline in its net profit for the June quarter, driven by the subdued loan growth and disbursements, according to brokerages tracking the company. The non-banking finance company has been cautious with lending because of stress in asset quality and an unfavourable collection trend.
The company's net profit for the June quarter is estimated at INR 2.75 billion, down 1.6% on quarter, according to the average of estimates from five brokerages. However, year-on-year, the net profit is likely to increase by 9.2%. The highest estimate for net profit is INR 2.89 billion from Kotak Institutional Securities while the lowest estimate is INR 2.63 billion from JM Financial Institutional Securities.
The company is expected to report a net interest income of INR 5.78 billion, up 3.4% from the March quarter and nearly 20% from a year ago. The highest estimate for net interest income is INR 5.90 billion by Kotak Institutional Securities while the lowest estimate is INR 5.65 billion from Sharekhan.
Kotak expects loan growth to moderate for most non-banking financial companies. The brokerage estimates Five-Star's loan growth for the June quarter at 6.8%, up 50 basis points from the March quarter. Brokerages also expect the company's assets under management to see moderate year-on-year growth. The company's assets under management were INR 118.77 billion as of Mar. 31.
"Five-Star, as of now, continues with its AUM growth guidance of 25% for FY26, till things settle in KTK (Karnataka). Over the medium term, AUM growth may be achieved by faster growth in inflexion point states... It is looking to increase the share of central India in overall AUM in the range of 15–20% vs. around 8% currently," ICICI Securities said.
Motilal Oswal Financial Services expects the company's net interest margins to contract 50 bps sequentially due to the around 200 bps cut in lending rates implemented by the company from November 2024. The brokerage expects loan growth to accelerate in the second half of the current financial year. The company is likely to focus on loans with an average ticket size ranging from INR 500,000 to INR 1 million and will reduce its focus on loans with an average ticket size below INR 300,000, considering the lending environment for small-ticket loans, ICICI Securities said.
The income levels of Five-Star's customers have not been impacted during the current crisis in Karnataka, but overleveraging has led to stress among some borrowers. The company's management believes that the planned implementation of Microfinance Institutions Network guardrails to restrict borrowers of microfinance institutions to a maximum of three lenders per borrower could result in incremental growth opportunities.
Motilal Oswal expects a deterioration in the company's asset quality, which may lead to a rise in credit costs to around 100 bps from 70 bps in the March quarter. Sharekhan expects the credit cost of the non-banking finance companies to stay elevated but improve sequentially. On the other hand, JM Financial expects credit costs to remain flat or decline marginally for most companies in the sector.
Of the six brokerage reports available on the company with Informist, five have a 'buy' rating on the stock, with an average target price of INR 854, whereas one brokerage has a ‘hold' rating on the stock.
Monday, shares of Five-Star Business ended at INR 670.15 on the National Stock Exchange, down 2.9%. The stock is down 5.1% since the company announced its earnings for the March quarter. The stock had fallen 6.4% after the March quarter earnings. The company will release its earnings for the June quarter on Monday.
Following are the June earnings estimates for Five Star Business Finance Ltd. based on reports from five brokerage firms in descending order of the estimate of net profit:
Brokerage Firms | Net Interest Income (in INR million) | Net Profit (in INR million) |
Kotak Institutional Equities | 5,895.00 | 2,890.00 |
Nuvama Wealth Management Ltd | 5,800.00 | 2,800.00 |
Sharekhan Ltd | 5,650.00 | 2,720.00 |
Motilal Oswal Financial Services Ltd | 5,748.00 | 2,703.00 |
JM Financial Institutional Securities Pvt Ltd | 5,815.00 | 2,626.00 |
Average | 5,781.60 | 2,747.80 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT.
Edited by Saji George Titus
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