Earnings Outlook
Five-Star Q4 PAT seen dn on credit costs, NIM compression
This story was originally published at 23:57 IST on 27 April 2026
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Informist, Monday, Apr. 27, 2026
By Shumaila Firoz
MUMBAI - Five-Star Business Finance Ltd. is expected to report a subdued performance in the March quarter, with pressure on its net-profit growth from increased credit cost and compression of its net interest margin. The non-banking finance company's net interest income is expected to decline sequentially, according to brokerages.
The company is expected to report a net profit of INR 2.70 billion for the March quarter, down over 3% on year, according to an average of estimates from six brokerages. It is expected to report a net interest income of INR 6.18 billion, up nearly 6% on year but down nearly 3% on quarter, according to the average of estimates.
The highest estimate for the non-bank lender's net profit is INR 2.74 billion from YES Securities (India) Ltd. and the lowest is INR 2.68 billion from Motilal Oswal Financial Services Ltd. The highest estimate for net interest income is INR 6.38 billion from YES Securities, the lowest is INR 6.02 billion from Motilal Oswal.
Five-Star Business Finance's net profit is expected to decline both sequentially and annually because of margin pressure and higher credit costs, as per the brokerages. "We build in 30 bps (basis points) qoq (quarter-on-quarter) NIM (net interest margin) compression to 18.5% driven by moderation in yields," Kotak Securities said in its earnings preview report. The brokerage highlighted that "stress in small ticket business loan persists" with the company's credit cost estimated at 1.9% for the reporting quarter. It expects the lender's cost to average asset under management to inch up, which is also likely to weigh on the net profit. "Cost-to-AAUM ratio will likely inch up to 6.7% (6.1-6.6% in previous four quarters)," the brokerage said.
Motilal Oswal expects the company's net interest margin to contract by around 50 basis points sequentially to 18.35%. The brokerage said in its report that it expects the company's credit costs to increase to 1.6% from 1.5% in the trailing quarter. At the same time, asset quality stress continues to weigh on its earnings. Motilal Oswal said, "Loan growth and disbursements remain subdued, as the company has consciously chosen to adopt a cautious stance amid ongoing deterioration in asset quality."
On the growth front, Five-Star Business is expected to follow a cautious approach amid asset quality concerns. As a result, Motilal Oswal estimates growth in the lender's assets under management at around 12% on year.
However, the sequential trend in the company's disbursements is expected to improve. JM Financial said, "We expect Five-Star's disbursements to increase 24% QoQ (-17% YoY)," indicating a pick-up in lending activity compared to the previous quarter, though the disbursements are likely to have fallen on year.
Friday, shares of Five-Star Business ended nearly 2% higher at INR 493.25 on the National Stock Exchange. The stock has risen over 11% since the company announced its December quarter earnings. All four brokerage reports on the company available with Informist have a "buy" or equivalent recommendation on the stock, with an average target price of INR 619, up over 25% from the current market price. The company will detail its financial results for the March quarter Tuesday.
Following are the March quarter earnings estimates, in INR billion, for Five-Star Business Finance from six brokerages in descending order of the net profit estimate:
|
Brokerage |
NII |
Net Profit |
|
YES Securities (India) Ltd. |
6.38 |
2.74 |
|
ICICI Securities Ltd. |
6.16 |
2.73 |
|
Nuvama Wealth Management Ltd. |
6.20 |
2.70 |
|
JM Financial Institutional Securities Pvt. Ltd. |
6.22 |
2.69 |
|
Kotak Securities Ltd. |
6.08 |
2.68 |
|
Motilal Oswal Financial Services Ltd. |
6.02 |
2.68 |
|
Average |
6.18 |
2.70 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Rajeev Pai
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