Five Star Business Finance, a Chennai-based lender to small businesses, said on March 26 that it has raised $234 million in primary and secondary capital and has been valued at $1.4 billion, making it India’s fourth unicorn in 2021.
The company said in a statement that the funding round was led by existing investors Sequoia Capital India, Norwest Venture Partners, as well as new investors namely KKR and TVS Capital. The round included primary capital and a secondary sale of shares by Morgan Stanley Private Equity.
Five Star Chairman and Managing Director D Lakshmipathy said, “In our mission of ‘funding the unfunded,’ we have created a niche for ourselves empowering small businesses and the self-employed across corners of India by providing them with reliable and responsible funding alternatives. We aim to achieve this social goal through grass-root efforts without compromising on the pillars of asset quality and profitability that are needed to build a sustainable institution of scale.”
After Digit Insurance, SaaS firm Innovaccer and business to business marketplace Infra.market, the company is the fourth startup in the country to be valued at over a billion dollars in 2021.
About The Lending Firm
Five Star Business Finance was founded in 1984 by VK Ramanathan. At that time, the company’s operations were focused on consumer and auto loans. Ramanathan later handed over control of the business to a relative, D Lakshmipathy. In 2005, the company shifted its focus to small and medium businesses (SMEs) which helped it grow faster. Till 2004, it had a loan book of less than Rs 1 crore, which grew to Rs 100 crore by 2012. Since 2012, the company has grown 20 times.
Currently, Five Star Finance operates 262 branches across eight states in the Southern and Central parts of the country. As of December 31, 2020, the company’s AUM stood at Rs 4,030 crore, and its GNPA stood at 1.29%. For FY20, Five Star reported a net profit of Rs 261.9 crore on a total income of Rs 787.3 crore compared with a net profit of Rs 156.7 crore on a total income of Rs 408.9 crore for FY19.
