Five Star Business Finance shares list at discount. What should investors do?

Shares of Five Star Business Finance Ltd made a dull stock market debut on Monday with the stock listing at 464 apiece on the NSE, a discount of over 2% as compared to its IPO issue price of 474 per share. On the BSE, Five Star Business Finance shares started trading at 449 apiece.

“Five Star Business Finannce got a dull listing and the stock is expected to remain under sell off pressure in upcoming sessions. My suggestion to the allottees is to exit on rise and look at other stocks that are better placed in current market scenario. For those who missed to get Five Star Business Finance during share allotment are also advised to avoid taking any position as the stock is still highly prices against its peers,” said Ravi Singhal, CEO at GCL Securities.

“The company’s muted listing can be attributed to unexciting investor subscription levels, high competition, and rising interest rates, which are big threats. Some of its peers are available at a better price in the secondary market; those who applied for listing gains can keep a stop loss of 460 in place,” said Parth Nyati, Founder at Tradingo.

The initial share sale was entirely an offer for sale (OFS) of shares to the tune of 1,960 crore by existing shareholders and promoter group entities. The price band for the issue was fixed in the range of 450 per share to 474 per share. The IPO closed with 70% subscription, lower than its actual issue size.

The non-banking financial company (NBFC) mobilised 588 crore from anchor investors ahead of its initial share sale that was open from November 9 to November 11, 2022. The firm decided to allocate 1.24 crore equity shares to anchor investors at 474 apiece.

SmallCap World Fund, Fidelity Investments, Capital Research, Malabar Investments, Government Pension Fund Global, Abu Dhabi Investment Authority, Norges Bank, Carmignac Gestion, White Oak, Bay Capital, Segantii, SBI Life Insurance, HDFC Mutual Fund (MF), Baroda BNP MF, Edelweiss MF and Mirae MF are among the anchor investors.

Five Star Business Finance provides secured business loans to micro-entrepreneurs and self-employed individuals, the two segments of borrowers largely excluded by traditional financing institutions.

The NBFC commenced operations in 1984 with a focus on consumer loans and vehicle finance. It changed its business approach in 2005 towards small business loan lending in urban, semi-urban markets and rural areas with growth potential. 

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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