Financial Services
Five-Star Business Finance
Secured loans to small entrepreneurs and self-employed borrowers underserved by banks.
Five-Star lends to people a spreadsheet often says no to. Its field officers try to understand the business instead. A kirana owner, small fabricator or self-employed trader may earn enough to repay a loan but still struggle to produce the formal documents a bank wants. Five-Star built its business around that gap. Officers visit the borrower’s shop and home, understand informal cash flows and lend against property. The model can earn very high returns, but it depends on disciplined underwriting and collections across hundreds of thousands of small borrowers.
The one thing to remember: High-yield lending only works if collections and asset quality stay disciplined.
How the business works
Five-Star is an NBFC focused on small, secured business and mortgage loans, largely to self-employed customers in smaller cities. Loans are typically backed by self-occupied property. The company earns a wide spread between loan yields and funding costs, while collateral helps reduce loss severity when a borrower defaults.
FY2025-26 snapshot
Net profit (PAT)
about ₹1,099 crore
Assets under management
about ₹13,225 crore
Return on AUM
about 8.7%
Return on equity
about 16.1%
Gross Stage 3
about 3.37%; Net Stage 3: about 2.00%
Figures are for the financial year 2025-26 as reported by the company. Educational context only.
Where the money comes from
Secured small-business loans Loans against property Branch-led customer acquisition Interest spread between loan yield and funding cost
What could make it much bigger?
Geographic expansion can widen the customer pool. The self-employed credit market remains underbanked. A strong capital base supports future AUM growth.
What can go wrong
Asset quality can worsen if informal-business cash flows weaken.
Branch expansion can raise costs before maturity.
Funding costs and regulation can compress spreads.
5 things to watch
AUM growth
Disbursements
Gross Stage 3 / slippages
Credit cost
RoAUM and ROE
Ramsam Takeaway
Five-Star’s edge is local underwriting, not financial engineering. Property collateral reduces loss severity, but the business still lives or dies by collections. High loan growth is attractive only when delinquency and credit cost stay controlled. Watch asset quality before celebrating scale.
This profile is educational context only. Ramsam does not rate companies or suggest whether to buy, hold or sell anything.