FIVESTAR — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. RENISH BHUVA – ICICI SECURITIES Five Star Business Finance Limited July 29, 2023

Ajit Kumar: · So I was asking, investment on your balance sheet is up sharply from INR144 crores in last

So I was asking, investment on your balance sheet is up sharply from INR144 crores in last quarter to INR355 crores in this quarter.

So again, just wanted to check what has happened there?

Moderator · Conference Operator

Yes sir, the participants have left the queue, we'll move on to the next question which is from the line of Mahruk Adajania from Nuvama, please go ahead.

Mahruk Adajania

Yes, hello, congratulations on a very good set of numbers.

I just had a few questions.

Firstly, if you could explain what happened to opex, why that was down and what is the outlook ahead on opex?

Moderator · Conference Operator

We'll take the next question from the line of Sameer Bhise from JM Financial.

Please go ahead.

Sameer Bhise

Yes, hi.

Thanks for the opportunity and congrats on a great set of numbers.

So you mentioned that the current book is probably at an all time high, even compared to obviously pre-COVID numbers.

What would you attribute this to and how do you expect these numbers to move?

Obviously one would want them to improve further, but some changes that you would have implemented and hence the outcome.

Some insights would be helpful?

Moderator · Conference Operator

Thank you.

The next question is from the line of Aditya Padhi from Girik Capital.

Please go ahead.

Aditya Padhi

Yes, hi, sir, great set of numbers.

I just had one question on the provisions front.

You wanted to know that the current provisions are what we should look for going forward like the credit cost or do we expect it to go down or was there a one time thing for the Q1?

Moderator · Conference Operator

Thank you.

We'll take the next question from the line of Arvind Das from Sundaram Alternates.

Please go ahead.

Arvind Das

Hello.

Thank you so much for the opportunity and congratulations on the great set of numbers.

I just had one question.

So NIMs had contracted quarter-on-quarter, I would sound, 77 bps, even though like a portfolio yield has been stable and cost of borrowings on the book has come down.

I’m just trying to understand why is that?

Moderator · Conference Operator

Thank you.

The next question is from the line of Ashok Kumar, an individual investor, please go ahead.

Ashok Kumar

Yes, hi, congratulations on a great set of numbers.

The current quarter numbers are exactly in line with the revised guidance of 35% CAGR growth for the next two years to three years.

So really happy to see this kind of numbers.

Sir, my first question is on our branch expansion into northern states.

So basically we are a secured lender so the same kind of business model will be continued in the northern states where we are going to open a new branch rapidly in the next two years to three years?

That's my first question, sir.

Moderator · Conference Operator

Thank you.

The next question is from the line of Nischint Chawathe from Kodak Securities.

Please go ahead.

Nischint Chawathe

Hi.

Thanks for taking my question.

So just clarifying, we have seen around 9% quarter-on- quarter loan growth, 10% quarter-on-quarter loan growth, and that has translated into a 100 basis points sort of a reduction in margins.

Is that the only reason or is there anything else?

I understand the, I mean, obviously in the sense that -- within what they are.

Moderator · Conference Operator

Thank you.

The next question is from the line of Jaiprakash Toshniwal from LIC Mutual Fund.

Please go ahead.

Jaiprakash Toshniwal

Thank you, sir.

Good afternoon.

Thank you for the results.

Sir, a few questions.

Just going back on the provisioning cost question, we had a 500 basis fund reduction in ECL provision for Stage 3.

Does it relate to any change in policy or is it a normal cost of business?

Moderator · Conference Operator

Thank you.

The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

Please go ahead.

Five Star Business Finance Limited July 29, 2023

Pallavi Deshpande

Yes.

Just two questions here.

One, was on write-offs, what would be the technical write-offs for this quarter versus same quarter last year?

And second one would be on this, what would be the share of top five, since we have spread across 50 borrowing partners, what would be the share of the top five?

Moderator · Conference Operator

Thank you.

We'll take the next question from the line of Franklin Moraes from Equentis Wealth Advisory.

Please go ahead.

Franklin Moraes

Yes, thanks for the opportunity and congratulations on a good set of numbers.

So, I wanted to understand in the newer regions that you are entering, who would be your competition and what would be the break-even period?

Moderator · Conference Operator

Thank you.

The next question is from the line of Pooja Ahuja from Monarch Networth.

Please go ahead.

Pooja Ahuja

Yes, hi.

Thanks for the opportunity and congratulations on the quarter.

Firstly, wanted to understand what has led to a sharp drop in our capital adequacy Q-o-Q?

Moderator · Conference Operator

Thank you.

The next question is from the line of Agam from Raj Trading.

Please go ahead.

Five Star Business Finance Limited July 29, 2023

Agam

Yes, Sir, congrats on a good set of numbers.

So I have a quick question.

In the commentary you mentioned that for this quarter I think you have provided around more than 1.5 bps of credit cost.

You have guided for around 1% credit cost.

So is this for this quarter and maybe for next, remaining three quarters, will you come down to on a year-on-year basis, the credit cost will be in the guided range?

Moderator · Conference Operator

Thank you.

The next question is from the line of Sumit Rathi from Centrum PMS.

Please go ahead.

Sumit Rathi

Thank you for this opportunity.

Sir, the first question on the growth, raise of the growth guidance from 30% to 35 percentage, I wanted to understand what would be driving this growth.

Will it be more in the increase in the ticket size or would it be driven by addition of our new branches or would it be driven by our normal branches getting converted into a super branch?

So or would we be increasing the target for our existing employees?

What would be the drivers for it, if you can give some Colour?

Moderator · Conference Operator

Thank you.

The next question is from the line of Parth Desai from Motilal Oswal.

Please go ahead.

Parth Desai

Congratulations on a good set of numbers.

My main question was on the AUM growth and I think you provided good clarity on where the three diversities should come from.

Sir, my another question that you mentioned that number of people per branches will increase and from my -- what I understand about how the cluster branches work, once a specific number of accounts exceed a branch you open a new branch.

So with the people in a certain number of branches increasing from let's say 8 to 9 as you mentioned, would this number of accounts also increase per branch?

The threshold would increase.

And how that would affect your plans to expand the branches going ahead?

And considering that you are going to be investing in technology, branches and manpower altogether, when can we see the operating leverage to flow in and the economic efficiencies to drive moderation in the opex to AUM ratios?

Thank you.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question for today.

I would now like to hand the conference over to Mr. Srikanth Gopalakrishnan for closing comments.

Over to you.

Srikanth Gopalakrishnan

So, thank you all.

I think as a company we are continuing to hold the investor interest as well as the confidence that each of you have placed on us.

We are confident of delivering the results that we have sort of guided you on.

And for now, we would like to sign off and look forward to connecting with you post the September results.

Thank you.

Moderator · Conference Operator

Thank you very much sir and thank you to the members of the management.

Ladies and gentlemen on behalf of ICICI Securities that concludes this conference.

We thank you for joining us and you may now disconnect your lines.

Thank you.

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

We have the first question from the line of Ajit Kumar from Nomura.

Please go ahead.

Ajit Kumar: · So I was asking, investment on your balance sheet is up sharply from INR144 crores in last

So my first question is on the yield side.

You were planning to reduce the yield from current 24 to 23 or 22 as the cost of funds goes down.

Just wanted to check a status on that.

That is my first question.