Five Star Business Finance reported a 2% year-on-year rise in first-quarter profit to ₹270 crore, meeting analyst expectations. Net interest income grew 10% to ₹640 crore during the same period. Investors are now tracking the company’s ability to manage rising operating expenses while maintaining its target growth in assets under management.
Detailed Coverage
Five Star Business Finance released its financial results for the first quarter of the 2027 fiscal year, reporting a profit after tax of ₹270 crore, a 2% increase compared to the same period last year. The company’s net interest income, which is the difference between interest earned from loans and interest paid to depositors or lenders, grew by 10% year-on-year to reach ₹640 crore.
Operational Performance and Expenses
While core income showed growth, the company faced higher spending on its daily operations. Operating expenses for the quarter rose 21% year-on-year to ₹240 crore. This figure came in approximately 5% higher than initial projections, signaling that the company is spending more to manage its branch network and business expansion. Despite this, the Pre-Provision Operating Profit, which measures earnings before accounting for loan losses, reached ₹420 crore, aligning with market forecasts.
Credit costs, which reflect the money set aside to cover potential loan defaults, stood at ₹61.8 crore for the quarter. This translates to an annualized credit cost of 1.84% of the company's total assets under management. This metric remained largely stable compared to the 1.85% recorded in the previous quarter, though it remains higher than the 1.6% reported in the same quarter of the prior year.
Future Growth and Valuation Context
Brokerage house Motilal Oswal has maintained a positive outlook on the stock, noting that the company’s recent performance aligns with expectations. The brokerage projects a compound annual growth rate of 23% in assets under management and 14% in profit after tax over the next two fiscal years ending in March 2028. These projections are built on the expectation of a 6.7% return on assets and a 15.5% return on equity by FY28.
The company currently trades at a price-to-book value multiple of 1.9 times its estimated FY27 earnings. For investors, the primary monitorables remain the impact of rising operating costs on overall profit margins and the company's ability to maintain its asset quality as it expands its loan book. Future updates will focus on whether the company can control expense growth while achieving its targeted expansion in loan assets.