Five-Star Business Finance Q2 results came out on October 26, and the headline profit number hides the more interesting story. The Chennai-based lender, which gives small business loans backed by the borrower’s house, reported a September-quarter profit after tax of ₹299 crore, up about 5% from ₹286 crore a year ago and 10% higher than the ₹271 crore it made in the June quarter, according to its investor press release filed with NSE.
The real move was in lending. Disbursements hit ₹2,078 crore, which the company calls its best quarter ever. That’s 74% more than the ₹1,196 crore it lent in Q2 last year and 39% more than in Q1.
Five-Star Business Finance Q2 results by the numbers
- AUM: ₹14,640 crore, up 14% year-on-year and 7% from June. Sequential growth in Q1 was 4%.
- Net interest income: ₹691 crore, up 11.5% from ₹619 crore, as reported in CNBC-TV18’s results liveblog.
- Total income: ₹875 crore, up 8% year-on-year.
- Profit before tax: ₹375 crore, down 2% year-on-year.
- Net interest margin: 19.87% of average AUM, against 19.71% a year ago and 19.97% in Q1.
- Return on average AUM: 8.39%, down from 8.98% a year ago but up from 8.11% in Q1. Return on equity was 15.25%, against 16.91% a year ago.
One detail matters here. The quarter’s profit includes a one-time tax benefit of ₹19 crore relating to earlier years. Take that out and profit is about ₹280 crore by our arithmetic, a little below last year’s ₹286 crore. That fits with profit before tax slipping 2%. For the half year (April to September), profit was ₹571 crore, up 3%.
Asset quality: worse than a year ago, steadier than last quarter
Gross Stage 3 assets, the company’s measure of bad loans, stood at 3.48% against 2.64% a year earlier and 3.46% in June. Net Stage 3 assets were 2.14%, up from 1.46% a year ago. So the year-on-year picture is clearly weaker.
The quarter-on-quarter trend is better. Collection efficiency (excluding NPAs) improved to 98.2% from 97.9% in Q1. Loans overdue by more than 30 days fell to 11.50% of AUM from 12.38%. The slippage ratio eased to 0.68% from 0.70%, and credit cost dipped to 1.80% of average AUM from 1.85%. The company expects slippages and credit cost to stay roughly flat for the rest of the year.
Funding costs are the next thing to watch
Five-Star raised ₹825 crore of fresh debt in the quarter at 8.43%, and its overall cost of funds edged down to 8.78% from 8.80%. But chairman and MD Lakshmipathy Deenadayalan said in the release that the company expects borrowing costs to rise somewhat in a tightening rate cycle. It plans to offset this with higher lending rates on new loans, effective from October 2026, and says it will comfortably beat its growth guidance for the year.
We think the trade-off is simple. Faster lending, a slightly higher rate on new loans and stable bad-loan ratios could rebuild profit growth. If funding costs rise faster than new-loan yields, that 19.9% margin narrows. The branch network now stands at 875 after 19 openings during the quarter.
To compare this with other lenders, read our Aavas Financiers Q2 breakdown and SBFC Finance’s Q2 numbers, or our guide on how to analyse quarterly results.
Source: Five-Star Business Finance investor press release (NSE filing, October 26, 2026); CNBC-TV18 Q2 results liveblog.
Disclaimer: This article is for information and education only and is not investment advice. Please consult a SEBI-registered adviser before making any investment decision.
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