The Indian Unicorn Club – 2021 Entrants – Five Star Business Finance – Offering One Stop Financial Solution For All Business/Personal Needs

Five Star Business Finance provides small business loans and small mortgage loans to eligible borrowers to meet their business and personal needs. The company joined the Unicorn Club in the year 2021 after its Series D Funding. The story and the growth of Five Star as a leading player in the NBFC sector is unique. Originally founded in 1984, the astronomical growth of the company has taken place just over the last 7 years. 

Currently valued at $1.4 Billion, the company has transcended its initially local presence in Chennai. From a small lending business run by the family to being backed by Giant Financiers like Sequoia Capital and KKR, the company has had a unique growth curve over the years.

Five Star Business Finance – The Beginning

Five Star Business Finance was founded by Mr V. K. Ranganathan in 1984. During its old days, they focused mainly on Auto Financing and consumer durables. During the early 2000s, when big banks and NBFCs started entering this sector, smaller players like Five Star found it hard to keep up. 

This was around the time when the current Chairman and MD, Mr D Lakshmipathy joined the company. He graduated as a Computer Science Engineer and joined the company of his Father-in-law. This appointment would prove crucial, as he spearheaded their change in business model to support SMEs more instead. 

Five Star Business Finance – The Shift

From 2002 to 2012, the firm began remodelling and perfecting its new business strategy. The company was now focusing on SME financing. This shift had its challenges, and their initial learning period would become vital to their success. 

Their new business model was quite unorthodox. They valued the relationships of the customer, whether it be with the company or their own family. The loans were considered a family decision, and the cash flow for the entire family was considered for granting them. By affiliating with the wife and other members as co-applicants, they managed to develop a reliable system based on this foundation. Their focus on relationships set them apart from other NBFCs and has proven to be a major part of their success. 

The Growth Curve

Five Star Business Finance began putting its efforts behind collecting more equity and expanding its business in 2012. They eventually began growing at 100 per cent year over year and have sustained this over the last 4 years. For an older, local firm to show this much growth after so long is a testament to their new and improved business strategy as well as their intelligence and perseverance. 

This growth has also attracted many investors over time. Currently, external investors hold about 65% of their shares, promoters have 20%, and 15% is owned by a small circle of family and friends. Their latest round of investments closed at $234 Million. While its longtime backer Morgan Stanley has sold their shares at over 5 times their initial value, they have also attracted giants like KKR and Sequoia Capital. 

Conclusion 

Even in a recession like situation, Five Star Business Finance has exhibited immense growth and potential. Their perfected business model has pushed them to Unicorn status, as they continue to finance the unfinanced and support small businesses all over.