Shares of Five-Star Business Finance fell more than 3% on Tuesday, September 29, after brokerage Dolat Capital introduced a ‘Buy’ rating and a ₹700 target. The price slide comes as the firm reassesses its valuation in light of recent asset‑quality pressures.
Dolat Capital’s note highlights that Five-Star, a Chennai‑based non‑banking financial company, offers secured micro‑loans to small businesses and self‑employed borrowers. About 40% of its customer base overlaps with microfinance institution borrowers, a figure that peaked at 50% during the FY24‑FY26 over‑leveraging cycle.
The brokerage sees a turnaround after a two‑year consolidation phase. It expects the company’s revised underwriting and staffing policies to curb credit costs to 153 basis points by FY29, down from 184 basis points in Q1 FY27.
Meanwhile, Dolat projects that Five-Star’s assets under management will grow at a 23% compound annual growth rate between FY26 and FY29. Earnings are forecast to rise at the same pace between FY27 and FY29, outpacing peer averages.
Despite the bullish outlook, the stock trades at a 10‑30% discount to peers, according to Dolat. The brokerage argues that the current valuation fails to capture the expected AUM expansion and stronger earnings trajectory.
Looking ahead, the firm’s target price of ₹700 sits 15% above the current level, offering a clear upside if the company can deliver on its growth and cost‑reduction plans. Investors will watch the next earnings release for confirmation of the projected improvements.