Five-Star Business Finance Ltd (FIVESTAR) Q1 FY27 Results Analysis: PAT Growth Slows to 1.9%, Cost-to-Income Worsens 405 bps

Five-Star Business Finance Ltd's Q1 FY27 numbers came in mixed, with revenue of Rs. 828.98 Cr (+5.38% YoY) and PAT growth of +1.92% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

Revenue grew modestly 5.4% YoY, with NII up 10.2% driven by declining finance costs, but asset quality deteriorated (GS3 +9 bps to 3.46%) and cost-to-income ratio worsened 405 bps YoY, resulting in PAT growth of only 1.9%. Strong capital adequacy (CRAR 51.25%) and liquidity provide a buffer.

Key Investment Insights

Key Positives

• Net interest income grew 10.17% YoY to Rs.636.11 crore, driven by 8.4% decline in finance costs
• Finance costs declined for the third consecutive quarter, down 8.4% YoY to Rs.171.50 crore
• Net interest margin improved to 75.84% from 72.98% a year ago
• Capital adequacy ratio a strong 51.25%, well above minimum regulatory requirement of 15%
• Debt-equity ratio improved to 1.03x from 1.11x, indicating deleveraging

Risk Factors

• Gross Stage 3 ratio rose to 3.46% from 3.37% QoQ and Net Stage 3 to 2.10% from 2.00%
• Impairment on financial instruments rose 29.4% YoY to Rs.61.82 crore
• Cost-to-income ratio deteriorated sharply to 40.22% from 36.17% YoY (405 bps erosion)
• Employee expenses grew 21% YoY and other expenses 23.1% YoY, outpacing revenue growth of 5.4%
• PAT growth was only 1.92% YoY, lagging revenue growth