Borrowers Are Trusting Formal Credit Sources, Says Srikanth Gopalakrishnan, CFO At Five Star Business Finance

Five Star Business Finance Limited (FSBFL) reported solid growth in loan disbursals during the second quarter. Its loan disbursements increased by 50 per cent year on year to reach Rs 1,204 crore. During the previous quarter, it stood at Rs 1,132 crore in the first quarter of financial year 2024.

Chief Financial Officer of FSBFL, Srikanth Gopalakrishnan, says that the NBFC is seeing a strong surge in demand for loans. "We have benefited from the pent up demand which got accrued during the pandemic," he claims.

The first of half of the financial year saw the profit after tax of the NBFC increase by 35 per cent. It stood at Rs 383 crore in H1FY24 as against Rs 284 crore in the same period last year. The net interest margin (NIM) stood at 17.72 per cent in the same period.

On what is helping the company stand out in terms of business, Gopalakrishnan says, "We cater to a segment which is largely not targeted. Our customer base consists of services oriented people. The ticket size is generally in the range of Rs 1-10 lakh."

Talking about the composition of loans, he says that majority of the loans taken by borrowers are for paying off credit taken at higher interest rates from organised players. "Instead of heading towards unorganised players, more and more borrowers are coming to us which shows that they are willing to trust formal credit sources. This is a positive development."

The lending space has been in the news for the rise of unsecured loans in the books of banks and NBFC. The central bank has cautioned the bank against the rapid rise in unsecured loans in the retail segment.

Also Read| Rise of unsecured lending threatens banking system

Commenting on this development, Gopalakrishnan opines, "If you are in the unsecured lending space, then there is definitely a need to pay caution. We don't deal in the space and all of our loans are secured. Given the fact that the consumer base doesn't have multiple assets, we see that delinquencies haven't increased. Moreover, FSBFL prioritises recovery over business."

The CFO doesn't expect the demand taper down and says that the company is on track to deliver good growth in this financial year. The NBFC is listed on the bourses and has delivered a return of over 58 per cent since its listing in November 2022.