Five-Star Business Finance Limited CC-Sep23.pdf · 2023-11-01
The business model what Five Star has built for last 20 years plus or more than that, is from the back of the assessing the collection first and assessing the customer on the cash flow and character, leaving the collateral aside. So, what gives us the confidence is the profile of customers whom we are backing for last two decades, purely the shopkeepers and self-employed’s of our country; they are quite busy now and their sales are coming back to the pre-COVID level and their margins are sticking very well. So, this is from one side . Second side, as you know, we are a secured lender , our entire loans are secured, we lend on the residential property where the customers and family members live in . This also gives the emotional attach and seriousness to the family members, even during the downturn cash flow cycle. So, these two things, the service sector whom we are backing, and we are backing them with one of the strong collaterals. And of course, the third one is important. With the collection infrastructure what we have put at the ground level, we are able to reach customers or customers are able to reach us in 30 minutes of time. So , with all three put together, our collections are always on the good side. There was some kind of pressure during COVID times because we didn't restructu re a lot. So , we are correcting those things, and we are bouncing back better than all pre -COVID collections metric whatever Five Star has seen. So, the strength of the cash flow and the underwriting strength and the infrastructure collections we put up at the ground level, all three are giving us good results quarter-on-quarter, that gives us strong belief that going forward our collections will be better, better every quarter.
So, I think the credit cost will stay in the same sub -1% level; even during demon, COVID-1 and 2, we didn't see this getting spiked up… just spiking it with a very short period of time in COVID and got settled where our eventual credit cost has to be . So, I don't think the credit cost will have any impact even the growth kicks in for Five Star, because the growth what we are getting into , the guidance of 35%-plus year-on-year, it's not going to be a big growth for Five Star because we have already seen big growth pre -COVID. So , we know how to underwrite the customers, keep the collections intact. So, it doesn't have any impact on the credit cost going forward.