homebusiness NewsFive Star Business Finance expects 25 35 bps rise in costs of funds over 2 3 quarters
Five Star Business Finance expects 25-35 bps rise in costs of funds over 2-3 quarters
Lakshmipathy Deenadayalan, the non-bank lender's Chairman and Managing Director, expects loan growth of over 30% in the current financial year as well as the next year.
Chennai-based non-bank lender Five Star Business Finance anticipates a 25 -30 basis points rise in its cost of funds following the Reserve Bank of India's (RBI's) revised lending norms.
"In the September quarter (Q2), our incremental cost of fund was 9.5% and book cost of fund was 9.7%. Almost three months have gone since the RBI circular hit banks and NBFCs. We have raised close to ₹1,000 crore in the last 90 days. We are borrowing at 9.59%. So there is a 9 basis points increase," Lakshmipathy Deenadayalan, Chairman and Managing Director of the company told CNBC-TV18.
One basis point is one-hundredth of a percentage point or 0.01%.
Five Star provides secured business loans to micro-entrepreneurs and self-employed individuals. While the lender gives out loans that are fully secured by collateral, the recent increase in risk weightages by RBI on loans given by banks has made it costlier for them to borrow from banks.
The demand for small size loans remains robust, Deenadayalan said, pegging the loan growth in the current financial year as well as the next year at over 30%.
Deenadayalan expects net interest margin to stabilise around 14-15% over the next three to four years.
On December 8, a total of 2.3 crore shares or 8% of Five-Star Business Finance's total equity changed hands in a block deal. The transaction, which took place at ₹730 per share, was valued at around ₹1,704 crore.
Shares of the lender have gained over 21% year to date. The company's market capitalisation is around ₹21,406 crore.
For more, watch the accompanying video
(Edited by : Shweta Mungre)
First Published: Dec 29, 2023 1:16 PM IST
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