A significant stake in Five Star Business Finance Ltd. is set to change hands as shareholders plan to offload 19.2% of the company’s total outstanding shares through a block deal. The transaction, valued at ₹4,317 crore (approximately $517 million), will involve the sale of up to 56.2 million shares. This deal marks a major move in the financial sector, as Five Star Business Finance is a prominent player in India’s non-banking financial sector, providing secured business loans to micro and small enterprises.
The indicative offer price for the block deal has been set at a floor price of ₹768 per share, representing a 5% discount compared to the stock’s previous closing price of ₹808. The pricing reflects an effort to attract large institutional investors while maintaining an attractive valuation for the selling shareholders. The total offer size is approximately ₹4,316.9 crore or $517 million based on the floor price.
Key Details of the Block Deal:
- Stake Size: 19.22% of the company’s total outstanding shares, or 56.2 million shares, will be sold.
- Deal Value: The block deal is valued at ₹4,317 crore ($517 million), assuming the floor price of ₹768 per share.
- Offer Price: The shares will be offered at a floor price of ₹768, a 5% discount to the previous closing price of ₹808.
- Lock-up Period: Selling shareholders will be subject to a 12-month lock-up period following the transaction, meaning they cannot sell additional shares during this period.
- Book Closure: The books for the deal will close by 7:30 a.m. on September 26, 2024.
- Brokers Involved: The transaction is being facilitated by top brokerage firms Nomura, Kotak, and Motilal Oswal.
This block deal presents an opportunity for large institutional investors to acquire a significant stake in Five Star Business Finance, one of India’s key players in providing financial services to micro, small, and medium enterprises. The company has built a robust portfolio and is seen as a vital component of India’s growing financial inclusion efforts.
The decision to offer a 5% discount through the floor price may appeal to long-term investors looking for value buys, especially given the company’s consistent performance in the sector. Additionally, the 12-month lock-up period for the selling shareholders ensures stability in the shareholding pattern, providing confidence to potential buyers that no further dilution will occur in the short term.
