Five-Star lifts credit cost view, trims ROA target despite record lending
Record ₹1,496 cr quarterly disbursements, but credit cost guidance raised to 1.9% and ROA target cut to 6.0%-6.5% as technical write-offs loom.
— 3 earlier stories on Five-Star Business Finance Ltd. →What's new
- Record quarterly disbursements of ₹1,496 cr, up 23% QoQ
- Credit cost guidance raised to 1.9%, with technical write-offs of ₹225-250 cr
- Steady-state ROA target cut to 6.0%-6.5% from 8.0%-8.25%
Why this matters
Five-Star is growing fast, but profitability expectations have narrowed. The ROA target was cut by a wide margin, signalling that higher credit costs are compressing returns. Lower opex guidance offers some relief, but credit quality remains the key variable.
What we're watching
- Whether the 500k active-customer milestone drives scale-driven margin improvement
- Slippage trends; gross stage 3 already rose to 3.46% from 3.37%
- Ability to keep opex within the new 5.75%-6.0% target
The full read
Five-Star Business Finance delivered record disbursements of ₹1,496 crore in Q1 FY27, up 23% sequentially. But the headline growth came with a sting: management raised the upper end of its credit cost guidance to 1.9% from 1.75%, flagging technical write-offs of ₹225-250 crore for the year. More striking, the steady-state ROA target was slashed to 6.0%-6.5% from 8.0%-8.25%. The logic is clear: growth is back, but the cost of that growth is higher than expected. On the plus side, opex guidance was trimmed to 5.75%-6.0% of assets, and collections remained steady in a seasonally weak quarter. The stock now faces a tension between record loan volumes and a visibly narrower profit outlook.
Questions answered
- Why did Five-Star raise its credit cost guidance?
- Management cited higher expected technical write-offs of ₹225-250 crore for FY27, lifting the upper bound of credit cost guidance to 1.9% from 1.75%.
- How much did Five-Star lend in Q1?
- Disbursements hit a record ₹1,496 crore, up 23% sequentially and 16% year-on-year.
- What is the new ROA target and why was it cut?
- The steady-state ROA target is now 6.0%-6.5%, down from 8.0%-8.25%. The cut reflects higher credit costs and a more conservative asset quality outlook.
- How many branches did Five-Star add in Q1?
- The company added 12 branches during the quarter, crossing 500,000 active loan customers.
- Did collections hold up in the seasonally weak quarter?
- Yes, collections held up with stable slippages and a 3 bps improvement in credit cost, though gross stage 3 edged up to 3.46% from 3.37%.
- What is the new opex guidance?
- Opex guidance was lowered to 5.75%-6.0% of total assets, down from previous levels.
Five-Star Business Finance Ltd.
Latest quarter · Jun 2026
Leverage & growth
Story so far
All notes on FIVESTAR →- 27 Jul 2026 · 11:23 AM IST Five-Star lifts credit cost view, trims ROA target despite record lending
- 3d ago Five-Star's record ₹1,496 cr disbursements power Q1 growth
- 3d ago Five-Star Business Finance Q1 profit up but asset quality slips
- 3d ago Five-Star Q1 net profit flat, asset quality softens within band