Five star business finance Limited has announced the allotment of 21,870 equity shares on February 12, 2026, following the exercise of employee stock options under its established employee benefit scheme. The Business & Resource Committee of the Board approved this allotment under the Five-Star Associate Stock Option Scheme, 2018, in compliance with SEBI regulations.

Share Capital Enhancement

The allotment has resulted in an increase in the company's paid-up share capital structure:

Exercise Price Structure

The employee stock options were exercised at differentiated pricing levels based on the scheme's framework:

Scheme Background and Compliance

The Five-Star Associate Stock Option Scheme 2018 was established prior to the company's initial public offering and has been subsequently aligned with SEBI Share Based Employee Benefit Regulations 2021. The scheme received shareholder approval at an extraordinary general meeting held on October 8, 2021, and obtained in-principle approval from both the National Stock Exchange and Bombay Stock Exchange. The scheme was further ratified by shareholders at the Annual General Meeting held on September 16, 2023.

Exercise Terms and Conditions

Under the scheme's framework, the exercise period commences from the vesting date and expires within 60 calendar months from the relevant vesting date. The exercise price is determined by the Nomination & Remuneration Committee, ensuring compliance with applicable accounting standards and SEBI regulations, with the price not being less than the face value of the shares.

Financial Impact and Next Steps

The newly allotted shares will rank pari-passu with the existing equity shares of the company, providing equal rights and privileges to the holders. The company has confirmed it is in the process of completing the necessary formalities for listing these allotted shares on the stock exchanges. As per the unaudited financial results for the half year ended December 31, 2025, the company reported a basic earnings per share of INR 28.17 and diluted earnings per share of INR 28.09.

Five-Star Business Finance Limited conducted its Q3FY26 earnings conference call on January 29, 2026, hosted by Ambit Capital Private Limited. The Chennai-based NBFC discussed its financial performance and strategic initiatives during the quarter ended December 31, 2025, with management providing detailed insights into collection improvements and future growth plans.

Management Commentary on Market Conditions

Chairman and Managing Director Lakshmipathy Deenadayalan outlined the company's three-stage approach during challenging times in the small-ticket lending sector. The management emphasized their strategy of understanding the crisis, fixing problems with a long-term perspective, and then accelerating growth. According to Deenadayalan, the company is currently in the final phase of problem resolution before moving toward business acceleration.

Collection Performance and Asset Quality Trends

The company reported encouraging stability in collection metrics during Q3FY26. Current proportion of the portfolio improved from 81.67% in September to 81.77% in December, indicating positive momentum in asset quality. Both unique customer collection efficiency and overall collection efficiency remained stable at 95.1% and 96.6% respectively compared to the previous quarter.

Joint Managing Director and CFO Srikanth Gopalakrishnan highlighted that unique customer collections on the current book improved from 98.5% in Q2 to 99.01% in Q3. When excluding NPA loans, the unique customer collection efficiency increased from 96.5% in Q2 to 97.26% in Q3, demonstrating improved performance in softer buckets.

Infrastructure Investment and Team Expansion

Despite moderating growth, the company continued investing in infrastructure and human resources. During Q3FY26, Five-Star added 35 branches and recruited 678 business and collection officers. The number of collection officers increased significantly to 2,452 as of December 2025, compared to 1,329 in December 2024.

The management is building a comprehensive collection vertical extending to senior positions at the head office. This strategic investment in collection infrastructure is expected to have a positive impact on asset quality in future quarters.

Financial Performance and Funding Developments

Disbursements during the quarter stood at ₹976 crores, representing an 18% decline compared to the previous quarter, aligning with the company's strategy of strengthening collections before accelerating disbursements. The company availed incremental debt of ₹460 crores during the quarter at a cost of 8.19%, slightly lower than the previous quarter.

A significant development was the signing of a loan agreement with Asian Development Bank for a sanction limit of $100 million, to be availed over the next couple of quarters. The cost of funds on the book decreased by over 50 basis points year-on-year, from 9.63% to 9.12%.

Recovery Efforts and Write-off Strategy

The company recovered approximately ₹23 crores from NPA or technical write-offs during Q3FY26. Management emphasized their philosophy of maintaining prudent technical write-offs rather than aggressive cleanup strategies, believing this approach preserves credit culture and borrower behavior.

Write-offs during the quarter amounted to ₹63 crores, with the company maintaining a write-off timeline of 450 days (15 months) for secured loans. The management expressed confidence in maintaining healthy recovery trends in coming quarters through focused collection efforts.

Future Outlook and Strategic Direction

Management indicated that while slippages in Stage-3 assets remain slightly elevated, they expect improvements to be visible in Q4 and thereafter. The company maintains a cautious approach to growth guidance, preferring to establish complete collection stability before providing specific growth targets for FY27.

Deenadayalan concluded the call by reiterating the company's commitment to long-term recovery rather than short-term fixes, expressing confidence that the next couple of quarters will demonstrate stronger performance across both growth and asset quality metrics.