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.

Five star business finance Limited conducted a board meeting on January 28, 2026, focusing on key governance appointments. The meeting, which ran from 2.00 PM to 4.50 PM, resulted in important decisions regarding the company's independent director positions. These appointments strengthen the company's board composition and governance framework.

Board Decisions and Appointments

The board made two significant decisions regarding independent director positions. Both appointments were recommended by the Nomination & Remuneration Committee and are subject to shareholder approval. The decisions demonstrate the company's commitment to maintaining strong corporate governance standards.

New Appointment: Ms. Rajeshwari Shankar

Ms. Rajeshwari Shankar brings extensive experience to the board as a Chartered Accountant with over three decades of expertise in statutory audits, internal audits, and corporate governance. Her professional background includes serving as signing partner for central statutory audits of major public sector banks, public sector undertakings, and listed corporates.

Her experience encompasses:

• Leading audit engagements for corporates and the Reserve Bank of India (Southern Region)
• Executing SEBI-directed inspection assignments
• Engaging with regulators, audit committees, and senior management on financial reporting and governance matters
• Currently serving as Senior Partner at M/s. PKF Sridhar & Santhanam LLP, a leading chartered accountancy firm based in Chennai

Re-appointment: Mr. Srinivasaraghavan Thiruvallur Thattai

Mr. Srinivasaraghavan Thiruvallur Thattai's re-appointment for a second term reflects his valuable contribution to the company's governance. He holds a Commerce graduate degree and a Master's in Business Administration from Gannon University, Pennsylvania. His extensive experience spans the finance and insurance sectors.

Regulatory Compliance and Independence

Both directors have confirmed their independence credentials under relevant regulations. Ms. Rajeshwari Shankar and Mr. Srinivasaraghavan Thiruvallur Thattai meet the criteria of independence under Section 149 of the Companies Act, 2013, and Regulation 16 of the SEBI LODR Regulations. Additionally, neither director is debarred from holding office by virtue of any SEBI Order or other regulatory authority.

The appointments follow proper regulatory disclosure requirements under Regulation 30 read with Para A of Part A of Schedule III and Regulation 51 of SEBI (LODR) Regulations, 2015. The company has made all necessary disclosures available on its website at fivestargroup.in/investors/.