Unconventionally traditional may seem like an oxymoron, but it fits Five Star Finance. There’s no better way to describe the Chennai-based non-banking financial company (NBFC). It has all the old-school trappings of a lender. From brick and mortar branches to 2,000 feet on the street that disburse Rs 3-4 lakh ($4,250 – $5,700) loans to small businesses. The unconventional part? Despite the relatively small loan sizes, Five Star still goes through the painstaking ordeal of taking property as collateral.

A collateral-based model for such small-sized loans flies in the face of fintech logic. New age lenders like Capital Float and Lendingkart give similar businesses loans—even up to Rs 50 lakh ($70,900)—without the need for collateral. This sort of convenience has helped them grow at 150% year-on-year. The belief is that fintechs—unfettered by branches, collateral, hordes of employees to determine creditworthiness, and by using algorithms to underwrite loans, can achieve far greater scale. Which is why investors have made a beeline for companies like Lendingkart and Capital Float.

Five Star once looked set to fall in the heap of also-rans—the majority of India’s 11,000-plus NBFCs with loan books of less than Rs 1 crore ($142,000), it has seen an astonishing rise over the last 15 years.  

For the first twenty-odd years of its existence, it had a loan book of less than Rs 1 crore. This was cranked up to Rs 100 crore ($14.1 million) over the following eight years. And then, an explosion. In the next seven years, it grew 20X. Despite its cumbersome model.

Its success has also drawn in some serious investment. Morgan Stanley put in Rs 114 crore ($16.1 million) in 2016. Then, in July 2018, global alternative asset firm TPG led a $100 million investment round in Five Star. This was TPG’s first punt on a medium-sized NBFC, pumping in around Rs 425 crore ($60 million). Their earlier investments were in Shriram Group and Janalakshmi Financial Services, both of which had a loan book of over Rs 10,000 crore ($1.4 billion). All told, Five Star has raised a total of Rs 1,000 crore.

NBFCs as a sector have had a great run by taking credit where banks couldn’t go. The bigger NBFCs have grown at 25% for the last five years, with smaller ones growing as much as 30-40%. But the liquidity crisis brought on by the fall of infrastructure lender IL&FS has hurt microlending and brought uncertainty to the sector. “A lot of NBFCs will get consolidated or be marginalised as there is still some real danger of some large NBFCs going under,” says Nidesh Jain, an analyst at investment bank Investec. Five Star, armed with its funding war chest, won’t be one.

Instead, this PE money is set to be the match that lights Five Star’s rocket fuel. It is expecting to disburse a total of Rs 2,100 crore ($298 million) by the end of March 2019.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

View Full Profile

Available exclusively to subscribers of The Ken India

This story is a part of The Ken India edition. Subscribe. Questions?


Annual Subscription

12-month access to 200+ stories, archive of 800+ stories from our India edition. Plus our premium newsletters, Beyond The First Order and The Nutgraf worth Rs. 99/month or $2/month each for free.

Rs. 2,750


Single Story

Instant access to this story for a year along with comment privileges.

Rs. 500


Annual Subscription

12-month access to 150+ stories from Southeast Asia.

$ 120


Single Story

Instant access to this story for a year along with comment privileges.

$ 20



What is The Ken?

The Ken is a subscription-only business journalism website and app that provides coverage across two editions - India and Southeast Asia.

What kind of stories do you write?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics.

We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

What do I get if I subscribe?

For subscribers of the India edition, we publish a new story every weekday, a premium daily newsletter, Beyond The First Order and a weekly newsletter - The Nutgraf.

For subscribers of the Southeast Asia edition, we publish a new story three days a week and a weekly newsletter, Strait Up.

The annual subscription will get you complete, exclusive access to our archive of previously published stories for your edition, along with access to our subscriber-only mobile apps, our premium comment sections, our newsletter archives and several other gifts and benefits.

Do I need to pay separately for your premium newsletters?

Nope. Paid, premium subscribers of The Ken get our newsletters delivered for free.

Does a subscription to the India edition grant me access to Southeast Asia stories? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

Do you offer an all-access joint subscription for both editions?

Not yet. If you’d like to access both editions, you’ll have to purchase two subscriptions separately - one for India and the other for Southeast Asia.

Do you offer any discounts?

No. We have a zero discounts policy.

Is there a free trial I can opt for?

We don’t offer any trials, but you can sign up for a free account which will give you access to the weekly free story, our archive of free stories and summaries of the paid stories. You can stay on the free account as long as you’d like.

Do you offer refunds?

We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Please write to us at support@the-ken.com detailing the error or queries.