Five-Star margin slips as expenses outrun revenue growth
Standalone net profit still rose 4.61% YoY as the tax rate fell 4.95 percentage points; management said disbursements hit a historical high of Rs 2,078 cr.
Filed 26 Oct 2026, 17:11 IST · after market close · Five-Star Business Finance Ltd (FIVESTAR)
Key takeaways
- Standalone operating margin fell 8.14 percentage points YoY to 62.40% as expenses grew 37.08% against 7.39% revenue growth.
- Net profit rose 4.61% YoY to Rs 299.32 cr, helped by a 4.95 percentage-point fall in the tax rate to 20.13%.
- Management said disbursements reached a historical high of Rs 2,078 cr, up 39% QoQ, while collection efficiency improved to 98.2%.
Price around the results
Revenue grew, but operating profit remained under pressure
Standalone revenue increased 7.39% YoY and 3.56% QoQ, but operating profit fell 5.01% YoY as costs expanded faster than income. The sequential margin decline moderated to 1.88 percentage points from the 8.14 percentage-point YoY contraction, but operating margin has now fallen for four consecutive quarters from 70.54% in Q2FY26 to 62.40% in Q2FY27. Among 27 Financial Services peers that reported the quarter, Five-Star’s margin was 2.10 percentage points below the 64.50% median.
Lower tax rate supported profit despite weaker pre-tax earnings
Pre-tax profit declined 1.87% YoY even as interest expense fell 6.83%, because expenses rose 37.08% against 7.39% revenue growth. Net profit nevertheless increased 4.61%, mainly because the tax rate dropped to 20.13% from 25.08%; the sequential tax-rate decline was 4.89 percentage points. Other income rose 134.09% YoY, but accounted for 4.42% of pre-tax profit, so it was not the main driver of reported earnings.
Disbursements and collections improved during Q2FY27
Management said disbursements reached a historical high of Rs 2,078 cr, up 39% QoQ and 74% YoY, while the company opened 19 branches to take its network to 875 across 11 states or union territories. Management also said collection efficiency excluding NPAs improved from 97.9% in Q1FY27 to 98.2%, while gross Stage 3 assets were broadly stable at 3.48% despite industry-wide macroeconomic pressure. The presentation reported a 23.10% portfolio yield, an 8.78% cost of borrowing and a 13.89% spread.
Management flagged funding-cost pressure ahead
Management said it expects portfolio quality to keep improving and credit slippages and credit cost to remain flat for the rest of the year. It also said the tightening rate cycle could raise funding costs and affect spreads and NIM, while expecting the overall impact to be minimal. The company said its data lake and machine-learning models are used for predictive behaviour and risk scoring.
No immediate market reaction after the filing
The results were filed after market close, so there is no post-result market move yet. Across eight recent result reactions, the stock fell six times and rose twice, with a median absolute move of 6.43%, making a move of that size the historical reference point for the stock’s results-day response.
Q2FY27 at a glance
Standalone figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹858 cr | ₹829 cr | +3.56% | +7.39% |
| Other income | ₹17 cr | ₹10 cr | +69.57% | +134.09% |
| Expenses | ₹323 cr | ₹296 cr | +9.02% | +37.08% |
| Operating profit | ₹536 cr | ₹533 cr | +0.52% | -5.01% |
| Operating margin (%) | 62.40% | 64.28% | — | — |
| Interest | ₹168 cr | ₹172 cr | -2.22% | -6.83% |
| Depreciation | ₹10 cr | ₹9 cr | +6.19% | +7.35% |
| Profit before tax | ₹375 cr | ₹362 cr | +3.54% | -1.87% |
| Tax | ₹75 cr | ₹91 cr | -16.68% | -21.24% |
| Net profit | ₹299 cr | ₹271 cr | +10.28% | +4.61% |
| EPS (₹) | ₹10.14 | ₹9.19 | +10.34% | +4.32% |
Operating margin of 62.40% compares with a Financial Services sector median of 64.50% across 27 peers that have reported Q2FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +0.74% | +0.75% |
Volume on the results session was 2.48× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- Disbursements reached a historical high of INR 2,078 crore, increasing 39% quarter-on-quarter and 74% year-on-year.
- Customer collection efficiency excluding NPAs improved to 98.2% from 97.9% in Q1FY27.
- The company opened 19 branches during Q2FY27, bringing its network to 875 branches across 11 states or union territories.
Guidance & outlook
- The company expects portfolio quality to continue improving in the coming quarters.
- The company expects credit slippages and credit cost to remain flat for the rest of the year.
- The company expects tightening rates to increase funding costs and affect spreads and NIM, but anticipates minimal impact overall.
New products
- The company provides secured financial solutions to small business customers and self-employed individuals.
New initiatives
- The company uses data-driven risk analytics and machine-learning models for predictive behaviour and risk scoring.
Competition
- The presentation reports a Q2FY27 portfolio yield of 23.10%, cost of borrowing of 8.78% and spread of 13.89%.
Problems & risks
- The company reported macroeconomic headwinds across the industry despite broadly stable gross Stage 3 assets.
- The company expects higher funding costs during the tightening rate cycle, affecting spreads and NIM.
What to watch
- Whether standalone operating margin stabilises from 62.40% after four consecutive quarterly declines.
- Whether expense growth narrows from 37.08% YoY against revenue growth of 7.39%.
- Whether gross Stage 3 assets remain near 3.48% as management’s stated flat credit-slippage and credit-cost outlook is tested.