Five-Star margin falls 6.79 points as expenses outpace revenue
Standalone net profit fell 3.53% year on year, while the stock's five-day decline was smaller than its typical post-results move.
Filed 28 Apr 2026, 20:03 IST · after market close · Five-Star Business Finance Ltd (FIVESTAR)
Key takeaways
- Standalone operating margin fell 6.79 percentage points year on year as expenses grew +35.75% against revenue growth of +8.60%.
- Standalone net profit declined 3.53% year on year to Rs 269.27 cr despite a 0.18 percentage-point reduction in the tax rate.
- The stock fell 5.44% over five sessions after the result, versus a median absolute post-results move of 6.43% across its last eight reactions.
Price around the results
Revenue growth did not translate into profit growth
Five-Star's standalone revenue grew +8.60% year on year, but operating profit declined 1.53% as costs rose faster. Net profit fell 3.53% year on year, with EPS down 3.69%. Sequentially, revenue was almost flat at +0.23%, while net profit declined 2.80%.
Expense growth drove the margin squeeze
Expenses increased +35.75% year on year against revenue growth of +8.60%, narrowing operating margin by 6.79 percentage points; sequentially, expenses rose +8.69% while revenue grew only +0.23%, cutting margin by 2.64 percentage points. Interest expense fell 3.79% sequentially but rose 3.47% year on year, so it did not offset the operating cost pressure. Other income contributed 2.55% of pre-tax profit, making it a limited support to reported earnings, while the 24.60% tax rate was only 0.18 percentage points lower year on year.
Margin remains above peers despite the recent decline
Operating margin moved from 72.83% in Q4FY25 to 69.40% in Q1FY26, recovered to 70.54% in Q2FY26, and then declined to 68.68% and 66.04% in the next two quarters. The latest two-quarter decline points to weakening operating momentum after the Q2 recovery. Five-Star's 66.04% margin was 6.63 percentage points above the 59.41% median for the 52 Financial Services peers that had reported.
Management points to collections and renewed growth
Management described FY26 as one of the most challenging years for Five-Star but said the senior-management exit had not affected performance. It reported customer collection efficiency of 98.1% excluding NPA loans and said the slippage ratio fell from 1.09% in Q3FY26 to 0.70% in Q4FY26. The company said it opened nine branches during the quarter and targets AUM growth of around 20% for FY27 and thereafter.
The market reaction was negative but not unusual
The stock fell 0.46% on the first session after the result and was down 5.44% after five sessions, underperforming by 6.81% on a relative basis. Six of the last eight post-results reactions were negative, and the latest five-day decline was smaller than the stock's 6.43% median absolute move over those eight events.
Q4FY26 at a glance
Standalone figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹817 cr | ₹815 cr | +0.23% | +8.60% |
| Other income | ₹9 cr | ₹7 cr | +27.23% | +21.79% |
| Expenses | ₹277 cr | ₹255 cr | +8.69% | +35.75% |
| Operating profit | ₹540 cr | ₹560 cr | -3.63% | -1.53% |
| Operating margin (%) | 66.04% | 68.68% | — | — |
| Interest | ₹181 cr | ₹189 cr | -3.79% | +3.47% |
| Depreciation | ₹10 cr | ₹10 cr | +5.10% | +12.35% |
| Profit before tax | ₹357 cr | ₹369 cr | -3.17% | -3.76% |
| Tax | ₹88 cr | ₹92 cr | -4.28% | -4.45% |
| Net profit | ₹269 cr | ₹277 cr | -2.80% | -3.53% |
| EPS (₹) | ₹9.14 | ₹9.41 | -2.87% | -3.69% |
Operating margin of 66.04% compares with a Financial Services sector median of 59.41% across 52 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -0.46% | -1.22% |
| Next session | -4.18% | — |
| 5 sessions | -5.44% | -6.81% |
| 15 sessions | -11.06% | — |
| 30 sessions | -12.25% | — |
Volume on the results session was 1.35× 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
- Customer collection efficiency excluding NPA loans was 98.1% in Q4FY26.
- The slippage ratio fell from 1.09% in Q3FY26 to 0.70% in Q4FY26.
Guidance & outlook
- The company is confident that collections will remain strong in the coming quarters.
- The company targets AUM growth of around 20% for FY27 and thereafter.
- The company aims for strong, sustainable growth, quality and profitability.
Expansion
- The company opened nine branches during the quarter.
Problems & risks
- The company described FY26 as one of the most challenging years faced by Five Star.
- The company experienced a senior management exit during the year.
What to watch
- Whether standalone operating margin stabilises above 66.04%.
- Whether expense growth moderates from +35.75% year on year.
- Whether collection efficiency remains near 98.1% and the slippage ratio near 0.70%.