Motilal Oswal has issued a buy rating on Five Star Business Finance with a target price of ₹685 in its research report dated September 11, 2026. According to the report, the brokerage firm's recommendation is based on the company's improving operational trends and growth recovery prospects. The stock currently trades at 1.9x FY27E P/BV, positioning it attractively for potential investors.
As reported by Motilal Oswal, Five Star Business Finance delivered strong growth in the initial post-IPO period before facing regulatory challenges. The company experienced headwinds from regulatory tightening, the Karnataka ordinance and borrower overleveraging that weighed on business momentum. While the Karnataka ordinance had limited impact on the company's portfolio, the broader overleverage cycle affected its secured customer base, weakening collections and prompting a strategic shift from growth to collections and portfolio quality.
According to Motilal Oswal's analysis, the company is expected to deliver robust growth metrics over the forecast period. AUM/PAT CAGR of ~25%/15% is projected for the FY26-28E period, while the company is expected to achieve RoA/RoE of 6.6%/16% in FY28E. The target price of ₹685 is based on 2x Mar'28E P/BV valuation methodology.
During interactions with the senior management team, represented by Mr. Srikanth G, Joint MD and CFO, Motilal Oswal noted visible signs of recovery in the company's operations. Operating trends have improved over the past 3-6 months, with slippages moderating and disbursement momentum showing improvement. This operational recovery has strengthened the brokerage's confidence in the company's future business trajectory and strategic roadmap.
