Aye Finance Raises INR 310 Cr To Expand Geographies

Aye Finance has raised INR 310 Cr in a Series F funding round led by the UK’s British International Investment (BII). The Waterfield Fund of Funds and Aye’s existing shareholder A91 Partners also participated in the round.

The primary equity funding round comes after the startup raised INR 210 Cr ($27 Mn at then exchange rates) in its Series E funding round in June 2020. Avendus Capital was the exclusive financial advisor to Aye Finance for this transaction.

Founded in 2014 by Sanjay Sharma and Vikram Jetley, Aye Finance offers affordable business loans to microenterprises in the country. It uses cluster-based credit assessment with AI algorithms to assess risk in the absence of traditional business documents.

“We have been growing consistently for the last two years, so there is a need for equity so that we can leverage our growth. Primarily, the money is for bolstering our portfolio and the lending book. A small part will be invested in expanding our branch network,” Sharma said.

The Aye Finance MD and CEO, Sharma, added that while Aye Finance is currently operating 395 branches across the country, it is looking to open another 80 branches in FY24.

The funding round also comes after Aye Finance raised more than INR 550 Cr in debt funding in the last three months of 2022 from BlueOrchard (INR 87 Cr), Triple Jump BV and Northern Arc (INR 75 Cr), Symbiotics (INR 65 Cr) and responsAbility Investments (INR 81.2 Cr). 

According to Sharma, despite raising INR 550 Cr in debt, Aye Finance’s debt-to-equity ratio stands at 3.3-3.4. This allows the company to raise further equity funding if need be.

Providing further insight into the startup’s business metrics, Sharma noted that Aye Finance’s gross NPA stood at 2.5%, which is under the Reserve Bank of India’s (RBI) sub-target of 7.5% of adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposure (CEOBE), whichever is higher, for MSME lending.

The company claims to have over INR 3,600 Cr in assets under management (AUM) and has delivered INR 80 Cr of PAT in the first six months of FY24. According to Sharma, Aye’s first-half performance equated to a return on equity (RoE) of 19.5%. 

“In the second half, this number is likely to increase because of the AUM buildup in the first half of the year,” he said.

Earlier this year, the startup reported that its Q1 FY24 profit after tax stood at INR 38.67 Cr, up 4X from INR 9.78 Cr in Q1 FY23.

The startup backs microenterprises in manufacturing, services, trading, job work, and dairy segments and competes with ftcash, ARTH, FlexiLoans, Lendingkart, LenDenClub and Kinara Capital in the lending tech space.

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