Aye Finance Ltd

Aye Finance

Aye Finance (NBFC-ML) provides loans to MSMEs in the small-ticket size segment (<4 lakh) through hypothecated & mortgage loans. The Company operates a pan-India branch network of 568 branches across 21 states, supported by over 10,459 employees. As of September 2025, it had ~5.9 lakh unique customers with an average ticket size of ~1.8 lakh, serving borrowers across the manufacturing, trading, services, and allied agriculture sectors.

DRHP filed: 16th Dec 2024

BRLM: Axis Capital, IIFL Capital Services, JM Financial, Nuvama Wealth Management

Auditor: S S Kothari Mehta & Co. LLP

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Delta’s View : Skip

While Aye Finance has strengthened its presence in small-scale MSMEs, scaling to ~₹6,028 crore of AUM and ~5.9 lakh customers, growth has been accompanied by higher exposure to sub-prime borrowers (GNPA of ~4.9% and PAR 30+ of ~6.8%), raising concerns over its asset quality. Continued exposure to higher-risk MSME segments may moderate earnings and RoA. We would prefer to re-evaluate the Company over the first few quarters post listing, once asset quality stabilises and improves to our comfort levels.

One may expect listing to be flat as per current GMP ~0% (9th Feb 26), provided the GMP sustains.

Aye Finance operates in the small-ticket MSME lending space with an average ticket size of ~1.8 lakh, charging interest rates as high as ~26-32% over 2-3 year tenors. While the Company has expanded its AUM (~6,028 cr) and customer base (~5.9 lakh) through branch additions (568 total branches) and wider geographic presence (21 states), growth has been accompanied by weaker borrower quality, reflected in an elevated Gross NPA of ~4.9% (as of Sept 2025) and credit costs of ~5.1% (6M FY26).

Further, the cumulative write-offs over the past 3 years exceed 300 cr, and collection efficiency declined to below 90%, indicating stress in recovery. The Company’s high operating and credit costs continue to weigh on profitability, resulting in a moderate RoA of 3.1% in FY25, which further declined to 1.9% in 6M FY26. Aye Finance is expected to be listed at an IPO ask valuation of 1.8x P/B (TTM) at 3,184 cr. 

• The Company’s AUM expansion to 6,028 cr (Sept 2025) has been accompanied with increased exposure to sub-prime borrowers, evidenced in its elevated Gross NPA ratio of ~4.9% of AUM (up from 2.5% in FY23 and 4.2% in FY25). Over the same period, credit costs increased sharply to 5.2% in FY25. In fact, the cumulative write-offs over the past three years amount to ~312 cr, exceeding its aggregate core operating profit over the same period.

• Aye Finance lends to micro-scale MSMEs at a high interest rate (~29% yield on net advances) which is also the reason for its high NIM of over ~15%. Around ~27% of its AUM is exposed to agri-allied / cattle-related customers, followed by small kirana shops (~13%) & garment stores (~10%). These customer segments carry higher collection and credit risk, as a significant portion comprises first-time or borrowers with limited formal credit histories and volatile cash flows.

• Collection efficiency has fallen below 90%, reflecting challenges in loan recoveries. In addition, PAR 30+ as a % of AUM has nearly doubled to 6.8% as of Sept 2025 from 3.4% in FY23, increasing the risk of further slippages into GNPA and elevated credit costs.

• The small ticket MSME lending segment is characterised with higher operating & credit costs, and requires presence in the smaller cities. While its customer acquisition has been strong, having presence across 21 states through 568 branches and a 5.9 lakh customer base (As of Sept 2025), elevated credit costs and a high operating expense base (cost-to-income ratio of over 50%) have weighed on profitability. Consequently, RoA remained modest at 3.1% in FY25 and further declined to 1.9% in 6M FY26.

Business

• Aye finance is a middle layer NBFC (NBFC - ML) focused on providing loans to MSMEs across India. It offers a range of business loans for working capital & business expansion needs of micro scale MSMEs, against hypothecation of working assets or against security of property to customers across manufacturing, trading, service and allied agriculture sectors.

• It had presence across 21 states in India with a total of 568 branches as of Sept 2025 which is diversified across North (~35% of AUM), East (~28%), West (~23%) and South (~15%) parts of India (As of Sept 2025). It had a total employee size of 10,459 and 5.9 lakhs active customer accounts as of Sept 2025.

• It provides small ticket size loans (ATS ~ 1.8 lakhs) over shorter tenor to micro-scale businesses in the form of secured and unsecured loans against working assets or property. 

• It also disburses loans through its supply chain finance platform - SwitchPe, tailored for micro and small enterprises, which helps in offering access to unsecured credit lines, an intuitive user interface that allows shop owners to explore products and manage payments efficiently. SwitchPe One is a credit-backed payment solution, designed specifically for merchants to optimize their working capital requirements. It provides integrated lending solutions by consolidating in one place services such as bookkeeping, working capital credit, digital payment options and optimization of available channels of promotion.

• It had an AUM of 6,028 cr as of Sept 2025, with gross disbursements of 2,317 cr for 6M FY26. For FY25, the company had a leverage ratio of 3.7x for which it generated RoE (Return on avg Equity) of ~12.1% for RoA (Return on avg Assets) of 3.1%. 

Issue Details

Fresh issue size - Amount → 710 cr ; Shares → 55 million ;

Offer For Sale size - Amount → 300 cr ; Shares → 23.25 million ;

Leadership

• The Company was originally incorporated in 1993 as Doda Finance Private Limited, an RBI-registered NBFC, and was subsequently rebranded as Aye Finance Limited in 2014.

• In 2014, Sanjay Sharma and Vikram Jetley founded Aye Finance as an operating platform. Sanjay Sharma is the Managing Director and CEO of Aye Finance. 

• Sanjay holds B.Tech from IIT Bombay and post graduate diploma from IIM Bangalore. He has worked with Standard Chartered Bank (India and UAE), HDFC Bank (as Vice President heading the direct banking business), ICICI Limited (personal financial services leadership) and Max New York Life Insurance (Senior Vice President – customer operations). Prior to joining the Company, he served as CEO of Tamweel International, a division of Tamweel PJSC, a UAE-based mortgage finance company. 

• Our Company does not have an identifiable promoter as per SEBI guidelines for NBFCs. Its Key Managing Personnel include Niraj Kumar Kaushik (Deputy CEO), Ujual George (COO), Jinu Joseph (CTO), among others.

Shareholding Pattern

Financials