Aye Finance
- Aye Finance is coming out with a 100% book building; initial public offering (IPO) of 8,27,86,884 shares of Rs 2 each in a price band Rs 122-129 per equity share.
- Not more than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
- The issue will open for subscription on February 9, 2026 and will close on February 11, 2026.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 2 and is priced 61 times of its face value on the lower side and 64.50 times on the higher side.
- Book running lead managers to the issue are Axis Capital, IIFL Capital Services, JM Financial and Nuvama Wealth Management.
- Compliance Officer for the issue is Vipul Sharma.
Profile of the company
The company is a non-banking financial company - middle layer (NBFC-ML) focused on providing loans to micro scale micro, small and medium enterprises (MSMEs) across India. It offers a range of business loans for working capital and business expansion needs, against hypothecation of working assets or against security of property to customers across manufacturing, trading, service and allied agriculture sectors. It is among the leading nonbanking financial companies (NBFCs) providing business loans to the largely underserved micro scale enterprises in India, with 5,86,825 active unique customers across 18 states and 3 union territories and with assets under management (AUM) of Rs 60,276.22 million, as of September 30, 2025.
It offers small-ticket business loans with an average ticket size (ATS) on disbursement of Rs 0.18 million to micro enterprises. Its expertise in underwriting business cash flows of a variety of business clusters has enabled it to maintain stable credit costs and allowed it to profitably scale up its operations. It is the most geographically diversified lender amongst the Peer MSME Focused NBFCs.
Its target customers are micro scale businesses with annual turnovers ranging from Rs 2.00 million to Rs 10.00 million, predominantly located in semi-urban areas. The industries it serves include manufacturing, trading, service and allied agriculture. Customers operate with a permanent business setup and have been in the same line of business for at least two years. It aims to ensure that its customers are business owners that have established businesses.
Proceed is being used for:
- It proposes to utilize the Net Proceeds towards augmenting its capital base to meet its future capital requirements arising out of the growth of its business and assets.
- It expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including enhancement of its brand name and the creation of a public market for its Equity Shares in India.
Industry Overview
NBFCs in India have demonstrated remarkable growth, driven by an increased focus on diversified loan segments catering to both individual and business needs. NBFCs have strategically expanded their portfolios across various segments, including auto loans, commercial vehicle loans, education loans, housing loans, personal loans, loans against property, tractor loans, two-wheeler loans, used car loans, and general as well as secured and unsecured business loans. NBFC non retail segment consists of secured MSME, Hypothecation MSME and unsecured MSME loans. This portfolio is growing at a moderate CAGR between 11% to 13% between Fiscal 2019 and Fiscal 2025. In NBFC retail the secured business loan segment stands out as the fastest-growing segment, with a CAGR of 54.8%.
India has over 57.7 million MSMEs, of which 98% of MSMEs are classified as micro enterprises as per annual report 2024-25 published by Ministry of Micro, Small and Medium Enterprise. MSMEs complement large corporates as suppliers or directly cater to end users. The MSME sector contributes to India’s socio-economic development by providing huge employment opportunities in rural and backward areas, reducing regional imbalances, and assuring equitable distribution of national wealth and income. MSMEs in India contribute around 30% to the national GDP and faces a substantial unmet credit demand estimated at Rs 103.00 trillion. The Government expects that MSMEs’ contribution to GDP to increase from 30% in Fiscal 2023 to 40-50% by Fiscal 2030.
Over past few years, players offering MSME loans have expanded their branch network with the intent to serve a larger customer base. Share of borrowers from top cities in India has been on a declining trend indicating that lenders are shifting their focus on MSMEs in rural and semi urban areas. In the future also, Crisil Intelligence expects lenders with a strong focus on MSME lending and healthy competitive positioning to continue to invest in branch expansion. With increasing branch network, customer acquisition and credit penetration, share of MSME loans is also expected to increase.
Pros and strengths
Effective underwriting methodology: Its underwriting expertise gives it a key competitive advantage that has been honed over the years. Lending to MSMEs involves challenges such as limited financial records, small loan sizes, restricted access to traditional banks and financial institutions, and reluctance to provide property as collateral for smaller loans, making it difficult to underwrite loans for such customers. The foundation of its approach to evaluating creditworthiness is based on a reliable estimation of business cash flows and margins based on specific understanding of the ‘business cluster’ using observable data points. It has pioneered a ‘business cluster’ based underwriting methodology, developed from its specific understanding of over 70 business clusters, as of September 30, 2025. These clusters range from shoe manufacturing in Agra, Uttar Pradesh, to garment trading in Patna, Bihar to toys and wooden furniture in Channapatna, Karnataka.
Robust multi-tiered collection capabilities: The company collection processes have been designed to address the repayment behaviors of its target customer segment. This starts with ensuring that its customers have registered ACH mandates to minimize cash collection on the field. Additionally, to enhance repayment adherence, customers receive calibrated reminders prior to their EMI dates through SMS, voice bot, tele-calling, or field visits. Furthermore, it deploys a strong field collection team that is supported by data science models to optimize collection outcomes. Through the effective execution of its collection efforts, it ensures that the overdue buckets are managed tightly. its ratio of Stage 2 assets to total gross loans was 1.65% and 1.82% as of September 30, 2025 and March 31, 2025, respectively, which was the lowest among the Peer MSME Focused NBFCs in those periods.
Building resilience through technological prowess: It follows a ‘phygital’ business model that combines the strengths of physical and digital channels to optimize operations. This integrated model enables it to manage the complexity of cluster-based underwriting, economically source and service a small loan ticket size on disbursement of Rs 0.18 million and monitor and affect timely controls in its business operations. It also allows it to leverage the benefits of both physical presence and digital technology, delivering a seamless and cost-effective experience for its customers.
Access to diversified lender base and cost-effective financing: The company has historically funded its growth through a combination of equity and debt financing. Its debt-to-equity ratio was 3.02, 2.56, 2.73, 2.84 and 3.04 as of September 30, 2025 and September 30, 2024 and March 31, 2025, March 31, 2024 and March 31, 2023, respectively. It benefits from a diversified lender base, accessing capital from 82 different lenders as of September 30, 2025. Its lender base has increased from 56, as of March 31, 2023 to 80, as of March 31, 2025. It has historically secured and seek to continue to secure cost effective funding through a variety of sources, including public sector banks, private sector banks, small finance banks, foreign banks other non-banking financial institutions, developmental financial institutions, multilateral agencies and public investors, together with NCDs, pass through certificates, and direct assignment of loans.
Risks and concerns
Risk of non-payment or default by borrowers: The company typically serves micro scale businesses that are predominantly located in semi-urban areas including in tier II, tier III and tier IV cities and towns, with annual turnovers ranging from Rs 2.00 million to Rs 10.00 million. Lending to MSMEs may often be perceived as involving challenges such as inter alia limited financial records and reluctance to provide property as collateral for smaller loans. Its customers generally have limited sources of income and credit histories, and may not have tax returns, bank or credit card statements, statements of previous loan exposures, or other documents through which it can accurately assess their credit worthiness. As a result, they may pose a higher risk of default than borrowers with greater financial resources and more established credit histories. Its customers may delay and/or default on their repayment obligations due to various reasons including business failure, insolvency or lack of liquidity. It is subject to the risk of non-payment or default by its borrowers which may adversely affect its business, results of operations and financial condition.
Risk associated with unsecured loan: The company offers unsecured loans to its micro-enterprise customers. In the six months ended September 30, 2025 and September 30, 2024 and Fiscals 2025, 2024 and 2023, unsecured loans comprised 37.97%, 41.47%, 39.68%, 37.91% and 30.26% of its total assets under management, respectively. If it is unable to recover such receivables in a timely manner or at all, its business, results of operations, cash flows and financial condition may be adversely affected. Such unsecured loans pose a higher credit risk as compared to its secured loan portfolio because they are not supported by realisable collateral that could help ensure an adequate source of repayment for the loan and, in some cases, may be recalled at any time. It may be unable to collect its outstanding advances in part or at all in the event of non-payment by a borrower.
Risk related to interest rate volatility and dependence on interest income: The company results of operations depend, to a large extent, on the amount of its net interest income, as its primary revenue source is interest income. Its business is vulnerable to interest rate risk. In the six months ended September 30, 2025 and September 30, 2024 and in Fiscals 2025, 2024 and 2023, its interest income accounted for 85.03%, 89.29%, 88.10%, 88.52% and 88.05% of its total income, respectively. Volatility in interest rates could have an adverse effect on its net interest income and net interest margin, thereby affecting its results of operations and cash flows.
Risk from RBI regulations and inspections: The company is subject to periodic inspections by the RBI as an NBFC-ML, of its balance sheet, financials and other records, including details of disbursements, non-performing assets, grievance redressal mechanism, and branches, among others, for the purpose of verifying the correctness or completeness of any statement, information or particulars furnished to the authorities. Non-compliance with observations made by the RBI during these inspections could expose it to penalties and restrictions, which may have an adverse effect on its business, results of operations, cash flows and financial condition.
Outlook
Aye Finance was incorporated to carry on the business of a finance company and to provide finance (whether short- or long-term loan or working capital finance, development finance, factoring, leasing, guarantees or any other debt related funding) to micro, small and medium scale enterprises and to individuals. The company is currently a systemically important non deposit taking Non-Banking Finance Company (ND-NBFC) as defined under Section 45 - IA of the Reserve Bank of India Act, 1934. On the concern side, the financial services market is being served by a range of financial entities, including traditional banking institutions, captive finance affiliates of players in various industries, NBFCs and small finance banks approved by RBI to enhance credit penetration. Its inability to compete effectively in an increasingly competitive industry may adversely affect its market share, business and financial condition. Additionally, the has experienced negative cash flows from operating activities in the past. Any negative cash flows in the future would adversely affect its cash flow requirements, which may adversely affect its ability to operate its business and implement its growth plans, thereby affecting its financial condition.
The issue has been offering 8,27,86,884 equity shares in a price band of Rs 122-129 per equity share. The aggregate size of the offer is around Rs 1010 crore to Rs 1067.95 crore based on lower and upper price band respectively. Minimum application is to be made for 116 shares and in multiples thereon, thereafter. On performance front, its total income increased by 40.42% from Rs 10,717.50 million in Fiscal 2024 to Rs 15,049.87 million in Fiscal 2025. Its profit for the year in Fiscal 2025 was Rs 1,752.52 million while its profit for the year in Fiscal 2024 was Rs 1,716.79 million.
The company strategy to leverage technology and data science for enhancing productivity and scalability includes several key initiatives. For instance, in terms of its underwriting capabilities, it aims to incorporate technology and data science to enable the aggregation of surrogate information to complement its cluster based underwriting methods, and it intends to enhance its existing credit scoring models as it adds new business clusters. It is in the process of developing image recognition models to enhance straight-through processing models to improve the productivity of its underwriting teams. For its collections, it intends to ensure the better use of geolocation-based analytics and digital footprints of customers to improve traceability of defaulting customers. It will also invest in developing multiple alternate digital payment options for its customers, as well as customer education to influence customer behaviour towards the most efficient method of repayment.
