Aye Finance to Raise ₹250 Crore in Funding Round Led by ABC Impact

Gurugram-based non-banking finance company, Aye Finance, is gearing up for its latest funding round, which is set to raise ₹250 crore. This round is led by ABC Impact, a Singapore-based impact investment fund backed by Temasek. Additionally, British International Investment (BII), which led Aye Finance's last round in December 2023, will also participate in the latest capital infusion.

Strengthening Financial Profile and Expanding Reach

The successful closure of this funding round will boost Aye Finance’s net worth to ₹1,250 crore. With this strengthened financial position, the company is expected to raise further debt from its lending partners, fueling growth and expansion. Sanjay Sharma, Managing Director of Aye Finance, stated that this capital injection will significantly improve the company’s financial profile and expand its scope of operations.

"Most of these funds will go into financing loans for micro and small enterprises, while a smaller portion will be allocated toward further automating our processes," Sharma said.

Focus on Digital Solutions and SME Lending

Founded in 2014, Aye Finance has been committed to providing financial services to small and medium enterprises (SMEs), a sector often underserved by traditional lenders. The company operates 478 branches to source customers, but it has embraced digital solutions for collections and servicing. Currently, 92% of its customers are registered for automated repayment through the ACH (Automated Clearing House) mode. Even in cases of payment bounces, Aye Finance manages to collect 30% of repayments digitally, while the rest are collected by field teams.

Sharma highlighted the potential of digital public infrastructure, such as the NBFC-Account Aggregator ecosystem, which could enhance Aye Finance's credit operations and improve efficiencies.

Cluster-Lending Model and Secured Loans

Aye Finance operates on a cluster-lending model, catering to industries like textiles, dairy, manufacturing, and trading. According to a July 2024 report by India Ratings and Research, around 60% of Aye Finance’s assets under management (AUM) are secured by mortgages and hypothecation of underlying inventory. As of May 2024, the company’s AUM stood at ₹4,670 crore, with an average loan size of around ₹1 lakh.

IPO Plans and Future Outlook

In light of its growth, Aye Finance is preparing for a potential initial public offering (IPO), with plans to file draft papers with market regulators. Although Sharma declined to comment on specific IPO plans, this latest funding round will undoubtedly strengthen the company’s financial position and set the stage for future expansion.

Backed by Leading Investors

Aye Finance has attracted a strong lineup of investors, including Alphabet’s growth fund Capital G and Elevation Capital, both of which were part of its earlier funding rounds. However, its initial investors are not participating in the current round.

As Aye Finance continues to expand its presence in the SME lending space, this ₹250 crore funding round marks a pivotal step in its journey, enabling the company to scale its operations, enhance its digital infrastructure, and support underserved small businesses across India.