Aye Finance Limited is a leading NBFC focused on providing business loans to micro and small enterprises across India. The company primarily serves underserved and informal businesses through secured and unsecured MSME loans. Revenue is earned through interest income on loans. It operates a branch-led “phygital” model, combining on-ground sourcing with technology-driven underwriting to serve semi-urban and rural borrowers efficiently .

Key Clients and Operating Infrastructure

Aye Finance caters to over 503,000 active micro-enterprise customers across 21 states and 3 union territories. The company does not have manufacturing facilities, as it is a financial services provider. Operations are supported by a wide branch network of 568 branches and 7 offices, all on leased premises, enabling deep geographic penetration and localized customer acquisition .

Product Portfolio and Order Book Execution

The product portfolio includes secured MSME loans (62% of AUM) and unsecured MSME loans (38%), with average ticket sizes of ₹0.10–0.18 million. These products support working capital and business expansion needs of clients. Loans are short- to medium-tenor, ensuring faster churn and repeat business. Strong branch execution and high loan disbursement per employee reflect efficient order book execution .

Mergers, Capex, and Expansion Plans

Aye Finance has not announced any major mergers recently. Future growth plans focus on branch expansion, technology investments, and deepening presence in underserved regions. Capital expenditure is aimed at scaling operations, enhancing underwriting models, and supporting loan book growth. The company plans to fund expansion through internal accruals, borrowings, and proceeds from the IPO to strengthen its balance sheet .

Employees and Banker Details

As of September 30, 2025, the company had 10,459 full-time employees. The Banker to the Company is ICICI Bank Limited, IndusInd Bank Limited, HDFC Bank Limited, State Bank of India, Federal Bank Limited, Union Bank of India, IDBI Bank Limited, DCB Bank Limited, CSB Bank Limited.

Management and Growth Vision

The management aims to build a scalable, sustainable MSME lending franchise focused on profitability and asset quality. Near-term priorities include expanding the branch network, increasing repeat customer conversions, and improving operating efficiency. Long-term goals focus on leadership in micro-enterprise lending. Funding for capex and expansion will be arranged through IPO proceeds, diversified borrowings, and retained earnings, while maintaining prudent leverage and risk management practices .

Industry Overview

Aye Finance operates in the Indian MSME lending and NBFC sector. India has over 63 million MSMEs, contributing ~30% to GDP. The MSME credit gap is estimated at over ₹25 trillion, offering strong growth potential. The MSME lending industry is expected to grow at 15–18% CAGR over the next few years. Key players include Five-Star Business Finance, SBFC Finance, and Veritas Finance. Government support and formalization initiatives further improve growth outlook .

Key Risk Factors

1. Credit Risk
   Exposure to micro-enterprises increases default risk, especially during economic downturns, as borrowers are sensitive to cash flow disruptions and lack formal financial buffers.
2. Asset Quality Risk
   Higher unsecured loan exposure (38% of AUM) can impact asset quality if underwriting or collection efficiency weakens.
3. Regulatory Risk
   NBFCs are subject to RBI regulations. Any tightening in capital adequacy, provisioning, or lending norms may affect growth and profitability.
4. Funding and Interest Rate Risk
   The business depends on borrowings. Rising interest rates can increase funding costs and compress net interest margins.
5. Geographic and Operational Risk
   A wide branch network increases operational complexity and dependency on leased properties, which may affect continuity if leases are not renewed timely.

Key Strengths, Moat, and Opportunities

1. Strong Geographic Diversification
   Presence across 21 states with no single state contributing over 16% of AUM reduces concentration risk and supports stable growth.
2. Focused Micro-Enterprise Franchise
   Deep expertise in micro-ticket MSME lending enables better underwriting and customer acquisition in an underserved segment.
3. Scalable Branch-Led Model
   A high-touch, branch-based approach combined with technology improves credit assessment and customer retention.
4. Efficient Operations
   High loans disbursed per employee and strong PAT CAGR of 16.8% over 2.5 years reflect operating efficiency .
5. Large Untapped Market Opportunity
   Formalization of MSMEs and government initiatives like Udyam Registration expand the addressable borrower base.
6. Technology-Driven Risk Management
   Use of data analytics and credit models enhances risk control and supports sustainable long-term growth.