From microlending to market listing: Aye Finance to file draft IPO papers by end of October

Sanjay Sharma, founder and CEO of Aye Finance, is now eyeing another milestone: going public. The Gurugram-based microlender plans to file draft papers with the Securities and Exchange Board of India by late October or early November, gearing up for a public listing by FY26.

“We will soon be selecting a set of investment bankers, and then the process will start. The expectation is that next financial year, FY25-26, probably the first half, we will see an entry into the market," Sharma said.

Aye Finance, with an active customer base of around 400,000, focuses on lending to small and micro enterprises (SMEs). According to Sharma, the company is exploring a pre-IPO fundraise to allow secondary exits for existing shareholders.

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Revenue from operations grew 44.5% to ₹623 crore during FY23 while profit stood at ₹54 crore. For FY24, the company claims that its revenue rose a significant 67% to ₹1,072 crore and profit surged three-fold to ₹161 crore.

Aye ended FY24 with an assets under management (AUM) worth ₹4,500 crore, an increase of 66% from a year ago.

“We will grow to ₹6,500 crore which would be about slightly over 50% growth. Our profit on the other hand is expected to grow from ₹160 crore to almost close to ₹260 crore in FY25. Our first quarter profits are in line with the projected numbers," said Sharma.

The company's typical loan size ranges from ₹1 lakh to ₹2 lakh, competing with startups like Lendingkart, Axio, and Indifi.

Expanding offerings

Diversifying beyond microlending, Aye Finance has ventured into property-based loans, catering to customers seeking larger loans up to ₹10 lakh. This segment has grown from 3% to 10% of their portfolio, with expectations to reach 16-17% this year.

“We have realised that the same customer besides looking at a hypothecation loan where he hypothecates its machinery etc, is also sometimes looking for a larger loan. A normal hypothecation loan is between ₹1 lakh and ₹2 lakh, a larger loan could be up to ₹10 lakh. In those cases, the customer is willing to give property, so we have also started actively doing property-based loans for such customers," he added.

A hypothecation loan is a type of financing where the borrower uses assets such as inventory or vehicles as collateral without transferring ownership of the assets to the lender.

Aye Finance has secured approximately ₹10,000 crore in equity funding and over ₹2,200 crore in debt, with investors including Elevation Capital, Capital G, and Alphabet. 

Last month, the company raised $30 million in debt from Dutch bank FMO, and $37 million in a Series F round led by British International Investment in December. 

“A lot of our funding coming in is debt funding. We have recently raised a very large facility from Goldman Sachs which is $100 million which is going to be disbursed in tranches. All that money will go into the growth of the ₹2,000 crore extra AUM that we have to build," said Sharma.

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He highlighted a robust recovery in demand in the MSME lending space following the pandemic-induced slowdown Sharma noted that in 2022-23, there was hesitancy due to uncertainty, but in 2023-24, demand has been strong and continues to grow.