Elevation Capital-backed Aye Finance Receives Board Approval for an IPO of INR 1,450 crore

Nitin Konde, Varun Bhardwaj

Dec 14, 2024 — 2 min read

Aye Finance Gets Board Nod for INR 1,450 Crore IPO

The SME-focused non-banking loan company Aye Loan Limited (previously Aye Finance Private Limited) plans to raise up to INR 1,450 crore through an IPO. According to documents obtained by a media outlet, the company's board authorised the IPO plans at an Extra-Ordinary General Meeting (EGM) on December 11.

A new issue of equity shares up to INR 885 crore and an offer for sale (OFS) of equity shares totalling INR 565 crore are both part of the planned IPO. The offering is a component of Aye Finance's plan to strengthen its financial position and grow its business in the cutthroat lending industry, but it is contingent upon regulatory approvals and market conditions.

After years of rapid expansion, the announcement comes as Aye Finance is eager to increase its presence in the cutthroat lending industry. The market's reaction and the regulatory landscape, however, will ultimately determine the IPO's outcome.

ESOP Modification and Revamping of Management

The EGM authorised changes to the company's ESOPs, including plans for 2016, 2020, and 2024, in addition to the IPO with the goal of improving employee incentives. The resolutions also contained changes to the conditions of significant executive appointments, such as the nomination of Aditya Misra as a non-executive, non-independent director and Sanjay Sharma as Managing Director of ABC Impact.

The Singapore-based ABC Impact led a Series G fundraising round in September that saw the microlending platform successfully raise INR 250 crore. British International Investment also participated in the round. Together with the $30 million in debt financing the company had previously secured in June, this equity investment increased Aye Finance's total equity fundraising to INR 1,500 crore.

Five non-executive and non-independent directors, primarily representing investors, also resigned during the meeting for personal reasons. When a private corporation wants to go public, it is normal practice to tighten the board.

These directors were Gaurav Malhotra from British International Investment, Kaushik Anand Kalyana Krishnan from A91 Emerging Fund, Kartik Srivatsa from LGT Capital Invest Mauritius PCC, Navroz Darius Udwadia from Alpha Wave India, and Vivek Kumar Mathur from Elevation Capital.

Financial Book and Company’s Operations in FY24

At the end of FY24, the loan book of Aye Loan Limited was worth INR 4,473 crore, the net profit increased from INR 57 crore in FY23 to INR 161 crore, and the annual growth rate was 46% from FY18 to FY24. In FY24, their entire revenue increased from INR 637 to INR 1,066 crore.

The business focuses mostly on small and medium-sized businesses and excels in working capital financing. Microbusinesses with yearly sales between Rs 10 lakh and Rs 1 crore, such as kiranas or general stores, dairies, manufacturers, and merchants, are the main recipients of loans from Aye Finance. As of June 30, 2024, hypothecation loans and quasi-mortgage loans, with an average ticket size of INR 1-1.5 lakh, accounted for 92% of the AUM.