Elevation Capital-backed Aye Finance gets board nod for Rs 1,450 crore IPO with fresh issue of Rs 885 crore

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Aye Finance Limited (formerly Aye Finance Private Limited), an SME-focused non-banking finance company, is set to raise up to Rs 1,450 crore through an initial public offering.

The company's board approved the IPO plans during an Extra-Ordinary General Meeting (EGM) held on December 11, according to filings seen by Moneycontrol.

The proposed IPO will include a fresh issue of equity shares worth up to Rs 885 crore, along with an offer for sale (OFS) of equity shares totaling Rs 565 crore. The offering, which is subject to market conditions and regulatory approvals, is part of Aye Finance’s strategy to bolster its financial position and expand operations in the competitive lending market.

The announcement comes at a time when Aye Finance is keen on enhancing its footprint in the competitive lending market, following years of strong growth. However, the final decision on the IPO will depend on the reception in the market and the regulatory environment.

Moneycontrol had exclusively reported in August on the fintech NBFCs's plan to go public and appointment of bankers. Per sources, Axis Capital, JM Financial. Nuvama and IIFL Securities were mandated to handle the IPO as merchant bankers.

Change in management, ESOP amendment  

In addition to the IPO, the EGM approved amendments to the company’s ESOPs, including plans for 2016, 2020, and 2024, aimed at enhancing employee incentives. The resolutions also included variations in the terms of appointments for key executives, including Sanjay Sharma’s appointment as Managing Director and Aditya Misra, Director at ABC Impact, role as non-executive non-independent director.

In September, the microlending platform successfully secured Rs 250 crore in a Series G funding round led by Singapore-based ABC Impact. The round also saw participation from British International Investment. This equity raise, combined with the company's earlier debt financing of $30 million in June, brought Aye Finance’s total equity fundraising to Rs 1,500 crore.

The meeting also saw the resignation of five non-executive and non-independent directors, mostly representing investors, who stepped down for personal reasons.

Tightening the board is common practice for a private company looking to go public.

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

Closing FY24 with a loan book of Rs 4,473 crore, annual growth rate of 46% during FY18-FY24, and net profit of Rs 161 crore, up from Rs 57 crore in FY23. It reported a total income of Rs 1,066 crore in FY24, up from Rs 637 previously.

The company specialises in providing working capital finance and is largely focused on small and medium enterprises.

Aye Finance primarily lends to micro businesses like kiranas/general stores, dairies, manufacturers and traders with an annual turnover of Rs 10 lakh-1 crore. With an average
ticket size of Rs 1-1.5 lakh, hypothecation loans and quasi-mortgage loans comprised 92% of the AUM as on June 30, 2024.

The customers in this segment typically have limited credit history and their cash flows could be volatile and highly sensitive to minor business disruptions and external shocks, notes credit rating firm ICRA. " The firm is gradually scaling up its mortgage loan portfolio and plans to increase its share in the AUM to 15-20% in the near-to-medium term from 8% as on June 30, 2024," it added.

Further, secured loans comprised 60% of the on-book portfolio as on March 31, 2024.

According to a report by India Ratings, it’s major shareholders are Elevation Capital (19.86% holding on diluted basis, at end-September 2023), LGT Capital (17.38%), Capital G (16.43%), Falcon Edge (now Alpha Wave at 13.32%), A91 (10.32%) and MAJ Invest (7.11%). Promoter Sanjay Sharma held a 3.16% stake in the company, while the rest was held by employee welfare trust (1.81%) and others.