Lending Tech Startup Aye Finance Raises INR 80 Cr Debt Funding

Gurugram-based digital lending company Aye Finance has raised INR 80 Cr in debt funding from an undisclosed investor.

The company plans to use the funds to further grow its lending portfolio. In July and August, Aye Finance raised $17.7 Mn debt funding from responsAbility Investments AG, a Swiss impact investor and DCB Bank.

Prior to this, the fintech lender has raised over INR 480 Cr in an equity round, and approximately INR 1100 Cr through a variety of debt funding rounds. Aye is equity funded by stellar names in the global financial and impact sectors- CapitalG, SAIF Partners, Falcon Edge, Accion, LGT & MAJ Invest.

In 2014, Sanjay Sharma and Vikram Jetley founded Aye Finance to provide B2B financial services to small and micro enterprises across India. Aye Finance claims to use data science coupled with cluster-based underwriting model to keep its operating costs low, drive better underwriting and help with obstacles related to inadequate documentation for its customers.

The company uses various data science tools – psychometric profile tools, behaviour based statistical credit scores and constantly improving cluster insights to decide to lend to small-scale enterprises. Aye also gains debt facility from institutions such as SBI, HDFC Bank, BlueOrchard, Triodos Investment, and Symbiotics.

The company claims to have disbursed over INR 2200 Cr to over 150K under-served and under-banked grass-root businesses. Its current Asset Under Management is INR 1200 Cr with 91000 active customer base.

The opportunity in the Indian SME lending market is huge. According to a May 2019 IBEF report, the public deposit of NBFCs increased from $293.78 Mn in FY19 to $4.95 Bn (INR 319.05 Bn) in FY18, registering a compound annual growth rate (CAGR) of 36.86%.

Although there are a lot of positives and potential for NBFCs, their lending habits has had left much to be desired with many going bust last year because of reckless credit expansion and now face a liquidity crunch due to external developments (IL&FS default) and as investors take a step back from the initial investment frenzy to measure their moves, especially with stock prices of the listed non-banks faring poorly.

However, Union finance minister Nirmala Sitharaman’s 2019 budget announced the issuance of INR 70K Cr to banks which will further help recapitalise NBFCs. The impetus to revive the NBFC sector in Union Budget 2019 emphasises the importance of this sector for the Indian economy and measures taken in this budget are expected to improve the situation.

NBFC sector is pivotal in fulfilling the credit demand of the country. Credit provided by NBFCs drives growth in consumption and hence the GDP.