The enterprise capital-backed microlender has set a worth band of ₹122-129 per share for its preliminary public providing (IPO), valuing the corporate at roughly ₹3,200 crore on the higher finish. The pricing locations the agency’s valuation barely under that of its 2025 sequence G spherical, its administration informed Mint, with out sharing particulars.
“Whereas we began actively engaged on the IPO round July-August, the markets have been uneven, significantly for the monetary phase. Our service provider bankers suggested us to attend, which stretched the timeline, however we at the moment are shifting forward as our IPO approval expires in April,” Aye Finance’s managing director Sanjay Sharma stated.
A number of non-banking monetary firms (NBFCs) had been eyeing IPOs for months. These included Veritas Finance Ltd, Hero FinCorp, SK Finance, Belstar Microfinance, Avanse Monetary and Credila Monetary Companies. However most of those affords had been delayed amid sectoral ache and rising dangerous loans.
“Asset high quality pressures have continued for India’s retail non-bank monetary firms because the seasoning affect of the sooner fast-paced progress performs out,” stated a January report by Icra Ltd. It added that NBFCs have accelerated technical write-offs, banking on their satisfactory provisions and capital to soak up larger credit score prices on steadiness sheets.
Icra expects internet profitability of NBFCs to average in fiscal 2025-26, with credit score prices more likely to stay elevated. “A modest enchancment is anticipated in 2026-27, because the asset high quality issues get assuaged. Steady curiosity margins and working prices would offer help to the sectoral profitability within the close to time period.”
Aye Finance is moving into the general public market in opposition to this backdrop.
“We’re conscious of the dangers concerned in testing the waters, however we have now opted for a really cheap valuation,” Sharma stated. “Our pricing is decrease than our final non-public spherical, which we imagine is a good place to begin for the general public investor’s journey. Due to this, the promoting shareholders have lowered their participation within the OFS (supply on the market). They’re searching for higher worth and are keen to attend for the enterprise to scale additional.”
Scaled-down supply
Aye Finance has trimmed the OFS ₹300 crore from ₹565 crore introduced earlier. Traders LGT Capital and Alphabet’s CapitalG have lower their share gross sales between the draft papers and the submitting of the crimson herring prospectus (RHP). LGT will now be promoting stake price ₹30 crore as a substitute of its earlier deliberate ₹150 crore, whereas CapitalG will likely be offloading fairness price ₹82.5 crore as a substitute of its authentic intent of ₹137 crore.
In the meantime, enterprise capital agency A91 Companions has opted out of the share sale, after beforehand agreeing to dump shares price ₹100 crore. Alpha Wave, too, has lower its OFS to ₹30 crore from ₹100 crore. Danish non-public fairness agency MAJ Make investments, nevertheless, has upsized its stake sale to ₹140 crore from ₹56 crore.
Elevation Capital, Aye Finance’s largest shareholder with a 16% pre-offer stake, will not be promoting shares within the IPO.
The scaled-down IPO contains a ₹710 crore contemporary difficulty of shares, down from ₹885 crore within the draft. Web proceeds will likely be utilised to extend the lender’s Tier-1 capital buffer, in line with the RHP.
The corporate’s IPO will open for subscription on 9 February and shut on 11 February for retail traders.
“Given the valuation we fetched, we determined to not dilute our fairness extra. Although the contemporary difficulty measurement is lowered, we imagine it’s sufficient major fairness to fund our progress for the following two to 3 years,” Sharma stated. As of September, he stated, Aye Finance was sitting on a mortgage ebook of roughly ₹6,000 crore, and the first capital would assist the corporate attain as much as ₹15,000 crore within the coming years, together with accruals. “The ₹885 crore major fundraise goal would have elevated our progress buffer, which might have then taken us to a ₹16,000 crore ebook.”
Burdened loans
One inherent problem of microlending is the excessive quantity of confused loans. For Aye Finance, present non-performing property stand at 4.85% for the quarter ended September 2025, with write-offs at the same stage. This brings the general stress pool as much as round 9% for the gross advances.
“As a result of our loans have a brief typical tenor of 24 months, credit score prices and write-offs present up shortly on the ebook in comparison with longer merchandise within the trade similar to five-year mortgages,” Sovan Satyaprakash, the lender’s head of technique and product, stated. “Our terminal losses are about 2% larger than the historic common as a result of latest “over-lending” interval within the trade. However we have now seen sequential enchancment in credit score prices over the past three quarters and the ache is now largely behind us.”
Sharma stated that the corporate operates a ‘phygital’ mannequin: a digital firm with a bodily presence. “Our progress will not be strictly linear to department growth. About 22% of our 30% AUM (property below administration) progress is generated by mature branches.”
Regardless of being known as a fintech, the corporate doesn’t declare the label. “I as soon as requested Elevation Capital why they do not classify us as a ‘fintech’ of their portfolio, alongside their different tech-heavy investments. Elevation replied: ‘You make revenue, so you possibly can’t be a fintech.'”
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