Aye Finance raises Rs70 crore in LGT-led funding round
Aye Finance Pvt. Ltd, a lender to small businesses, said it has raised Rs70 crore in a series B round of funding led by LGT Impact Ventures, an impact investing private equity fund.
The round also saw participation from existing investors SAIF Partners, and Accion, a non-profit firm that supports microfinance institutions.
The company will use the funds for expanding to more cities in India and invest in its technology products.
In February 2015, the company had raised $1 million in seed funding, followed by Rs20 crore in series A funding from SAIF and Accion in December.
Founded in 2014 by Sanjay Sharma and Vikram Jetley, Aye Finance is a non-banking financial company (NBFC), that assesses creditworthiness of micro and small enterprises and provides loans between Rs50,000 and Rs25 lakh to support their working capital needs. Aye currently has 31 branches across seven states in north and south India.
Technologically, Aye has developed tools to perform credit appraisal of a borrower.
“We usually have to assess these companies (borrower) without them having any proper documentation (and credit history),” said Sharma. “We look at micro enterprises in terms of clusters or industry types, because that helps us to understand their cash flows better, their working capital cycle, supply chains, and helps us do a better credit analyses with whatever little documents they have.”
Aye has identified over 40 industry groups or clusters such as shoe-making, glass manufacturing, restaurants and kirana shops, across three broad categories: manufacturing, trading and services.
Delhi-based Aye Finance has lent to 10,000 small enterprises so far, extending an average loan amount of Rs1 lakh for a duration of 12 to 18 months, at an annualized rate of interest of 22% to 28%, depending upon the borrower’s risk profile, said Sharma. The company has 400 employees.
Currently, the company’s loan book stands at more than Rs80 crore, and plans to raise it to close to Rs300 crore in the next 12 months.
Aye aims at launching 30 more branches across states like Uttar Pradesh, Rajasthan, Andhra Pradesh, Gujarat and Maharashtra by December 2017.
According to a company statement, Aye targets a loan portfolio of more than Rs2,000 crore over the next five years.
The company is also investing in technology products, such as an Android mobile app for small enterprises to manage business, introduce an online payment mechanism and internally, invest in data analytics to improve Aye Finance’s products and services.
Other start-ups that also lend to small and medium enterprises include Capital Float (Zen Lefin Pvt. Ltd), NeoGrowth Credit Pvt. Ltd. However, unlike Aye Finance, these are NBFCs that extend loans to businesses through their online platforms.
In May, Capital Float had raised $25 million in series B funding led by Creation Investments Capital Management LLC, while NeoGrowth had raised $35 million (about Rs225 crore) from IIFL Asset Management, Accion Frontier Inclusion Fund, managed by Quona Capital, PTI had reported.