Aye Finance raises $17.4 mn from Dutch DFI FMO

Aye Finance, the Gurugram headquartered NBFC that lends to micro-enterprises, has raised $17.4 million from Dutch development finance institution FMO via a non-convertible debenture issue. 

With this transaction, Aye Finance, which dubs itself a technology-driven lender, has so far raised $238 million in equity and debt capital. 

In 2018-19 alone, the company raised $53 million in equity capital from Google parent Alphabet’s investment vehicle CapitalG along with investors such as SAIF Partners, Falcon Edge, Accion, LGT Impact Ventures and MAJ Invest Financial Inclusion Fund.

In August this year, Aye Finance raised $10 million from Swiss investor responsAbility Investments and $8 million in a securitisation transaction from private sector lender DCB Bank in July.  

The company continues to successfully raise significant capital at the time when the overall NBFC sector is facing a cash crunch. However, it faced higher finance costs in FY19. 

With the latest capital infusion, the company will expand its lending portfolio and expand its reach by specifically targeting micro-enterprises owned by women, it said in a statement. In addition, FMO will work with Aye Finance to expand lending to women entrepreneurs in the country through a gender finance program, the statement added.

“While we have women as co-applicants for over 95% of our loans, we believe we can do more in enabling the women micro-enterprises. We expanded our branch network this year to Bihar, Jharkhand, Gujarat and Maharashtra which have a prevalence of women entrepreneurship and will support the growth of women led enterprises in 18 states in which we have our presence,” Sanjay Sharma, managing director and founder of Aye Finance, said.

Founded in 2014 by Sharma and Vikram Jaitley, Aye Finance offers business loans to micro-enterprises and claims to have 173 branches and employ 2,900 staffers. It also claims to have disbursed over Rs 2,500 crores to over 1,80,000 customers and has a loan book of Rs 1,430 crores.

This month, the lender posted a muted 9% growth in net profits in FY19 to Rs 25 crore despite a doubling of income to Rs 217 crore on account of higher provisioning for stressed assets. Gross NPAs (non performing assets) rose to Rs 18.6 crore from Rs 7.7 crore while net NPAs fell to Rs 4.11 crore from Rs 4.99 crore.

“The debentures issued by Aye Finance are particularly interesting as the on-lending will be to micro entrepreneurs, of which half will be dedicated to women entrepreneurs in the financial inclusion area of underbanked end clients,” said Linda Broekhuizen, CIO of FMO.

In 2019, FMO has led funding rounds for two fintech startups so far --  $7.2 million Series A round in loans and payments solutions provider FtCash and $86 million Series A round in loan provider InCred Financial Services. The DFI is also in the process of investing $5.2 million in agritech startup Waycool Foods & Products. In September, FMO had also invested in a  $33 million fund launched by Accion Venture Lab, an initiative of US-based non-profit organisation Accion.