Gurugram-based financial services startup Aye Finance has raised INR 210 Cr ($27 Mn) in Series E funding round from existing investors LGT Capital Partners, CapitalG International, Maj Invest Financial Inclusion Fund II, Falcon Edge India and A91 Emerging Fund I at a pre-money valuation of INR 1,700 Cr ($224 Mn).
The Gurugram-based company will use the funds to add to its liquidity base and strengthen operations to offset any impact from the economic fallout of the Covid-19 pandemic, Aye Finance said in a statement.
Sanjay Sharma, managing director at Aye Finance said, “This equity investment will further add to liquidity that will enable us to emerge strong from the Covid crisis and continue to benefit millions of micro-enterprises across India. Our (Aye Finance’s) credibility in repayments and the milestones Aye has achieved has given our debt providers considerable comfort and confidence. Our ability to raise money even in these testing times is a testament to that ”, he added.
The company was founded in 2014 by Sharma and Vikram Jetly to offer B2B loans to unbanked micro-enterprises of India. The company is currently offering its services in 14 states and plans to expand into Bihar, Jharkhand, Gujarat and Maharashtra in the coming years. The company has over 173 branches and 2,900 employees. So far, the company has disbursed 2 Lakh loans amounting to INR 2,700 Cr to over 196 thousand small scale businesses in the country.
Aye Finance provides working capital and business development loans to companies in the MSME space. It uses statistical models and predictive analytics to determine risk profiles, even in the absence of formal credit histories or documentation.
According to the ministry of corporate affairs filing, Aye Finance has allocated 34,09,800 Series E Cumulative Convertible Preference Share (CCPS) these companies at a face value of INR 10 per share at a price of INR 615.87 which includes a premium of INR 605.87.
As per the filings, LGT Capital invested INR 56.24 Cr in Aye Finance in exchange for 9,13,339 Series E CCPS, CapitalG has invested INR 71.24 Cr for 11,56,897 shares, MAJ Investments Maj Invest Financial Inclusion Fund II has invested INR 22.49 Cr for 3,65,336 shares, Falcon Edge India has invested INR 29.99 Cr from 4,87,114 shares and A91 Emerging Fund has invested INR 29.99 Cr for 4,87,114 Series E shares.
With this investment, LGT Capital has 17.49% shareholding in Aye Finance, followed by Falcon Edge India with 13.87%. A91 Emerging Fund, MAJ invest Financial Inclusion and CapitalG hold 10.32%, 7.39% and 2.16% in the company. So far, the company has raised INR 690 Cr across multiple rounds.
Prior to this, Aye Finance had raised INR 180 Cr in debt from several lenders in India and abroad back in April 2020, after the Reserve Bank of India (RBI) had announced a three-month moratorium on term loans. The company is looking to use this fundraise to support the MSME segment and provide business loans to the underserved business sector during the time of this crisis.
In December, the financier raised Rs 107 crore ($15 million) in debt funding from Swiss impact investor BlueOrchard. The impact group has been investing in the company since May 2017 and has taken a total exposure to Rs 290 crore in the lender to small and medium-sized businesses.
At a time when banks and large financial institutions are cautious about who they lend to, Aye Finance has been able to disburse loans of around Rs 1-2 lakh to businesses with an annual turnover of Rs 10-30 lakh.
Aye has raised nearly $70 million and is among a handful of NBFCs to raise successive rounds of capital in equity and debt. The firm has disbursed loans worth more than Rs 3,000 crore to over 200,000 micro, small and medium enterprises.
“We are excited to continue to back Aye Finance on this next leg of growth as they bring credit to India’s under-served MSMEs via a thoughtful and risk-adjusted cluster-based approach,” said Navroz Udwadia, cofounder, Falcon Edge Capital.
The company also said that the disruptions brought on by the onset of COVID-19 adversely affected the MSME sector. Despite that, Aye Finance has recorded improving operating ratios in the first quarter of the financial year 2020-21.