IPO Size: Rs. 1,010 cr

• Fresh Issue of Rs. 710 cr for growth capital
• Offer for Sale (OFS) of Rs. 300 cr, by 5 investors (43% combined stake to drop to 24% post IPO)

Price band: Rs. 122-129 per share

M cap: Rs. 3,147 cr, implying 32% dilution

• Only 10% retail, as company’s cash equivalents exceed net worth, typical of most lending business

IPO Date: Mon 9^th Feb to Wed 11^th Feb 2026, Listing Mon 16^th Feb 2026

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Gurugram headquartered NBFC for MSMEs

Aye Finance is a 10 year old non-banking finance company, without any identifiable promoter, offering MSME loans of Rs. 1.8 lakh average ticket size, having assets under management (AUM) of Rs. 6,030 cr, but only 62% secured. Company operates 568 branches in tier 2 and 3 towns, serving 6 lakh customers.

Financial Parameters Deteriorating

Credit cost to average total assets of 5.14% in H1FY26 has doubled from 2.70% in FY23, reflecting very poor quality of the AUM growth. Even 2.7% credit cost is sub-standard and reflects company’s poor underwriting skills, the single most important parameter for any lending business.

Provision has increased 70% YoY to Rs. 173 cr in H1FY26, from Rs. 101 cr in H1FY25, being on a steady rise from Rs. 131 cr in FY24 to Rs. 289 cr in FY25. Collection efficiency, on the other hand, has been on a decline from 93% in FY23 to 89.72% in H1FY26.

Even net NPA of 1.78% as of 30.9.25 is not comforting, and has worsened from 1.15% a year ago, even after accelerated provisions. In absolute terms,

Net NPA rose 2.6x in 18 months, from Rs. 37 cr as of 31.3.24, to Rs. 97 cr as of 30.9.25. Thus, most financial parameters have been deteriorating, implying growth in business is not good quality.

Extremely High Yields

Company’s yields on advances is at 27-28%, which is similar or probably higher than micro-finance loans. This is despite 62% of the book being secured. One wonders then how is this different from the informal sector?

While it is not illegal, we believe such high interest rates are unsustainable in the long run, especially with Jan Dhan accounts building credit history of rural Indians rapidly. Long back, high rates charged by microfinance companies had caused political and regulatory havoc in the country.

Charging 2%+ monthly interest rate simply because borrower is new to credit or lacks credit history does no good for overall system either!

While Aye’s cost of borrowing of 11.2% leads to high net interest margins of 14% with 1.92% RoA, RoE is ~14%, with 3x leverage, comprising Rs. 5,200 cr debt rated ‘A’ by India Ratings.

Unattractive Pricing

Net worth is at Rs. 1,723 cr as of 30.9.25. Post money, as of 31.3.26, expected book value per share (BVPS) is at about Rs. 103, leading to a PBV multiple of 1.3x. This is not attractive for small size of just Rs. 6,000 cr AUM, poor underwriting capabilities and other financial parameters worsening.

Company’s CFO resigned just last month, after being in office for 2.5 years. Key managerial personnel’s departure just prior to IPO is not viewed favourably.

Even the largest OFS investor MAJ is part-exiting its holding at a paltry 9% IRR on 7 year old investment. Besides, the fresh issue dilution of 23% and total IPO size of 32% is quite large.