Money & Banking

Aye Finance to open up lending tap in July to micro enterprises

K.R.Srivats New Delhi | Updated on July 01, 2020

Sanjay Sharma, Managing Director, Aye Finance   -  N. Ramakrishnan

Sees 25-30 per cent overall growth in loan portfolio in FY20-21 if Covid-19-induced disruptions settle by September

Aye Finance, a new-age non-banking finance company, is hopeful of clocking 25-30 per cent growth in its overall loan portfolio this fiscal year provided things settle down on the Covid-19 front by September, a top official said.

This Capital G (Google parent Alphabet’s investment arm)-backed fintech, which started its journey in 2014, had recorded about 80 per cent growth in its overall loan portfolio in FY19-20, Managing Director & CEO Sanjay Sharma told BusinessLine in an interview.

Sharma said that Aye Finance, which is focused on supporting micro enterprises, plans to resume lending in July. The NBFC had recently raised ₹210 crore in Series E funding, led by CapitalG, Alphabet’s independent growth fund. This round also saw participation from Aye’s existing investors LGT Lightstone, Falcon Edge Capital, A91 partners and MAJ Invest. With this fresh investment, Aye’s total equity funding since inception exceeds ₹690 crore.

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“This money that we raised recently has come in at a good time because we have a lot of liquidity. The liquidity we have will see us through 9 months. Rather than hoarding on to liquidity and being frozen, we want to release some liquidity into the market in July. April-June was focussed on collection. We are now looking to open up the tap to better micro enterprises and benefit from the busy season.

“What gives us lot of confidence to lend is that we saw lot of good collections in June. The number of customers who had sought a moratorium from us was only 25 per cent. The scenario is not that everyone has sought a moratorium. People realise in the micro segment that they cannot afford not to pay instalments as interest costs will add up,” Sharma said.

He highlighted that the July-August-September quarter is when several micro-enterprises will need money as they prepare for the festival months. “Most of the micro enterprises do nearly 30 per cent of their annual sales in these months. It will be difficult for everybody to lend in the current situation. However, you can’t paint everyone with the same brush. I can’t imagine a situation where 100 per cent of the 6 million micro enterprises in India will vanish. Many will survive. We have found those who are capable of seeing this problem through and who are managed well. We are naturally positioned to do this analysis as we have always been doing cluster-based lending,” Sharma said.

He highlighted that most of the micro enterprises are in semi urban and rural areas. The rural economy is working fine, the agri sector is positive and that is going to play a crucial role in the revival of the overall market, Sharma added.

Asked how Covid-19 has impacted the existing portfolio in the first quarter, Sharma said that it would be difficult to assess the impact given that the RBI had announced a moratorium. He also said that Aye Finance is expected to remain in the black this fiscal year, too, and is likely to record a profit before tax of about ₹45 crore, the same level as in the last fiscal year.

Published on July 01, 2020

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