HDFC Securities has released an extensive research note on Aye Finance Limited, the Non-Banking Financial Company specializing in micro-scale MSME lending, ahead of its mainboard initial public offering scheduled to open on February 9, 2026. The offering, priced between Rs 122-129 per share, comprises a fresh issue of up to Rs 710 crore and an offer for sale of Rs 300 crore, with listing expected on February 16, 2026, on both BSE and NSE exchanges.

The Mumbai-based NBFC-Middle Layer company has positioned itself as India's fastest-growing micro-enterprise lender, boasting 586,825 active customers and Assets Under Management totaling Rs 60,276.22 million as of September 30, 2025. Grey market sentiment remains subdued, with the latest premium quoted at Re 1, suggesting an estimated listing price of Rs 130—a modest 0.78% above the upper price band.

Based on my comprehensive analysis of the IPO note from HDFC Securities and current market intelligence, here's a professional assessment of the Aye Finance Limited public offering:

HDFC Securities Provides Comprehensive Analysis on Aye Finance IPO: Micro-Enterprise Lender Eyes Rs 1,010 Crore Capital Raise

HDFC Securities has released an extensive research note on Aye Finance Limited, the Non-Banking Financial Company specializing in micro-scale MSME lending, ahead of its mainboard initial public offering scheduled to open on February 9, 2026. The offering, priced between Rs 122-129 per share, comprises a fresh issue of up to Rs 710 crore and an offer for sale of Rs 300 crore, with listing expected on February 16, 2026, on both BSE and NSE exchanges.
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The Mumbai-based NBFC-Middle Layer company has positioned itself as India's fastest-growing micro-enterprise lender, boasting 586,825 active customers and Assets Under Management totaling Rs 60,276.22 million as of September 30, 2025. Grey market sentiment remains subdued, with the latest premium quoted at Re 1, suggesting an estimated listing price of Rs 130—a modest 0.78% above the upper price band.
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Strategic Positioning and Market Leadership

Aye Finance Limited operates at the critical intersection of India's underserved micro-enterprise segment, addressing a staggering credit gap that reached Rs 117 trillion in Fiscal 2025. The company has distinguished itself through specialized "business cluster" underwriting methodology, having developed deep expertise across more than 70 distinct industrial and business clusters spanning shoe manufacturing in Agra to garment trading in Patna.
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The firm's competitive edge lies in its comprehensive product suite—offering both secured and unsecured loans against hypothecation of working assets alongside traditional property-collateralized lending. With an average ticket size of approximately Rs 0.18 million upon disbursement, Aye Finance maintains granular portfolio diversification while serving businesses that typically lack formal documentation or extensive credit histories.
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Impressive Growth Trajectory and Financial Performance

Between Fiscal 2023 and Fiscal 2025, the company's AUM surged at a remarkable 42.60% CAGR, with year-on-year growth of 23.9%—the highest among peer MSME-focused NBFCs according to CRISIL. This expansion has been strategically distributed across four geographical zones: North (34.80%), East (27.79%), West (22.73%), and South (14.69%), ensuring no single state accounts for more than 15.77% of total AUM.
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The company's financial metrics demonstrate operational maturity. Return on Equity escalated from 5.46% in March 2023 to a peak of 17.28% in March 2024, settling at 12.12% by March 2025. Net Interest Margin stood at a healthy 14.1% for H1FY26, though down from 15.3% in FY25. The company reported profit after tax of Rs 646 million for H1FY26, translating to earnings per share of Rs 3.4 on a face value of Rs 2.
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Technological Innovation: The Phygital Advantage

Aye Finance employs a sophisticated "phygital" operational model, seamlessly integrating 568 branches across 415 districts with cutting-edge digital infrastructure. The company has achieved remarkable automation benchmarks: 100% paperless sanctioning, 100% cashless disbursements, 98.84% digital signing, and 93.45% NACH registration.
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The firm's in-house data science and artificial intelligence capabilities deploy machine learning models across the customer lifecycle—from bureau screening to bounce likelihood assessment. This technological prowess manifests in operational efficiency: file productivity of the credit team surged from 211 in Fiscal 2023 to 411 in Fiscal 2025, while the company delivered 29.3 loans per employee—the highest among peer NBFCs.
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Capital Structure and Funding Diversification

The company maintains prudent capital management with a debt-to-equity ratio of 3.02 as of September 30, 2025. Aye Finance has successfully diversified its lender base from 56 counterparties in March 2023 to 82 by September 2025, comprising public and private sector banks, foreign banks, developmental financial institutions, and multilateral agencies.
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The funding mix reflects strategic optimization: 59.02% through term loans and Pass-Through Certificates, 28.95% via Non-Convertible Debentures, and 12.03% from External Commercial Borrowings. The average cost of borrowings declined to 11.21% (annualized) for H1FY26 from 11.80% in FY23, driven by increased bank borrowings that rose from 18.57% to 31.38%.
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Risk Assessment and Investment Considerations

Despite robust fundamentals, prospective investors must evaluate several inherent risks. The micro-enterprise segment presents elevated credit risk due to limited formal financial records and collateral, making creditworthiness assessment challenging. The company's profitability hinges critically on collection efficiency, with any delays potentially impacting cash flows.
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Interest rate volatility poses margin compression risk, while the specialized "business cluster" methodology, though sophisticated, depends on the accuracy of localized data points. Regulatory compliance remains paramount, as changes in RBI's capital adequacy norms or provisioning requirements could materially impact profitability. Additionally, the company's heavy reliance on founder Sanjay Sharma and senior management creates succession planning concerns.
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Valuation Perspective and Investment Outlook

At the upper price band of Rs 129, Aye Finance is valued at approximately 1.45 times its book value of Rs 88.66 as of September 30, 2025. The post-issue equity will expand to Rs 49.36 crore from Rs 38.35 crore pre-issue. The company benefits from marquee investor backing, including Elevation Capital, CapitalG (Alphabet's growth fund), British International Investment, and Lightrock.
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The tepid grey market premium of Re 1 suggests limited near-term listing gains, potentially reflecting concerns about valuation or broader market sentiment toward NBFC stocks. However, long-term investors may find merit in the company's market leadership position, technological differentiation, and exposure to the Rs 117 trillion MSME credit gap.
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Given the company's focus on deepening existing branch penetration rather than aggressive expansion—with mature branches (over three years) generating Rs 135.47 million AUM versus Rs 61.83 million for newer locations—operational leverage should improve progressively. The strategic pivot toward mortgage loans (growing from 1.86% in FY23 to 19.28% by H1FY26) enhances portfolio stability through longer tenures and property security.
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For investors seeking exposure to India's financial inclusion narrative with an appetite for moderate risk, Aye Finance presents a compelling proposition, though expectations for substantial listing gains should remain measured given current grey market indicators.