Aye Finance IPO Review: Muted Demand—Should You Subscribe?

As the bidding window enters its final day, the Aye Finance IPO has garnered only 17% subscription by the end of Day 2. Founded in 1993, the lender specializes in providing secured and unsecured working capital loans to micro-enterprises.

As the company looks to raise Rs 1,010 crore to expand its lending book, the question remains: does the reward outweigh the risk? Explore our exclusive IPO analysis on growth, financials and the risks you can't ignore.

Aye Finance IPO Details 

• Issue Details: Mainstream
• Issue Size: Rs 1,010 crore
• Fresh Issue: Rs 710 crore
• Offer for Sale: Rs 300 crore
• Price Band: Rs 122 – Rs 129
• Lot Size: 116 shares

Aye Finance: Business Overview

• AFL is a Non-Banking Financial Company – Middle Layer (NBFC-ML) focused on providing credit solutions to India’s micro and small enterprises (MSEs). As of 30 September 2025, it operates 568 branches across 18 states and 3 union territories, serving over 5 lakh active customers.
• AFL offers a comprehensive suite of lending products, including both secured and unsecured loans such as Mortgage Loans, Saral Property Loans and Hypothecation Loans. It primarily focuses on small-ticket business loans for micro enterprises, with an average ticket size (ATS) of approximately Rs 1,80,000 at the time of disbursement.

Aye Finance Key Strengths

• Robust Track Record: Net profit surged from Rs 39.87 crore in FY23 to Rs 175.25 crore in FY25, translating into a strong CAGR of 110%. Net interest income also witnessed impressive growth, expanding at a CAGR of 53% to Rs 857.96 crore in FY25.
• Solid AUM Growth: AFL has emerged as one of the fastest-growing MSME-focused NBFCs, recording the highest growth in AUM per branch and per employee among peers during FY23–25. Its AUM grew at a CAGR of 42.6%, reaching Rs 6,027.62 crore as of 30 September 2025, reflecting strong credit demand and scalable operations.
• Diversified Portfolio: AFL maintains a geographically diversified loan book, with no single state contributing more than 15.77% of AUM. Region-wise distribution remains balanced, with 34.80% in the North, 27.79% in the East, 22.73% in the West and 14.69% in the South as of 30 September 2025.
• Strong Customer Retention: AFL benefits from high customer stickiness, reflected in a low foreclosure rate of less than 2.86% (annualised) for FY25. Foreclosure refers to customers repaying outstanding dues before the scheduled EMI end date, excluding closures due to death or write-offs — an indicator of stable borrower relationships.

Aye Finance Risk Factors

• Deteriorating Asset Quality: The Gross NPA ratio has increased from 2.49% in FY23 to 4.21% in FY25 and further to 4.85% as of 30 September 2025, indicating elevated credit risk that could impact financial performance.
• Exposure to Unsecured Loans: Unsecured loans accounted for 39.68% of total AUM in FY25 and 37.97% in H1FY26. Any delays or failures in recovery could adversely affect earnings and cash flows.
• Asset–Liability Mismatch Risk: AFL’s assets have an average maturity of 29.23 months compared to a borrowing tenor of 23.43 months. Such mismatches may create liquidity pressures, potentially affecting operations, funding costs and profitability.
• Cash Flow Concerns: AFL has reported negative operating cash flows in H1FY26, H1FY25 and the last three fiscal years. Sustained negative cash flows could strain liquidity, affect day-to-day operations and weaken financial flexibility.
• High Attrition Rates: Employee attrition stood at 64.56% in FY25 and peaked at 65.53% in H1FY26. Continued workforce churn could increase hiring costs and impact operational stability.
• Legal Risks: AFL and its directors are involved in legal and regulatory matters amounting to ~Rs 137 crore. Unfavourable outcomes may affect its business, reputation and financial condition.

Final Thoughts: Should You Subscribe to Aye Finance’s IPO?

• AFL has emerged as one of the fastest-growing MSME-focused NBFCs, delivering the highest growth in AUM per branch and per employee among peers during FY23–25. The firm has also reported strong growth in revenue and profitability over the past three years.
• However, these positives are tempered by its relatively small scale of operations and an evolving product portfolio that remains exposed to small and economically vulnerable borrowers.
• Profitability trends have also shown signs of moderation, with the firm’s annualised Return on Assets (ROA) declining to 1.9% in H1FY26 from a peak of 4.3% in FY24, raising concerns around the sustainability of returns as the loan book expands.
• At a P/E multiple of ~14x based on FY25 earnings, the IPO does not appear particularly compelling. Investors can find comparable opportunities in listed mid-sized and larger microfinance players that benefit from stronger diversification, established operating track records and more predictable risk-adjusted growth — many of which trade at similar valuations.
• Although AFL’s growth trajectory remains encouraging, the combination of modest scale, emerging pressure on profitability and an undemanding valuation reduces its investment appeal. In the absence of a clear pricing advantage, investors may be better off avoiding the IPO at this stage.
• Investors should closely monitor post-listing performance, particularly trends in asset quality and earnings stability, before taking exposure.

For a deep dive into other IPOs, explore: IPO Corner on Liquide