Company Profile
· Aye Finance (P) Ltd (AFL) is a Delhi based RBI registered non-deposit accepting, Non Banking Finance Company (NBFC). The company is operating in lending to micro-enterprises in rural and semi-urban areas. .
· Started in November 2013, the company is promoted by Mr. Sanjay Sharma and Mr. Vikram Jetley who have experience in retail lending. Promotors hold 10% stake in the company while other large shareholders are SAIF partners (28%), LGT Impact Ventures (17%) and Accion (17%).
· AFL follows a cluster-based approach where the company identifies business clusters and performs preliminary market research for understanding the dynamics of the cluster by interacting with buyers, suppliers and manufacturers. Once a cluster is selected, the company opens a branch and starts lending to that cluster.
· AFL is on a high growth path with AUM growing 15.9x in the last 2 years. AUM was Rs 5.25 billion as on Q1FY19 and expected to touch Rs 10 billion by FY19 and Rs 50 billion in FY23.
· As on Q1FY19, the company operated through 72 branches in 10 states with UP having more than 30+% of branches with the rest distributed among Rajasthan, Haryana, Punjab, Uttarakhand, Delhi, Karnataka, Tamilnadu, Andhra Pradesh and Madhya Pradesh. Company AFL plans to expand with 175 branches across states.
· Company has funding support through equity infusions and debt; ICRA has long term rating of BBB (Stable) on a standalone basis
Capitalization Profile
AFL had a net worth of Rs.2.50 billion as on Q1FY19 as against Rs.0.95 billion as on February 2018 and by FY19, Net Worth is expected to be at Rs 2.85 billion. AFL raised Rs. 1.47 billion equity via Capital-G, LGT Impact Ventures and SAIF Partners during Q1 F119. The company plans to grow at a CAGR of 65-75% over the next three years and would need to raise additional equity capital of around Rs. 1.50 – 2.50 billion during this period. The gearing was at 3.4x as on Feb-18 and expected to be at 4x as on Mar-20.
Business Profile
AFL Primarily lends to micro enterprises in semi urban & urban areas and adopts a cluster-based Credit Assessment methodology. Loan origination and credit appraisal system process consists of collecting KYC documents, multiple reference checks, credit bureau checks, home and business visits, estimation of income and expenses of the business among others. The final credit call is taken by the centralized credit team with multiple levels of approvals required at the branch.
AFL had a portfolio outstanding of Rs. 5.25 billion as on Q1FY19 with hypothecation loans accounting for 68% of the portfolio, quasi-mortgage loans for 30% and mortgage loans accounting for the remaining 2%. In==Over the next three years, the share of secured portfolio (mortgage and quasi-mortgage loans) is expected to be around 50%. Company primarily lends to micro businesses such as kirana and general stores, dairies, manufacturers and traders with an annual turnover of Rs. 1 million – Rs. 10 million. As most borrowers are self-employed customers and assessed income-based lending model used to evaluate risk, the segment remains susceptible to income shocks. Average ticket size is Rs 100,000 and management expects this to grow by 11% yearly
AFL posted NII growth of 224% at Rs 452.6 million as on FY18 against Rs 139 million in FY17. Profit was Rs 23 million against loss of Rs 71.9 million in FY17.Total income grew 4.61 times to Rs 261 million. Return on assets and return on average net worth were 0.64% and 2.61% respectively during FY18 against -6.34% and -13.42% respectively during FY17.The company’s operating expense ratio was high at 12.40% for FY18 due to branch expansion and small scale of operations, Company has high processing fees of 2.5%
Asset QualityIn Q1FY98, assets under management (AUM) grew by 4.61%, to Rs 60.25 billion from Rs 57.65 billion as of FY18. UP, Bihar, MP and Punjab together constituted 69.66% of the overall loan portfolio as on FY18, which has reduced from 84.55% as on FY17.
Company’s asset quality improved with 0+ and 90+ dpd at 3.53% and 2.17%, respectively, as on Q1FY19 from 7.21% and 2.61%, respectively, as on Q2FY17 (0+ and 90+ dpd were 5.21% and 2.37%, respectively, as on FY17, as businesses returned to normalcy post demonetisation and GST and on increased collection effort by the company. As on FY18 gross NPA was at 1.99%, PAR30 was at around 1% and net NPA was at 0.89%
Liability Profile
AFL had total 19 lenders as on FY18, which included nine NBFCs and four banks. Company also raises funds through the NCD and securitization route. During FY18, the Company met its funding requirements through debts from Financial Institutions (including Banks) and issuance of Non-Convertible Debentures to the tune of Rs. 3.65 billion. The aggregate debt outstanding as on FY18 was Rs. 3.98 billion (Long term-Rs.3.26. billion and short term-Rs. 725.3 million).Current Capital infusion will run them through till September and the company will need additional debt of Rs 2.50 3.00 billion for the rest of the year, which also has been tied up with Term Sheets from MFs. AFL is working with IFC & ADB and Manaveeya for raising funds.
