Aye Finance Limited delivered its strongest first-quarter disbursement performance on record during Q1FY27, reporting a 144% year-on-year surge in net profit after tax (PAT) to ₹75 crore. The micro-enterprise lender achieved this profitability milestone despite the seasonally softer nature of the quarter, driven by robust demand in the under-penetrated micro-MSME segment and disciplined underwriting. Gross total income grew 22% year-on-year to ₹490 crore, while net total income increased 38% year-on-year to ₹322 crore. The company also secured a credit rating upgrade from India Ratings and Research, which raised its long-term rating from IND A to A+ and commercial paper ratings from IND A1 to A1+, citing strong risk management and consistent execution.

The financial results were presented in an earnings conference call hosted by IIFL Capital on July 23, 2026, attended by Sanjay Sharma, Managing Director and Co-Founder; Niraj Kaushik, Deputy Chief Executive Officer; Gaurav Seth, Chief Financial Officer; and Sovan Satyaprakash, Chief Strategy and Investor Relations Officer. The transcript was submitted to BSE Limited and National Stock Exchange of India Limited pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Management highlighted that the growth was achieved without compromising asset quality, with gross non-performing assets (NPA) improving by 28 basis points sequentially to 4.49%.

Key Financial Metrics

The improvement in profitability was primarily fueled by a decline in credit costs, which fell to 4.01% from 4.30% in the previous quarter, marking the sixth consecutive quarter of asset quality improvement. Pre-provision operating profit stood at ₹179 crore. The net interest margin expanded by 20 basis points sequentially to 15.9%, powered by falling interest costs and overall borrowing rates, even as the share of mortgage loans in the portfolio increased. The weighted average cost of borrowing dropped to 10.78% from 10.87% in the prior quarter, with incremental borrowing coming in at approximately 10.20%.

Portfolio Growth and Asset Quality

Customer acquisition remained robust, with the addition of over 44,000 new borrowers, a 38% increase year-on-year, pushing the active borrower base beyond 6.7 lakhs. This growth occurred despite tighter underwriting standards, with the approval rate shrinking from 55% to 45%. The company operated through 571 branches across 18 states and three union territories as of June 2026. Management plans to add only 40 to 50 branches this year, focusing on deepening presence in existing markets rather than entering new geographies. AUM per employee increased by 12% year-on-year, reflecting improved productivity.

Asset quality metrics showed continued strength. Gross NPA improved to 4.49% from 4.77% in the previous quarter and 4.6% a year ago. PAR X stood at 7.01%, while PAR 30 remained stable at 6.07%. Collection efficiency remained healthy, with non-overdue collection efficiency at 99.2% and Bucket 1 collections at 54.5%. Management noted that large states like Bihar, Uttar Pradesh, and Rajasthan, which constitute a significant portfolio share, are not expected to be adversely affected by monsoon variations this year.

What the Numbers Show

A notable divergence exists between the reported credit cost and the underlying portfolio performance due to management overlays. While the reported credit cost was 4.01%, management disclosed that ₹6 crore of this figure represented a voluntary overlay created during the quarter to build buffers for future cycles. Excluding this overlay, the normalized credit cost would be lower, indicating stronger-than-reported asset quality trends. Additionally, fee and other income decreased primarily because the company did not undertake direct assignment (DA) deals during the quarter following its IPO capital injection, and foreign exchange movements were shifted from profit and loss to other comprehensive income (OCI). These one-time factors suggest that core operational income generation remains resilient despite the headline drop in fee income.

Aye Finance has completed the allotment of ₹220 crore in Rated, Senior, Listed, Secured, Transferable, and Redeemable Non-Convertible Debentures (NCDs) via private placement. The Securities Allotment Committee of the Board approved the allotment on July 29, 2026, fulfilling the full issue size including the oversubscription option. This capital raise strengthens the company’s liquidity position with long-term debt funding at a fixed cost of 9.75% per annum.

The allotment was made to seven institutional investors, with Northern Arc Capital Limited emerging as the largest subscriber. The debentures carry a face value of ₹1 lakh each, totaling 22,000 units. Interest is payable monthly, and the principal will be redeemed after a tenor of 24 months from the deemed date of allotment.

Allotment Details

The following table outlines the distribution of the 22,000 debentures among the investors:

Security and Terms

The NCDs are secured by a first-ranking exclusive and continuing charge over identified book debts and loan receivables of Aye Finance Limited. The value of these hypothecated assets must remain at least 1.05 times the outstanding debenture value until final settlement. In the event of a payment default exceeding three months, a penalty interest of 2% per annum over the stated rate will apply.

Gaurav Seth, Chief Financial Officer, signed the intimation to BSE Limited and the National Stock Exchange of India Limited pursuant to Regulations 30 and 51 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The maturity date is set for July 28, 2028, assuming the allotment date of July 29, 2026.