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    Aye Finance Q1 FY27 earnings call

    AYE
    Financial Services·23 Jul 2026
    Management Summary

    Aye Finance Limited reported a robust Q1 FY27, achieving its strongest-ever first-quarter disbursement of ₹1,219 crores, leading to a 28% YoY AUM growth to ₹7,324 crores. Profitability surged with a 144% YoY increase in PAT to ₹75 crores, supported by a 20 bps NIM expansion to 15.9% and a 28 bps QoQ improvement in Gross NPA to 4.49%. The company also received a credit rating upgrade, which is expected to further reduce borrowing costs.

    Highlights

    6

    • Disbursements reached ₹1,219 crores, marking a 22% year-on-year growth, demonstrating strong demand and customer base resilience.

    • Assets Under Management (AUM) grew 28% year-on-year and 4% sequentially to ₹7,324 crores.

    • Profits after tax increased 144% year-on-year to ₹75 crores, extending strong profitability momentum.

    • Gross NPA improved by 28 basis points sequentially to 4.49%, reflecting the sixth consecutive quarter of asset quality improvement.

    • Net Interest Margin (NIM) improved by 20 basis points sequentially to 15.9%, driven by falling interest costs and borrowing rates.

    • Credit rating upgraded from IND A to A+ by India Ratings and Research, expected to reduce borrowing costs by 20-25 bps.

    Concerns

    1

    • Analyst noted that the guided credit cost of 3.5%-4% remains significantly higher than peers, despite improving asset quality.

    Key financials

    Single quarter

    15 metrics
    1. 01Disbursements₹1,219 Cr+22%YoY
    2. 02AUM₹7,324 Cr+28.0%YoY
    3. 03Gross NPA4.5%-0.3%QoQ
    4. 04Credit Cost4.0%-0.3%QoQ
    5. 05Gross Total Income₹490 Cr+22%YoY

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Debt disclosed

    Cost 10.8%

    Liquidity

    Liquidity disclosed

    Capital adequacy ratio of 42.4% provides substantial headroom to support future growth without the need for additional capital. The company can grow its book to almost ₹14,000 crores before needing fresh capital, providing a window of slightly more than 2 to 2.5 years.

    Guidance & targets

    17
    CategoryTargetPriority
    Credit Growth
    AUM Growth
    25% to 30%
    		High
    Credit Cost
    Credit Cost
    3.5% to 4%
    		High
    Credit Cost
    Credit Cost (with 30-35% mortgage)
    3% to 3.5% at max
    		Medium
    Product Mix
    Mortgage Loans Share
    gradually increase
    		Medium
    Product Mix
    Mortgage Share
    30% to 35%
    		Medium
    Product Mix
    Hypothecation Loan Share
    60%-70%
    		High
    Product Mix
    Micro LAP Share
    30%
    		High
    Product Mix
    Other Products Share (Gold/Solar Loan)
    10%
    		High
    Branch Network
    Branch Additions
    around 40 to 50 branches
    		High
    Branch Network
    Branch Count Increase
    roughly 10%
    		High
    Profitability
    NIM
    remain flat
    		High
    AUM Growth
    AUM
    ₹24,000 crores
    		High
    Direct Assignment
    DA as % of AUM
    5% to 7%
    		High
    Leverage
    Leverage Ratio
    4 to 4.5 levels
    		High
    Asset Quality
    Sustainable PAR X
    6% to 6.5%
    		Medium
    Operating Efficiency
    Opex Ratio
    8.25%-8.75%
    		High
    Operating Efficiency
    Opex Ratio
    7% to 7.5%
    		Medium

    What to watch in Q2 FY27

    5

    Refined Guidance

    by the end of Q2
    CurrentInitial guidance for FY27
    TargetNarrowed guidance numbers

    Why it matters

    Management expects to refine its full-year guidance based on Q2 performance, providing more clarity on future outlook.

    But we continue to maintain our guidance as we had given during the year. Let me then start this by giving a brief perspective of the operating market environment before we discuss our quarterly performance.

    Risks & concerns

    2
    RiskSeverity

    Geopolitical and Monsoon Impact

    Initial concerns about West Asia war and weaker monsoon have moderated, with monsoon expected to be near normal (92% of long-term average) and impact localized to central/southern India. — Management downplayed

    low

    Credit Cost higher than peers

    Analyst noted that the guided credit cost of 3.5%-4% is higher than peers. Management explained this is inherent to their hypothecation loan product's terminal loss rates and business model. — Analyst acknowledged

    medium

    Q&A highlights

    8

    “Because of that, we believe that this business model typically should give a credit cost of roughly around 3.5%. In a good year, it can come down as low as 3%, but should be in the range of between 3.5% to 4%.”

    Analyst questioned why credit cost guidance is higher than peers despite improving asset quality; management explained it's inherent to their business model and product type.

    asked by Sajal Raj

    2 min read6 chapters

    Detailed Narrative

    01

    Robust Q1 FY27 Performance Amidst Moderating External Factors

    Aye Finance Limited commenced FY27 with strong performance, achieving its strongest-ever first-quarter disbursement of ₹1,219 crores, a 22% year-on-year growth. This momentum translated into Assets Under Management (AUM) of ₹7,324 crores, reflecting a 28% YoY and 4% QoQ increase. The company noted a steady recovery in the micro-MSME segment and moderated concerns regarding the West Asia war and monsoon, which is expected to be 92% of the long-term average.

    02

    Significant Profitability Growth and Margin Expansion

    The company delivered a strong financial quarter, with gross total income growing 22% YoY to ₹490 crores and net total income increasing 38% YoY to ₹322 crores. Profits after tax surged 144% YoY to ₹75 crores, extending the strong profitability momentum established in H2 FY26. Net Interest Margin (NIM) improved by 20 basis points sequentially to 15.9%, primarily driven by a reduction in finance costs and overall borrowing rates.

    03

    Sustained Asset Quality Improvement and Declining Credit Costs

    Asset quality continued its improving trend for the sixth consecutive quarter. Gross NPA decreased by 28 basis points sequentially to 4.49% from 4.77% in the previous quarter, and 4.6% a year ago. PAR X stood at 7.01%, with PAR 30 at 6.07%. The credit cost declined to 4.01% during the quarter, improving by 29 basis points sequentially, aligning with the full-year guidance of 3.5%-4%. This improvement is attributed to tighter underwriting, stronger collection efforts, and growth in mortgage loans.

    04

    Enhanced Funding Profile and Credit Rating Upgrade

    India Ratings and Research upgraded Aye Finance's long-term credit rating from IND A to A+ with a stable outlook, and commercial paper ratings from IND A1 to A1+. This upgrade is expected to broaden lender relationships, enhance funding flexibility, and reduce incremental borrowing costs by approximately 20-25 basis points. The company's capital adequacy ratio stood at 42.4%, providing substantial headroom for future growth without immediate need for additional capital.

    05

    Strategic Growth and Product Mix Targets

    Aye Finance aims for an AUM growth of 25%-30% for FY27, with a long-term target of ₹24,000 crores AUM within five years (27-28% CAGR). The product mix strategy for the next three years targets 60%-70% hypothecation loans, 30% Micro LAP, and up to 10% other secured products like gold or solar loans. Management expects the share of mortgage loans to gradually increase, which should further reduce credit costs to 3%-3.5% at max when mortgage share reaches 30-35%.

    06

    Efficiency Gains and Branch Network Expansion

    Customer acquisition remained strong, with over 44,000 new borrowers added, growing the active borrower base to 6.7 lakhs. The company plans to add only 40-50 new branches during the year, focusing on deepening presence in existing markets and improving productivity. The AUM per employee increased by 12% YoY. The opex ratio for Q1 was 8.9%, with a full-year guidance of 8.25%-8.75%, and a long-term target of 7%-7.5% within the next three years.

    This is an AI-generated summary of a publicly available earnings call transcript.