AYE

Aye Finance demonstrated strong growth in Q3 FY26, with AUM expanding by 23.5% year-on-year and 5.5% quarter-on-quarter, reaching INR 6,428.57 crores as of December 2025. Disbursements for the quarter were INR 1,310 crores, a 35% year-on-year increase, adding 41,015 new borrowers. The company aims to achieve 29-30% AUM growth for the full FY26 and targets a 30% CAGR over the next three years. The portfolio is well-diversified across 18 states and 3 union territories, with a granular book of 5.23 lakh loans as of December 2025.

Asset quality showed significant improvement, with non-OD collection efficiency at 99.3% in December and further improving to 99.4% in February 2026. Bucket one collection efficiency also rose from 42.8% in April to 58% in December and 60% in February 2026. Despite these improvements, the annualized credit cost in Q3 FY26 was 4.67% of AUM, which is higher than the desired 3.5-3.75% range. Management expects credit costs to fall below 4% in Q4 FY26 and normalize to the 3.25-3.75% range over the next three years.

PAT for Q3 FY26 was INR 43 crores, an 87% year-on-year and 23.4% quarter-on-quarter growth, even after absorbing a one-time^📎 impact of INR 1.7 crores. Total income for the quarter was INR 449 crores, growing 21.3% YoY and 5% QoQ. NIM remained stable at 14.21%. Profitability has been impacted by elevated credit costs and increased operating expenses due to investment in the mortgage team. However, with credit costs expected to decline and operating leverage from the mortgage team, the company targets an ROA of 4-4.5% and an opex ratio of 7-7.5% over the next three years.

Aye Finance leverages technology for efficiency, with 100% paperless loan origination and 32% of underwriting done using AI/ML models. 96.8% of customers are registered on ACH, and 84.1% of collections occur through digital modes. The company uses a cluster-based underwriting method for the remaining 68% of underwriting. The branch network, comprising 527 branches (44 new in FY26), contributes to growth, with repeat loans being a highly efficient channel, generating INR 1.8 crores in disbursements per telecaller per month.

The mortgage loan portfolio, which constitutes 21% of AUM (INR 1,350 crores as of December 2025), is a key growth driver. The company aims to increase the mortgage share of its overall portfolio to an ideal mix of 30% over the next three years. This shift is intended to increase loan tenure and reduce runoff rates. While competition exists in the micro-LAP segment, Aye Finance's focus on business loans and a robust 45-day end-use verification process differentiates its offering.

Despite concerns regarding the MFI bill and lower bucket one collection efficiency in Bihar (40%), management stated that the state's AUM concentration is 15.5% and non-OD collections remain strong at 99.2-99.4%. The company believes its business model, focused on non-MFI NBFCs lending to traders and manufacturers, makes it less susceptible to such regulatory impacts, similar to experiences in Karnataka and Tamil Nadu.