Aye Finance Limited — Q3 FY26 earnings call

Call held 13 Mar 2026

Management summary

Aye Finance reported robust Q3 FY26 performance with strong AUM and disbursement growth, driven by its micro-scale business model. While profitability was impacted by elevated credit costs and investments in the new mortgage team, the company is on track to achieve its FY26 AUM growth guidance and expects credit costs to normalize, aiming for a 4-4.5% ROA in the next three years. The company emphasized its diversified portfolio, technology-driven underwriting, and strong collection capabilities.

Highlights

  • AUM grew by 23.5% year-on-year and 5.5% quarter-on-quarter, reaching INR 6,428.57 crores as of December 2025.

  • Disbursements in Q3 FY26 stood at INR 1,310 crores, marking a 35% year-on-year growth and adding 41,015 new borrowers.

  • PAT for Q3 FY26 was INR 43 crores, an 87% year-on-year increase and 23.4% quarter-on-quarter growth, despite a one-time impact of INR 1.7 crores.

  • Collection efficiency for the non-OD bucket improved to 99.3% in December and further to 99.4% in February 2026, with bucket one efficiency rising from 42.8% in April to 60% in February 2026.

  • Net worth was augmented by INR 710 crores through the IPO, bringing the total to INR 2,483 crores post-IPO.

Concerns

  • Credit cost remained elevated at 4.67% of AUM in Q3 FY26, higher than the desired 3.5-3.75% range.

  • Operating expenses are currently impacted by the investment in the mortgage loans team, which has added over 1,400 people in the last 1.5 years.

  • Hypothecation loan approval rates have decreased from 55% to 40-45%, potentially limiting growth in this segment.

Key financials

  1. AUM ₹6,428.57 Cr +23.5%YoY
  2. Disbursements ₹1,310 Cr +35%YoY
  3. Net Worth (Post-IPO) ₹2,483 Cr
  4. Total Income ₹449 Cr +21.3%YoY
  5. NIM 14.2%
  6. PAT ₹43 Cr +87%YoY
  7. Credit Cost (Annualized) 4.7%
  8. ROA 2.8%

What they filed

Q1 FY27: revenue up 17.8%, net profit up 138.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue361 409 405 437 443 +23%515 +26%477 +18%
Net profit23 41 31 35 43 +87%86 +110%74 +139%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentShare of AUMPAR 30PAR 90
Mortgage Loans21%3.5%2.7%
Hypothecation Loans77.5%7.5%5.7%

Guidance & targets

AUM Growth

  • AUM Growth AUM Growth · FY26 · High confidence 29-30%
    we are on the trajectory to achieve our guidance of 29% to 30% growth in AUM for the full financial year 26.

    — Sanjay Sharma

  • AUM CAGR AUM Growth · next 3 years · High confidence 30%
    we are targeting to get to a consistent growth of about 30%

    — Sanjay Sharma

AUM Mix

  • Mortgage Share of AUM AUM Mix · next 3 years · High confidence 30%
    So we believe that the mortgage share of the overall portfolio should increase to about 30% which is the ideal mix.

    — Sovan Satyaprakash

Credit Cost

  • Annualized Credit Cost Credit Cost · Q4 FY26 · High confidence <4%
    So we believe that quarter 4 we should be at a quarterly annualized credit cost of less than 4% which is a good place to start the next financial year and come down to a level.

    — Sovan Satyaprakash

  • Credit Cost Range Credit Cost · next 3 years · High confidence 3.25-3.75%
    a credit cost to be kept in the range of 3.25 to 3.75

    — Sanjay Sharma

Operating Expense

  • Opex Ratio Operating Expense · next 3 years · High confidence 7-7.5%
    opex to be maintained between 7 and 7.5

    — Sanjay Sharma

Profitability

  • ROA Profitability · next 3 years · High confidence 4-4.5%
    ROA between 4 and 4.5 with adequate leverage.

    — Sanjay Sharma

Hypothecation Growth

  • Approval Rate Hypothecation Growth · coming year · Medium confidence 55%

    Previously 40-45% → 55%

    our approval rates which used to be 55% are only 45%- 40% to 43%. So clearly as we start opening up and coming back to the 55% approval rate automatically the growth of 8% or 9%-10% will get added.

    — Sanjay Sharma

What to watch in Q4 FY26

Credit Cost Normalization

next quarter (Q4 FY26) and next 3 years
Current 4.67% (Q3 FY26 annualized)
Target <4% (Q4 FY26), 3.25-3.75% (next 3 years)

Why it matters

Directly impacts profitability and ROA, a key component of the 3-year vision.

So we believe that quarter 4 we should be at a quarterly annualized credit cost of less than 4% which is a good place to start the next financial year and come down to a level. Our comfort range with respect to credit cost typically is in the 3.5% range with about gross plus 0.25% to minus 0.25%.

Risks & concerns

  • Elevated Credit Costs

    medium

    Credit cost of 4.67% of AUM in Q3 FY26 is higher than the desired 3.5-3.75% range, impacting profitability.

    Management acknowledged

  • Operating Expense Impact from Mortgage Team Investment

    medium

    Addition of over 1,400 people to the mortgage team in the last 1.5 years is currently increasing the operating expense ratio.

    Management acknowledged

  • Lower Hypothecation Loan Approval Rates

    low

    Approval rates for hypothecation loans have dropped from 55% to 40-45% due to tightened credit policies, affecting growth.

    Management acknowledged

  • Bihar Regulatory Environment and Portfolio Stress

    low

    Analyst raised concerns about the MFI bill and lower bucket 1 collection efficiency in Bihar (40%), but management stated minimal impact on their non-MFI NBFC model and strong non-OD collections (99.2-99.4%).

    Analyst downplayed

Q&A highlights

6 direct
AUM Mix and Credit Cost Trajectory Direct
So we believe that the mortgage share of the overall portfolio should increase to about 30% which is the ideal mix... quarter 4 we should be at a quarterly annualized credit cost of less than 4%... Our comfort range with respect to credit cost typically is in the 3.5% range.

Analyst sought clarity on strategic portfolio mix and the path to credit cost normalization, which management addressed with specific targets.

Asked by Shalin Kapadia

NIM Outlook for FY27 Partial
With respect to exact guidance on the NIM and numbers for FY 27, we would like to give it in the next earnings call after the year-end.

Analyst probed for future NIM guidance, a key profitability metric, but management deferred specific numbers while explaining influencing factors.

Asked by Shalin Kapadia

Bihar Portfolio Performance and MFI Bill Impact Direct
AUM concentration for Bihar is 15.5% odd in the total mix... collection in Bihar you can see is almost or for the months has been between 99.2% and 99.4% for the non-OD and even the bucket one is in the 40% sort of range... we haven't seen a challenge around our collection.

Analyst questioned a potentially stressed region; management provided specific data on Bihar's AUM share and collection efficiency, downplaying the impact of regulatory changes on their business model.

Asked by Viral Shah

Hypothecation Book Stress and Growth Outlook Direct
improvement at a overall portfolio level is being driven by the improvement in the hypothecation loan book, so both credit cost and delinquency levels of the hypothecation loan has been coming down... hypothecation loan kicker with respect to growth should be normalized in the next financial year.

Analyst inquired about the health and future growth of the largest loan segment; management confirmed improving trends and expected normalization of growth.

Asked by Chinmay Nema

Mortgage Loan End Use Monitoring and Competition Direct
we go and validate that end use within 45 days a vigilance team goes and visits the customer... many providers in the market and honestly speaking there's a fair amount of supply in the market for micro-lap product.

Analyst sought details on risk management for mortgage loans and competitive landscape; management provided insights into their verification process and market positioning.

Asked by Sameer Bhise

ROA Target and Drivers Direct
if the credit cost goes below 4 then we have at least a 67-basis points improvement from there. Operating expense because it is right now deferring the mortgage teams' cost, this will gradually drop and I think that you will see almost close to 67 basis points shaved off from there itself.

Analyst questioned the feasibility of achieving a 4% ROA; management detailed the specific drivers (credit cost and opex reduction) that would contribute to this target.

Asked by Sameer Bhise

Overall Growth Strategy and Approval Rates Direct
it will be across the country... our approval rates which used to be 55% are only 45%- 40% to 43%. So clearly as we start opening up and coming back to the 55% approval rate automatically the growth of 8% or 9%-10% will get added.

Analyst asked about the regional focus for growth and how the 30% target would be met; management clarified a pan-India approach and highlighted the significant growth potential from recovering approval rates.

Asked by Rohitash Arora

3 min read 6 chapters

Detailed narrative

Robust Growth and AUM Diversification

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.

Improving Asset Quality and Credit Cost Trajectory

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.

Profitability Drivers and Outlook

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.

Operational Efficiency and Technology Adoption

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.

Strategic Focus on Mortgage Lending

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.

Bihar Portfolio Resilience and Regulatory Impact

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.

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