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    AYE

    AYE
    Financial Services·28 Apr 2026
    Management Summary

    AYE Finance Limited reported a strong Q4 FY26, driven by robust AUM and disbursement growth, significant profit increase, and improved asset quality metrics. The company successfully completed its IPO, strengthening capital adequacy. Management highlighted consistent reduction in credit costs and a strategic shift towards a higher proportion of mortgage loans, while maintaining a positive outlook for FY27 with targets for growth, profitability, and further cost reductions.

    Highlights

    6

    • Assets under management grew 27% YoY to INR7,044 crores, with sequential 6% QoQ growth.

    • Disbursements for Q4 FY26 grew 26% sequentially to INR1,655 crores.

    • Profit after Tax (PAT) for Q4 FY26 increased 110% YoY and 100% QoQ to INR86 crores.

    • Non-OD collection efficiency improved from 99.1% in October '25 to 99.5% in March '26.

    • Credit costs reduced to 4.3% in Q4 FY26 from 4.67% in Q3 FY26, marking the fifth consecutive quarterly reduction.

    • Capital adequacy strengthened to 42.2% following the successful IPO in February '26, which raised INR1,010 crores.

    Concerns

    2

    • First half of FY26 was marked by tighter liquidity conditions, elevated credit costs, and macro headwinds on small businesses, though these were addressed in H2 FY26.

    • Increasing proportion of mortgage loans in the portfolio is expected to exert some pressure on yields, though management anticipates compensation through improved operating expenses and credit costs.

    Key financials

    Metrics

    22

    Periods

    4

    Headline

    6
    • Assets Under Management
      ₹7,044 Cr
      YoY+27%QoQ+6%
    • Non-OD Collection Efficiency (Mar '26)
      99.5%
    • Stage 2 Bucket
      1.1%
    • GNPA (Mar '26)
      4.8%
    • Provision Coverage Reserve (PCR)
      64%

    Q4 FY26

    9
    • Disbursements
      ₹1,655 Cr
      QoQ+26%
    • Profit
      ₹86 Cr
      YoY+110.0%QoQ+100%
    • Net Interest Margin
      16.4%
    • Overall Cost of Borrowings
      10.9%
    • Incremental Cost of Borrowings
      10.1%

    FY26

    4
    • Disbursements
      ₹5,169 Cr
      YoY+20%
    • Profit
      ₹194 Cr
      YoY+13%
    • Net Interest Margin
      14.7%
    • Total Income
      ₹1,796 Cr
      YoY+20%

    FY26 Portfolio Share

    3
    • Mortgage Loans
      23%
    • Secured Hypothecation Loans
      40%
    • Unsecured Hypothecation Loans
      37%

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    The company's capital adequacy stood at 42.2%, significantly strengthened by the IPO proceeds. Lending activities qualify for priority sector lending norms, ensuring adequate liquidity from markets. The fund profile is diversified across banks, NBFCs, and capital market instruments, including NCDs, to enhance stability and flexibility.

    Guidance & targets

    13
    CategoryTargetPriority
    Growth
    AUM Growth
    25-30%
    		High
    Credit Cost
    Credit Cost
    3.5-4%
    		High
    Credit Cost
    Credit Cost
    3-3.25%
    		High
    Operating Expense
    Operating Expense Ratio
    8.25-8.75%
    		High
    Operating Expense
    Overall Opex Growth
    15%
    		High
    Profitability
    ROA
    4-4.5%
    		High
    Profitability
    ROE
    high teens
    		Medium
    Cost of Borrowing
    Cost of Borrowing Reduction
    25-35 bps
    		High
    Product Mix
    Mortgage Loan Book Share
    30-35%
    		High
    Asset Quality
    PAR X (PAR 1+)
    below 6% (5.5-6%)
    		High
    Asset Quality
    PAR X (PAR 1+)
    3.25-3.75%
    		Medium
    Asset Quality
    Mortgage PAR 90
    2-2.5%
    		High
    Provisioning
    Stage 3 Provision Coverage Ratio
    above 60%
    		High

    AUM Growth

    FY27
    Current27% YoY (FY26)
    Target25-30% growth

    Why it matters

    To assess if the company can maintain its strong growth momentum as guided.

    Our expectation is that for the guidance would be that for FY26, we will target a growth in the range of 25% to 30%.

    How to verify

    key_financials.metrics[label='Assets Under Management'].yoy_growth

    Risks & concerns

    4
    RiskSeverity

    Tighter liquidity and macro headwinds in H1 FY26

    First half of FY26 saw tighter liquidity conditions, elevated credit costs, and macro headwinds on small businesses, but the company remained disciplined and focused on portfolio quality, leading to improvements in H2. — Management acknowledged

    low

    Impact of global geopolitical events (West Asia) and local issues (LPG) on micro-MSMEs

    Management believes the micro-MSME segment is recovering and is insulated from organized industry trends, showing no adverse impact from West Asia events in March data, with early warning metrics in place. — Management downplayed

    low

    Yield compression due to increasing share of mortgage loans

    While a higher proportion of mortgage loans typically exerts some pressure on yields, management expects this to be compensated by improvements in operating expenses and credit costs. — Management acknowledged

    medium

    Hardening of interest rates in the market

    Management expects the impact of hardening interest rates to be moderated by the company's priority sector lender status, projecting a 25-35 bps drop in borrowing costs for FY27. — Management acknowledged

    medium

    Q&A highlights

    6

    “Yes, I think that's a excellent question. See, for this segment, because no one has offered them any services, financial services, it becomes a white space and there are so many other products that are their need which we are aware of. So besides the business loans, they can be gold loans that they look at, they can be two-wheeler loans, even small commercial vehicle loans, etcetera, are all relevant to this segment. And we will this year focus on at least one product launch.”

    Management confirmed continued focus on MSME and plans to launch at least one new product (e.g., gold loans, solar-based lending) in FY27 to cater to the segment's broader needs.

    asked by Deepak Poddar

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q4 FY26 Performance and Annual Highlights

    AYE Finance Limited concluded Q4 FY26 with robust financial performance, reporting INR7,044 crores in Assets Under Management (AUM), reflecting a 6% sequential growth and 27% annual growth. Disbursements for the quarter reached INR1,655 crores, a 26% sequential increase. The company's Q4 profit stood at INR86 crores, marking a significant 110% year-on-year and 100% quarter-on-quarter growth. For the full fiscal year FY26, profit grew by 13% to INR194 crores, with total income at INR1,796 crores, up 20% YoY.

    02

    Consistent Asset Quality Improvement

    The company demonstrated consistent improvement in asset quality, with non-OD collection efficiency rising from 99.1% in October '25 to 99.5% in March '26. PAR X (PAR 1+) improved to 6.9% in Q4 FY26 from 7.6% in Q3 FY26. Credit costs reduced for the fifth consecutive quarter, reaching 4.3% in Q4 FY26, down from 4.67% in the previous quarter. Gross NPA (GNPA) for March '26 stood at 4.77%, a 17 basis points decline from the prior quarter, supported by a robust provisional coverage reserve (PCR) of 64%.

    03

    Strategic Product Mix Evolution

    AYE Finance has strategically evolved its product mix, with mortgage loans now comprising 23% of the portfolio in FY26, up from 12% in FY24. Secured hypothecation loans account for 40%, and unsecured hypothecation loans for 37%. The company aims to further increase the mortgage loan book to 30-35% over the next 2-3 years to enhance overall portfolio stability, anticipating that any yield compression will be offset by improvements in operating expenses and credit costs.

    04

    Advancements in Technology and Underwriting

    The company leverages its in-house data science and machine learning team to automate processes and enhance credit underwriting. A significant pilot was completed using generative AI to translate unstructured inputs, such as store images, into actionable financial assessments for underwriting trading businesses in Tier 2 and beyond cities. This multi-modal large language model, integrated with their ML system, helps estimate monthly sales for businesses like garment and grocery stores, improving formal credit extension with greater confidence.

    05

    Liability Management and Cost of Funds Outlook

    The successful IPO in February '26, raising INR1,010 crores, significantly strengthened the company's capital adequacy to 42.2%. AYE Finance continues to diversify its fund profile across banks, NBFCs, and capital market instruments. The overall cost of borrowings moderated to 10.87% in Q4 FY26, with incremental borrowings at 10.13%. Management anticipates a 25-35 basis points reduction in borrowing costs for FY27 due to the replacement of older, higher-cost debt and potential corporate rating improvements.

    06

    FY27 Outlook and Strategic Targets

    For FY27, AYE Finance targets a growth in AUM of 25-30% and expects credit costs to normalize to 3.5-4%. The operating expense ratio is projected to improve to 8.25-8.75% from 9.6% in FY26. These factors are expected to drive Return on Assets (ROA) to 4-4.5% and Return on Equity (ROE) to high teens, assuming a leverage of 4-4.5x. The company also aims to reduce PAR X to 5.5-6% and maintain Stage 3 provision coverage above 60%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.