Concall AI

Aye Finance Limited — Q4 FY26 earnings call

Call held 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

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

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

4 periods

Headline

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%
Capital Adequacy
42.2%

Q4 FY26

Disbursements
₹1,655 Cr
QoQ +26%
Profit
₹86 Cr
YoY +110% QoQ +100%
Net Interest Margin
16.4%
Overall Cost of Borrowings
10.9%
Incremental Cost of Borrowings
10.1%
PAR X (PAR 1+)
6.9%
Credit Costs
4.3%
ROE
16%
ROA
4.6%

FY26

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

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

What they filed

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

₹ Cr · quarterly

Line item	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	361	409	405	437	443 +23%	515 +26%	477 +18%
Expenses	219	240	242	266	253	279	256
Other income	9	11	9	10	12	17	12
Interest	115	123	126	133	141	135	131
Depreciation	6	6	5	6	7	8	6
Profit before tax	30	50	41	42	54 +80%	111 +122%	97 +137%
Tax rate	25%	19%	25%	17%	21%	23%	23%
Net profit	23	41	31	35	43 +87%	86 +110%	74 +139%
EPS	1.19	2.12	1.60	1.80	2.22	3.48	3.02

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.

Capital allocation

high confidence

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.

On the liability front, the proceeds from our IPO have meaningfully strengthened our capital adequacy to 42.2%, providing a solid foundation to support our future growth. We continue to diversify our fund profile across banks, NBFCs, and capital market instruments including NCDs, which enhances both stability and flexibility of our borrowing mix. Our lending qualifies completely for priority sector lending norms and this always ensures that we have adequate and good liquidity available from the markets for our business.

Guidance & targets

Growth

AUM Growth Growth · FY27 · High confidence 25-30%

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

— Sanjay Sharma

Credit Cost

Credit Cost Credit Cost · FY27 · High confidence 3.5-4%

We also expect the credit costs to continue to normalize further and we expect to be guided in our workings on a 3.5% to 4% credit cost, supported by better portfolio quality and sustained collection efficiencies.

— Sanjay Sharma
Credit Cost Credit Cost · Q4 next financial year · High confidence 3-3.25%

And by Quarter 4 we should be in the 3% to 3.25% kind of a range in the next financial year, bringing the overall credit cost of the FY '27 below 4% mark.

— Sovan Satyaprakash

Operating Expense

Operating Expense Ratio Operating Expense · FY27 · High confidence 8.25-8.75%

Previously 9.6% → 8.25-8.75%

In FY27, we'll focus on sweating these assets to build productivity and bring operating expense ratio to the range of 8.25% to 8.75%. Remember that we ended the year with a 9.6% operating expense ratio.

— Sanjay Sharma
Overall Opex Growth Operating Expense · FY27 · High confidence 15%

Yes, about 15% overall opex growth should be able to deliver the 25% to 30% total AUM growth that we are expecting.

— Sovan Satyaprakash

Profitability

ROA Profitability · FY27 · High confidence 4-4.5%

Taken together, these factors give us confidence that we should be able to target a ROA of 4% to 4.5% and deliver sustainable and responsible growth while continuing to strengthen our core business fundamentals.

— Sanjay Sharma
ROE Profitability · FY27 · Medium confidence high teens

We do believe that with that we will deliver, try to deliver in the range of 4% to 4.5% ROA and with the leverage of 4-4.5x, we should be in the high teens in terms of ROE.

— Sanjay Sharma

Cost of Borrowing

Cost of Borrowing Reduction Cost of Borrowing · FY27 · High confidence 25-35 bps

The net effect that we believe could be an upside of about 25 to 35 basis points in our borrowing costs, which mean that we do expect a borrowing cost to reduce by 25 to 35 basis points compared to FY27.

— Sanjay Sharma

Product Mix

Mortgage Loan Book Share Product Mix · next 2-3 years · High confidence 30-35%

Previously 23% → 30-35%

Yes, I think I think we will continue to move the mortgage loan book up and today we are at 23%, we want to see it grow in the next let's say two to three years to about 30% to 35%.

— Sanjay Sharma

Asset Quality

PAR X (PAR 1+) Asset Quality · FY27 · High confidence below 6% (5.5-6%)

Previously 6.9% → below 6% (5.5-6%)

With respect to the PAR X levels, we during the complete year I think we want to bring down the PAR X to below 6%. So from the current 6.9% or so, we want to be in the 5.5% to about 6.00% or so.

— Sovan Satyaprakash
PAR X (PAR 1+) Asset Quality · 3-year forward · Medium confidence 3.25-3.75%

And I think in the three-year forward guidance, we have given a number where we expect the asset quality to be in the 3.25% to 3.75% range.

— Sanjay Sharma
Mortgage PAR 90 Asset Quality · sustainable level · High confidence 2-2.5%

Previously 2.7% → 2-2.5%

Mortgage book, I think between 2% to 2.5% is what we would be targeting the mortgage PAR 90 levels.

— Sovan Satyaprakash

Provisioning

Stage 3 Provision Coverage Ratio Provisioning · next financial year · High confidence above 60%

However, on the Stage 3 provision coverage ratio, we intend to keep it above 60% level, even though there would be a difference in mix with mortgage increasing, which should bring down the overall provision level, but we intend to keep it above 60% in the next financial year also.

— Sovan Satyaprakash

What to watch in Q1 FY27

AUM Growth

FY27

Current 27% YoY (FY26)

Target 25-30% 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%.

Risks & concerns

Yield compression due to increasing share of mortgage loans
medium

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
Hardening of interest rates in the market
medium

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
Tighter liquidity and macro headwinds in H1 FY26
low

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

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

Q&A highlights

5 direct

MSME focus and product diversification Direct

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

NIM trajectory despite capital raise and lower cost of funds Partial

On the yield, we believe that the mix because of the, first of all, the yield in hypothecation loan has not changed or has not gone down. If anything, it is stable. Mortgage loan when the mix comes in, it tends to bring our blended yield down. This is compensated, as I had mentioned, by the replacement of old debt with new debt and we have done some calculation that if we take the old stock of borrowings and whatever is falling due in the next year that is replaced with the rates that we are getting today, which is the incremental rate of 10.13%, that itself will give us a 30 to 35 basis points drop in the cost of borrowing rate.

Analyst questioned why NIMs were not higher given the IPO and lower borrowing costs. Management explained that while mortgage loans compress yields, this is offset by a projected 30-35 bps drop in borrowing costs from replacing older, more expensive debt.

Asked by Adarsh

Sustainability of non-interest income from fair value changes Direct

Now the fair value change that you are seeing is primarily driven on two aspects. One is the income or the change due to the mutual funds. The second is given the geopolitical situation, there was a there was a cross-currency swap impact that has been baked into the P&L. Now right now we are in discussion with our auditors to since this is in the P&L, we intend to move it down to OCI because that is where the real line is since this is volatile market and this is a volatile number. So we intend to move it down to the OCI. We could not do it this year because all this was happening in the middle of the year and we wanted to do it as a as a fresh start, so we'll do it in in FY27 at the beginning of April.

Management clarified that fair value changes in non-interest income are from mutual funds and cross-currency swaps, with plans to move the volatile swap impact to Other Comprehensive Income (OCI) from FY27 for better clarity.

Asked by Shalin

Credit cost trajectory and reasons for gradual reduction Direct

Shalin, with respect to the credit cost, obviously the first focus point of this entire thing is the tightening of the underwriting. That was the first focus point that we were looking at. Because it is a shorter tenure product, the tightening of underwriting relatively shows up quicker with respect to our overall book and if you look at almost 80% plus portfolio today is post this entire crisis that played out of the over-lending. The next focus area for us is the non-OD bucket where we have seen that gradual increase and as the non-OD and X DPD bucket have improved, collection efficiencies have improved, we have somehow been able to tighten the Stage 2 portfolio. However, because the early part of this entire crisis played where the slippages had happened from all the buckets, so right now there is a bulge up with respect to the NPA portfolio, NPA pool that we have. So that is the reason we have not seen a rapid decline in the overall credit cost, even though the collection efficiencies have drastically improved over the last six months to nine months window.

Management explained that while underwriting and collection efficiencies have improved, the credit cost reduction is gradual due to a 'bulge' in the NPA portfolio from earlier slippages, with expectations for further reduction by Q2/Q3 FY27.

Asked by Shalin

Profitability skewness and PAR X targets for credit cost guidance Direct

So I think with respect to pick up the first question with respect to profitability, a typical skewness of the profits are in the first half we deliver 35% to 40% of the profit value and about 60% to 65% of the profits come in H2. And that's a skewness that has been observed across years, primarily because of the improvement of disbursements in the H2 and the same also reflect on the PPOP levels. With respect to the PAR X levels, we during the complete year I think we want to bring down the PAR X to below 6%. So from the current 6.9% or so, we want to be in the 5.5% to about 6.00% or so.

Management clarified the historical H2 skewness of profits due to H2 disbursements and provided a target to reduce PAR X to 5.5-6% for FY27, down from 6.9%.

Asked by Ananga Rana

Sustainable GNPA level for mortgage loans Direct

Mortgage book, I think between 2% to 2.5% is what we would be targeting the mortgage PAR 90 levels. At a credit cost level, we would want to keep it below 2% level. But from a target standpoint internally we would want to keep it in the range of 2% to 2.5%.

Management set a target for sustainable mortgage PAR 90 levels at 2-2.5%, indicating their long-term asset quality expectations for this growing segment.

Asked by Rudraksh Raheja

2 min read 6 chapters

Detailed narrative

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.

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%.

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.

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.

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.

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%.

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