Google’s CapitalG Leads US$27M Series E For Indian MSME Lender Aye Finance

Aye Finance

Aye Finance has also raised several debt funding rounds since its large venture financing

Indian microfinance fintech Aye Finance has raised INR 2.1 billion (approximately US $27.8 million at current rates) in Series E Round from existing investors, the company announced in a statement.

The round was led by Google-owned Alphabet’s independent growth fund CapitalG. Participating investors include LGT Group’s impact investing firm LGT Lightstone, alternative asset manager Falcon Edge Capital, Indian venture capital fund A91 Partners and Dutch asset management company MAJ Invest, the statement said.

It further noted that with the fresh haul, the company’s total capital raise to date has brimmed over INR 6.9 billion (around US $91.2 million at current rates).

Founded in 2014, Aye Finance is a micro, small and medium enterprise (MSME) lender that uses advanced statistical models and predictive analytics to assess credit applications even without formal documents, the company said in its statement.

The startup offers mortgage, hypothecation and term loan services to Indian MSMEs, and has disbursed INR 30 billion (almost US $400 million at current rates) by way of loans since its inception, it added.

Managing Director of Aye Finance, Sanjay Sharma noted in the statement that the investment would provide liquidity to the company to take it through the economic volatility caused by Covid-19.

“Our loans are underwritten with cluster insights and this continues to assure good repayment behavior in our portfolio. Our [customer and employee relationships and] our extensive presence on the field, supported with automation, is a huge differentiator that enables us to optimally restrict credit losses,” he also said.

The venture round comes after Aye Finance took on a number of debt financing rounds amounting to over $82 million, as well as $20 million in secondary market financing, according to data available on Crunchbase.

The company had also earlier raised a Series D round for INR 2.3 billion (approximately $30 million) in March 2019. The round was led by Falcon Edge Capital, with participation from LGT Group’s LGT Capital Partners, MAJ Invest and CapitalG.

Co-founder and Partner at Falcon Edge Capital Navroz D. Udwadia said in the statement that the firm “focused on MSME and SME lending as a significant yet under-served financing opportunity with healthy unit economics and a large, fragmented addressable market.”

“We are excited to continue to back Aye Finance on this next leg of growth as they bring credit to India’s under-served MSMEs via a thoughtful and risk adjusted cluster-based approach,” he added.

Micro-credit options are a critical financing route for MSMEs in India, which has a large unorganized sector, to whom formal means of financing are often unavailable. India’s unorganized workers account for anywhere from 80% to up to 93% of the country’s total workforce.

Further, about a third of Indian MSMEs are permanently closing for business amidst the economic shocks to the sector due to Covid-19, and 61% are looking to downscale in the short term, despite relief packages announced by the government (which have since come under the radar of financial analysts).

Indian MSMEs are also severely underbanked. While they contribute significantly to the country’s gross domestic product (GDP), only about 8% of these companies are served by formal credit channels, with non-banking financial companies (NBFCs) and informal sector lenders filling in the gap.

This creates a large avenue for lending platforms such as Aye Finance, Vivriti Capital, and fintech developers Setu, to leverage fintech know-how in a mobile-first country, and provide credit relief through accessible channels for MSMEs in the subcontinent.

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