SME lending startup Aye Finance has raised a sum of $10 million in debt funding from responsAbility Investments AG, a Switzerland-based impact investor. The funding round has come soon after the startup had raised $7.7 million in funding (INR 55 Cr) from DCB Bank through a securitization deal just a few weeks back.
Aye has raised $5 million from responsAbility through NCDs (non-convertible debentures) , with the balance $5 million being issued from a securitization pool raised by responsAbility, arranged by J.P Morgan.
Key investors in this round include the likes of Overseas Private Investment Corporation (OPIC), the US government agency that provides seed capital to companies enabling them to mobilize the private institutional investment in the deal, and Alecta, the fifth-largest occupational pension provider in Europe who have invested the essential risk capital.
Sanjay Sharma, MD and Founder of Aye Finance, said,
This latest fund raise from responsAbility, which comes within three months after we raised INR 234 Cr in Series D equity round, is a validation of the trust the investor community has in our model and in our ability to achieve our mission.”
Commenting on the deal, Jaskirat S Chadha, Head of Financial Institutions Asia Pacific at responsAbility added-
responsAbility-managed funds have been providing funding for financial institutions targeting micro, small and medium-sized enterprises for the past 15 years. Through this transaction we bring global markets a step closer to the impact created by our partner institutions. We are pleased to have partnered with Aye Finance that has successfully built a scalable credit delivery channel aimed at financially excluded borrowers by combining its strong market understanding with technology.”
Aye Finance, with an employee size of 2500 employees and a branch network of 165 branches in 18 states, claims to be the lone Indian fintech company to be funded by CapitalG (the erstwhile Google Ventures) along with 5 marque investors in SAIF Partners, Falcon Edge Capital, Accion, LGT and MAJ Invest.
Aye is going to use these funds to grow its loan book, while also enabling affordable and customized credit solutions to the credit-starved micro enterprises in India. As of July 2019, the company has claimed to have an AUM of INR 1,150 Cr with 91,000 active customers.
Prior to this, the fintech lender has raised over INR 480 Cr in an equity round, and approximately INR 1100 Cr through a variety of debt funding rounds.
Further, its CSR interventions work towards building multi-dimensional entrepreneurial skills of micro business owners and equipping them with tools to adapt to the evolving business landscape. The company has also been able to pass the recent NBFC crisis after the IL&FS default crisis in October 2018.
The opportunity in the Indian SME lending market is huge. According to a May 2019 IBEF report, the public deposit of NBFCs increased from $293.78 million in FY19 to $4.95 billion (INR 319.05 Bn) in FY18, registering a compound annual growth rate (CAGR) of 36.86%. Also, as Union finance minister Nirmala Sitharaman’s 2019 budget announced the issuance of INR 70,000 Cr to banks, it will further help recapitalise NBFCs.
However, analysts believe that NBFCs will continue to face a liquidity crunch. Thus, the small, regular funding support received by Aye Finance from its investors speaks for itself.