Aye Finance Approves NCD Issuance Worth Up to 2.2 Billion Rupees

GURUGRAM — Non-banking financial company Aye Finance Limited has formally approved the issuance of rated, senior, secured, transferable, redeemable Non-Convertible Debentures (NCDs) aggregating up to ₹2.2 billion (₹220 crore). The fundraising plan includes a base issue alongside an oversubscription greenshoe option of ₹200 million (₹20 crore).

The board's approval marks another milestone in the company's systematic debt-raising schedule following its public market listing and recent credit rating upgrades. The proceeds from this debt issuance will be utilized primarily to fund disbursements to micro, small, and medium enterprises (MSMEs), strengthening the lender's liquidity profile and supporting its expanding balance sheet.

Capital Mobilization and Structure of the Debt Issuance

The proposed debt offering will be executed through a private placement mechanism aimed at institutional debt investors and qualified buyers.

Key parameters of the debt issuance program include:

• Total Target Size: Up to ₹2.2 billion (₹220 crore), comprising the core issue and a ₹20 crore greenshoe provision.

• Instrument Classification: Rated, Senior, Secured, Transferable, Redeemable Non-Convertible Debentures.

• Security & Collateral: The NCDs are backed by a first charge on a designated pool of loan assets and underlying receivables maintained by the company.

• Placement Mode: Private placement targeted at institutional entities and financial funds.

This capital placement aligns with the company’s broader strategy of maintaining a well-diversified liability mix consisting of bank borrowings, offshore development finance debt, and domestic market instruments.

Strategic Growth and MSME Market Impact

Aye Finance specializes in providing cluster-based, small-ticket business loans to previously unbanked micro-enterprises operating in manufacturing, trading, and service sectors. By deploying proprietary credit-assessment technologies and a hybrid phygital distribution network, the company addresses the structural credit gap in informal commercial markets.

Business and Operational Context

• Asset Growth: The lender recorded robust growth in its Assets Under Management (AUM), reflecting sustained credit demand among small businesses.

• Credit Rating Profile: India Ratings and Research recently upgraded the long-term debt instruments of Aye Finance to IND A+ with a Stable outlook, improving its access to competitive yield structures in local credit markets.

• Sectoral Reach: Fresh liquidity generated from the NCD program will directly support working capital requirements for micro-scale manufacturing units, neighborhood retail stores, and rural trade enterprises.

Official Statements and Regulatory Disclosures

In a regulatory filing submitted to stock exchanges, the company confirmed the board's action:

"According to official regulatory filings, the board of directors of Aye Finance Limited has approved the issuance of rated, senior, secured, listed, transferable, redeemable non-convertible debentures for an aggregate amount of up to ₹200 crore, along with a green shoe option of up to ₹20 crore, on a private placement basis."

Company management stated that the capital raised will be deployed in accordance with regulatory parameters set by the Reserve Bank of India and guidelines issued by the Securities and Exchange Board of India.

Why It Matters

Securing long-term fixed-rate debt via secured NCDs provides significant financial stability to non-banking lenders:

1. Lower Borrowing Costs: Upgraded credit ratings enable the company to lower its weighted average cost of capital.

2. ALM Matching: Long-term debenture structures align asset-liability maturity profiles, mitigating short-term liquidity mismatches.

3. Financial Inclusion: Direct expansion of capital funds translates to increased credit flow toward grass-root MSMEs.

Key Facts at a Glance

• Entity Name: Aye Finance Limited (NSE: AYE | BSE: 544699)

• Issue Value: Up to ₹2.2 billion (₹220 crore including greenshoe option)

• Instrument: Secured, Senior, Rated, Redeemable Non-Convertible Debentures

• Placement Type: Private Placement

• Primary Objective: Balance sheet expansion and MSME lending

Frequently Asked Questions (FAQs)

What is a Non-Convertible Debenture (NCD)?

A Non-Convertible Debenture is a long-term debt instrument issued by companies to raise capital from investors. Unlike convertible debentures, NCDs cannot be converted into equity shares at maturity and usually offer higher interest rates.

What is the purpose of the greenshoe option in this issue?

A greenshoe option allows the issuer to retain additional funds beyond the base issue size if demand from institutional subscribers exceeds the initial target. For Aye Finance, this includes up to ₹20 crore over the base offering.

How does this NCD issue affect retail equity investors?

While NCDs represent debt liabilities rather than equity, successful fundraising strengthens the balance sheet, lowers overall liquidity risk, and provides the necessary capital to grow the loan book, positively impacting long-term enterprise value.

Who oversees the issuance of NCDs by NBFCs in India?

Private placements and debt offerings by Non-Banking Financial Companies are regulated by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) under applicable listing and debt issuance regulations.

Source: Official disclosures filed with BSE India, National Stock Exchange of India, press releases from Aye Finance Limited, and regulatory notices from the Reserve Bank of India.