AYE FINANCE

Sanjay Sharma had already spent years lending to small Indian businesses before this. He knew the gap cold.

India has millions of micro-enterprises. A welding shop.

A small garment unit. A roadside food maker.

They are too big for a tiny microfinance loan but too informal for a bank that wants audited books and collateral. In 2014 Sharma teamed up with Vikram Jetley to start Aye Finance and serve that missing middle.

The whole company exists to lend to the businesses everyone else decided were too small and too messy.

Aye Finance is a lender, plain and simple. It gives business loans to micro-enterprises and earns interest on them.

The clever part is how it decides who to trust. Most of its borrowers have no formal accounts.

So Aye groups similar businesses into clusters, like all the shoe makers in one town, and uses what it knows about that trade to judge the risk. It borrows money from banks and big funds, lends it out at a higher rate to small firms, and lives on the gap.

Simple business, hard to do well.

The core product is the small business loan, sized for a micro-enterprise and underwritten using cluster data instead of formal accounts. Loans go to manufacturing units, traders, and service businesses across India.

Aye offers secured and unsecured versions depending on the business. Around the loan it has built collections, field services, and digital tools to manage a customer base that is mostly offline.

The pitch to a small shop owner is straightforward. Get a real business loan without the paperwork a bank would demand.

The growth engine is cluster-based lending, and it is genuinely clever. Instead of demanding paperwork a tiny business does not have, Aye studies whole trades.

It learns what a typical metal workshop earns, what a normal garment unit spends, and how cash moves through that specific business. Then it uses that knowledge to underwrite loans quickly across a whole cluster of similar shops.

That let Aye grow into hundreds of branches across India and serve well over half a million businesses without drowning in bad loans.

Lending to informal micro-businesses is risky by design. These borrowers have thin records and get hit hard by any shock.

Covid was brutal for exactly this kind of customer, and Aye had to manage a wave of stress in its loan book. The cost of borrowing is another constant fight.

Aye has to raise money cheaply enough to lend profitably to small firms, which is not easy for a non-bank lender. Now, with an IPO filed, it also faces the harder scrutiny that comes with going public.

Aye Finance drew serious backers who liked its focus on real, underserved borrowers. Elevation Capital and LGT were early supporters.

In 2018 CapitalG, the growth fund inside Google's parent Alphabet, invested and gave Aye real credibility. Alpha Wave and A91 Partners came in later.

British International Investment, the UK government's development finance arm, backed it with equity ahead of the IPO. On top of equity, Aye borrows from dozens of banks and funds to finance the loans it makes.

That debt is the raw material of the whole business.