British International Investment backs India’s Aye Finance in $37M funding | TechCrunch

Aye Finance, an Indian startup that offers its digital lending platform to small firms, has raised $37.18 million in a fresh funding round led by British International Investment, as it looks to continue to help micro enterprises grow their businesses and employees expand their incomes.

The Series F round, which takes Aye’s total fundraising to nearly $200 million, involves the participation of Waterfield Fund of Funds and the startup’s existing investor A91 Partners. In 2020, the startup raised $27.5 million in its Series E funding round led by Alphabet’s CapitalG.

Founded in 2014, Aye — means “Yes” in English and “Income” in Hindi — provides business loans in the form of mortgage, hypothecation, and term credit to underserved micro-enterprises that find it challenging to secure their working capital requirements from traditional lenders, including banks. The startup uses a mix of its in-house technology and analytics to offer a range of financial solutions to enterprises based on their need.

To date, the 10-year-old company has touted to have disbursed over $959 million of credit to over 700,000 unorganized businesses. It competes with the likes of Capital Float, Lendingkart and Indifi, which all work toward offering credit to small enterprises in the South Asian nation.

One key reason for startups like Aye Finance and others to gain enough traction in India is the lack of credit for small businesses.

India is home to over 63 million micro, small and medium-sized businesses, which contribute to nearly 30% of the country’s gross domestic product as well as over 43% of all exports and employ over 123 million people, per government data. The government does consider the importance of these businesses in the country’s overall growth and has introduced a number of initiatives to ease their credit requirements. However, several small businesses still find it hard to get funds to start and sustain their operations, as some government schemes and programs’ eligibility requirements do not match their business models or scale, while some involve lengthy processes. Startups like Aye are utilizing that gap by offering credit through their platforms.

“We believe there is immense potential in lending to underserved micro enterprises, and the fresh capital will provide a strong fillip to our compounding story,” said Sanjay Sharma, co-founder, MD and CEO of Aye Finance, in a prepared statement.

“Aye Finance is on a growth journey, and we are delighted to partner with BII, who have a deep understanding of the financial services sector in India. This equity raise is a testament to the strong conviction that investors have in a high-quality franchise such as Aye.”

The Gurugram-headquartered startup, which has a presence across 22 states through its 395 offices, says it has over $959 million of assets under management and delivered over $9.59 million of profit after tax in the first six months of the financial year 2024.

“Our investment in Aye Finance underscores our commitment to back companies that have a strong development impact philosophy and promote financial inclusion for India’s underserved groups. The team from Aye stands out for its dedication and experience in offering tech-enabled financing solutions with high potential for scalability,” said Gaurav Malhotra, Director for Financial Services, British International Investment.