AYE Finance lands Rs 147 crore from CapitalG and others

NEW DELHI: CapitalG, the growth-stage investment arm of Google’s parent company Alphabet, has led a Rs 147 crore funding round in non-banking financial company (NBFC) AYE Finance, in the process marking its first bet in the Indian financial services sector.

The Series-C round of funding, which had Unitus Capital as the financial advisor to the transaction, saw CapitalG put in about Rs 81 crore in AYE Finance, with the latter’s existing set of backers, which includes stage and sector-agnostic investment firm SAIF Partners and impact investment firm LGT also participating.

Till date, AYE Finance, which claims to have disbursed Rs 700 crore across 60,000 loans since its inception in 2014, has raised close to Rs 250 crore across four rounds. A fourth investor, Accion, did not participate in the latest round of equity financing.

The NBFC will use the proceeds from the round to further increase its loan book, which stands at about Rs 525 crore, with a significant portion also to be allocated towards building its technology platforms.

“We are already a very well-organised technology platform, but we will use some portion of the proceeds to further upgrade it. We will be using a lot more of cloud platforms and integrate machine learning algorithms… We want to take it to the next level, which will include taking our processes on platforms, involving artificial intelligence,” Sanjay Sharma, managing director of AYE Finance, told ET.

This comes at a time when most microfinance and NBFCs — post the Andhra crisis of 2010, which almost spelt the demise of the industry — are increasingly utilising technology to not only reach out to the base-of-pyramid population, but also manage their portfolios, create new financial products and servicing of loans. “MSMEs are a major contributor to the Indian economy… However, they continue to lack access to formal credit.

We were looking for a company which serves the large demand for credit for MSMEs,” Kaushik Ghosh, India head of CapitalG, told ET. “One of the challenges here is that you need to have low cost of operations, given that these are small-ticket loans. Through the adoption of technology, AYE has been able to do that, and address a large portion of the Indian market.”

For CapitalG, the transaction marks its sixth investment in Asia’s third-largest economy. Apart from AYE Finance, the growth-stage investor has also backed FreshWorks, CommonFloor, which was later sold to Quikr, CarDekho, Practo and CueMath.

Globally, in the broader financial services space, the investor, which also counts Lyft, Stripe, Snap and Airbnb in its portfolio, has also invested peer-to-peer lender LendingClub, which went public in a much vaunted IPO in 2014.

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