Aye Finance, an Indian non-banking financial company focusing on MSME loans, has received approval to issue up to INR equivalent of $15 million through senior secured non-convertible debentures. The funds aim to strengthen its capital base and lend further to small businesses across India.
- Issuance of senior secured debentures worth $15 million.
- Debentures to be listed on BSE’s Wholesale Debt Market segment.
- Funds secured by pledged loan assets with a 1.1X coverage ratio.
What happened
Aye Finance’s working committee approved issuing senior, secured, rated, and listed non-convertible debentures totaling up to approximately $15 million. These debentures will be privately placed with a face value of ₹1 lakh each and will mature after five years. The issuance is scheduled for June 25, and the securities will be listed on the Bombay Stock Exchange's Wholesale Debt Market segment.
The coupon rate will depend on currency or interest hedging arrangements. Interest payments will be made semi-annually, and the principal will be repaid in five equal installments starting 1.5 years after issuance. The company has committed to providing first-ranking charge on pledged loan assets and receivables as security, maintaining asset coverage at least 1.1 times the outstanding debenture amount.
Why it matters
This debt raise follows Aye Finance’s recent IPO, where it raised substantial fresh equity to enhance its Tier I capital base. Utilizing debt instruments like non-convertible debentures is a common approach among NBFCs in India to diversify funding sources and manage capital adequacy requirements without immediate equity dilution.
For Aye Finance, which focuses on providing small-ticket business loans to MSMEs, the raised capital will support growth and balance sheet strengthening. With an AUM exceeding ₹7,000 crore and strong recent profit growth, the company demonstrates resilience and ambitions to expand amid competitive lending markets.
What to watch next
Market participants will be attentive to the coupon rate set on these debentures given the hedging agreements and investor appetite for secured NBFC debt. Timely interest and principal payments will be critical to maintain investor confidence and avoid default penalties, which carry an additional 2% interest over the coupon rate on overdue amounts.
Furthermore, analysts and investors will watch Aye Finance’s operational metrics and asset quality evolution in the coming quarters, especially as funding costs and loan performance amid India’s dynamic MSME sector will impact the company’s credit profile and future capital raising paths.