Aye Finance Q4 FY26: PAT Up 110%, AUM at ₹7,044 Cr, GNPA Still 4.77% — The MSME Lending Detective Story

1. At a Glance

Aye Finance has walked into the listed market with a very NBFC-style plot: fast AUM growth, improving quarterly profit, fresh IPO capital, and asset quality that still demands a magnifying glass. Q4 FY26 looks strong on the surface: AUM rose 27% YoY to ₹7,044 crore, PAT jumped 110% YoY to ₹86 crore, and Non-OD collection efficiency improved to 99.5% in March 2026. But this is micro-MSME lending, not a fixed deposit brochure. GNPA was still 4.77%, NNPA 1.8%, credit cost 4.30% in Q4, and the borrower base is exactly the segment where one weak mandi season, delayed payment cycle, or local disruption can turn Excel sheets into crime scenes. The IPO brought ₹710 crore of primary capital, strengthening the balance sheet, but the real test now is simple: can Aye grow without letting delinquencies grow faster?

2. Introduction

Aye Finance is an NBFC-Middle Layer focused on lending to micro-scale MSMEs. These are small businesses, often under-documented, often outside the comfort zone of banks, and usually too small for traditional underwriting to handle neatly.

The company offers secured and unsecured business loans, including hypothecation loans, mortgage loans, and property-backed products. Its average ticket size is around ₹1.8 lakh, which tells us the customer is not a large corporate borrower wearing a suit. This is the kirana, dairy, trader, small manufacturer, service provider and local enterprise borrower.

The Q4 FY26 numbers show improvement. Total income was ₹516 crore, up 23% YoY. PAT was ₹86 crore, up 110% YoY. AUM reached ₹7,044 crore. Disbursements were ₹1,655 crore in Q4 FY26.

But the real debate is not growth. The real debate is risk-adjusted growth.

Aye Finance is trying to prove that lending to under-served micro-enterprises can be scaled with cluster-based underwriting, branch-led collections, AI/ML tools, and repeat-loan economics. Management had earlier said in the March 2026 concall that credit cost had been reducing for four consecutive quarters and expected Q4 credit cost to trend below 4% annualised. Q4 came in at 4.30% on average total assets, so improvement happened, but the detective still has questions.

3. Business Model – WTF Do They Even Do?

Aye Finance lends money to micro-businesses that traditional banks often avoid because their documents are messy, thin, or missing. Banks like GST returns, audited books, clean bank statements, and predictable behaviour. Aye’s customers may have business activity, but not always bank-grade paperwork.

The company solves this with a “business cluster” approach. It studies more than 70 business clusters and underwrites based on cash flows, business type, local understanding, field visits, and technology-backed risk models.

Product mix as of March 2026:

Product	AUM Share
Unsecured Hypothecation Loans	37.1%
Secured Hypothecation Loans	39.8%
Saral Property Loans	21.6%
Mortgage Loans	1.5%

The important point: management insists these are business loans, not consumption loans. That matters because if the loan is funding working capital, inventory, or business expansion, repayment capacity is linked to business cash flows. If it quietly becomes a wedding loan wearing a business-loan moustache, the risk changes completely.

The company operates through 571 branches across 18 states and 3 union territories, with around 6.4 lakh active customers. It calls this “phygital”: branch-led sourcing and collections, supported by digital underwriting and analytics.

4. Financials Overview

Particulars	Latest Quarter Q4 FY26	Same Quarter Last Year Q4 FY25	Previous Quarter Q3 FY26
Revenue / Total Income	₹516 Cr	₹420 Cr	₹449 Cr
EBITDA equivalent / PPoP	₹191 Cr	₹146 Cr	₹137 Cr
PAT	₹86 Cr	₹41 Cr	₹43 Cr
Basic EPS	₹3.89	₹2.12	₹2.22

Q4 FY26 was clearly stronger. PAT doubled QoQ and rose 110% YoY. PPoP also improved sharply, which means the operating engine performed better before credit cost and tax.

But NBFCs are not judged only by profit. They are judged by asset quality, cost of funds, credit cost, and whether growth is being bought by taking weaker borrowers.

Management had spoken in the March 2026 concall about tightening approval rates, improving collections, and reducing credit cost. Q4 does show progress: PAR X improved to 6.88%, GNPA improved QoQ to 4.77%, and collection efficiency reached 99.5% in March 2026. So management did broadly walk the talk on collections and asset-quality direction. But credit cost was still high enough to keep the auditor’s eyebrow raised.

5. Valuation Discussion – Fair Value Range Only

Current market cap: ₹3,667 crore
Current price: ₹148
FY26 PAT: ₹194 crore
FY26 basic EPS from investor presentation: ₹9.73
FY26 diluted EPS: ₹9.60
Screener EPS: ₹7.85
Stock P/E shown: 18.9x

Method 1: P/E Method

Using market cap / FY26 PAT:

₹3,667 crore / ₹194 crore = 18.9x P/E

Using current price / diluted EPS:

₹148 / ₹9.60 = 15.4x P/E

This difference exists because post-IPO share count and reported EPS bases can differ across sources. For conservatism, the market-cap-to-PAT P/E of 18.9x is cleaner for valuation discussion.

Educational P/E range:

Multiple	PAT Base	Implied Equity Value
16x	₹194 Cr	₹3,104 Cr
20x	₹194 Cr	₹3,880 Cr
22x	₹194 Cr	₹4,268 Cr

Method 2: EV / EBITDA Method

Enterprise Value: ₹7,721 crore
EV/EBITDA: 9.56x

Implied EBITDA:

₹7,721 crore / 9.56 = around ₹808 crore

Educational EV/EBITDA range:

Multiple	EBITDA Base	Implied EV
8x	₹808 Cr	₹6,464 Cr
10x	₹808 Cr	₹8,080 Cr
11x	₹808 Cr	₹8,888 Cr

For NBFCs, EV/EBITDA is less elegant than P/B, P/E, RoA and credit-cost analysis, but it still gives a broad operating-profit valuation check.

Method 3: DCF Style Earnings Method

Using FY26 PAT of ₹194 crore as the base profit pool, a simple educational DCF-style framework depends heavily on future growth, credit cost, and discount rate.

Aye’s FY27 guidance says AUM growth of 25–30%, RoA of 4.0–4.5%, credit cost of 3.5–4.0%, and NIM of 14.25–14.75%. These are management projections, not guaranteed outcomes.

A conservative fair value band from these three methods would sit around ₹3,100 crore to ₹4,300 crore equity value, depending on whether the market rewards growth or punishes asset-quality risk.