Non-banking financial company Aye Finance Pvt. Ltd has raised Rs 147 crore ($21.5 million) in a Series C round of funding from CapitalG as well as existing investors SAIF Partners and LGT Impact Ventures.
The company will use the funds to grow business, it said in a statement on Monday.
Aye Finance provides working capital and business development loans to micro and small enterprises using a cluster-based approach, supported by a proprietary underwriting methodology. It operates in 10 states and has 73 branches.
A March report by ratings firm ICRA said Aye Finance identifies business clusters and performs a preliminary market research to understand the dynamics of the cluster by interacting with buyers, suppliers and manufacturers. Once a cluster is selected, the company opens a branch and starts lending to that cluster.
Sanjay Sharma, founder and managing director at Aye Finance, said the company has used data models and technology to provide affordable business loans to micro enterprises across India.
He added that CapitalG’s access to Google's expertise in scaling businesses using analytics and technology will supplement Aye Finance’s approach. CapitalG is the growth-equity investment arm of Google parent Alphabet Inc.
“MSMEs form the backbone of the Indian economy and contribute a large portion of its GDP. However, they lack access to formal credit. Over the last few years, Aye has proven that their model is one of the most efficient ways to deliver credit to underserved MSMEs across industry clusters,†said Kaushik Anand, India head at CapitalG.
California-based CapitalG makes late-stage investments in tech firms across the US, India and China. It was formerly known as Google Capital.
In India, it has invested in math learning startup Cuemath, digital healthcare platform Practo, cloud-based customer engagement platform Freshworks and Girnar Software, which owns auto portals CarDekho.com and Gaadi.com.
Gurugram-based Aye Finance was founded in 2014 by Sanjay Sharma and Vikram Jetley, both former executives at Ujjivan Financial Services, the holding firm for Ujjivan Small Finance Bank.
As on 31 March 2018, the company’s outstanding loan portfolio stood at Rs 469.15 crore, according to ICRA.
In November 2016, Aye Finance had closed its Series B funding round at $10 million led by Zurich-based LGT Impact Ventures and existing investors SAIF and Accion.
In February 2015, SAIF Partners and Accion had co-invested an undisclosed sum in the company and followed it up with $3 million infusion in December 2015.
Bengaluru-based investment banking firm Unitus Capital acted as the financial adviser to Aye Finance on the latest transaction.