/** This MDX is based strictly on the provided investor presentation (Q4FY26) and the earnings call transcript dated April 28, 2026, plus the exchange cover letters. */

Aye Finance Q4FY26: Collections firm up, credit costs ease, and FY27 guidance targets a higher RoA

Aye Finance Limited closed FY26 with a stronger fourth quarter, backed by improving collections and a continued decline in credit costs. In Q4FY26, total income rose to INR 516 crore versus INR 420 crore in Q4FY25, while profit after tax increased to INR 86 crore from INR 41 crore. Assets under management (AUM) stood at INR 7,044 crore as of March 31, 2026.

For the full year, total income was INR 1,797 crore and PAT was INR 194 crore. Management positioned FY26 as a year of gradual recovery for India’s micro enterprise segment, with a choppy first half followed by a steadier second half. The company also highlighted its IPO in February 2026 as a balance sheet milestone, although the primary raise amount differs between the investor presentation (INR 710 crore) and the concall opening remarks (INR 1,010 crore).

A lender built around micro enterprises, with a branch-led footprint

Aye Finance describes itself as an RBI-registered NBFC focused on underserved micro MSMEs, with underwriting built around more than 70 business clusters. As of FY26, it reported around 6.4 lakh active customers, 571 branches across 18 states and 3 union territories, and more than 10,800 employees.

Portfolio composition is presented as granular, with a mix of hypothecation loans and mortgage loans. The company emphasises an in-house origination model, a technology-led underwriting stack, and multi-tiered collections using digital, field, and legal channels.

Q4FY26 performance: higher NII and profitability, with better operating leverage

In Q4FY26, net interest income rose to INR 305 crore from INR 252 crore in Q3FY26. Pre-provisioning operating profit increased to INR 191 crore from INR 137 crore in Q3FY26. The company reported an improvement in return ratios in Q4FY26, with RoA at 4.6% and RoE at 16.0% (noted as post capital infusion).

A key driver highlighted by management was collections. Non-OD collection efficiency improved through the second half of the year, reaching 99.5% in March 2026. PAR X also improved to 6.88% in Q4FY26 from 7.64% in Q3FY26.

Asset quality: steady month-on-month improvement, but credit costs still normalising

The presentation shows sequential improvement in both collection efficiency and delinquency metrics between October 2025 and March 2026. Non-OD collection efficiency moved from 99.1% in October 2025 to 99.5% in March 2026. Bucket 1 collection efficiency improved from 51.8% to 62.5% over the same period. PAR X reduced from 8.0% in October 2025 to 6.9% in March 2026.

Management linked this to tighter underwriting, deeper use of data-driven early warning systems, and more disciplined collections execution. It also acknowledged that the benefit to credit costs can lag improvements in early-stage delinquencies because of the existing NPA pool from the earlier volatile lending environment.

On provisioning, as of March 31, 2026 the company disclosed total ECL provisions of INR 267 crore on gross loans outstanding of INR 6,535 crore, with total provision percentage at 4.09% (and an effective provision stated as 4.2% excluding certain CGFMU loans). It also disclosed PCR at 63.66%.

Product mix: mortgage share rising, with a stated stability objective

As of March 2026, the company disclosed an AUM split across product categories: mortgage loans at 21.6%, secured hypothecation loans at 39.8%, unsecured hypothecation loans at 37.1%, and Saral property loans at 1.5%.

Management stated in the concall that mortgage loans were around 23% of the portfolio and the medium-term intent is to move this to around 30% to 35% over the next two to three years. The rationale presented is that longer tenor mortgage assets can increase AUM stability and long-term profitability, even though blended yields can soften.

The company also described operational investments behind this push, including deploying dedicated staff for a primary mortgage channel and maintaining branch coverage for the mortgage push.

Funding and liquidity: diversified lenders, improving borrowing costs, and no ALM mismatch

Aye Finance disclosed a diversified lender base, with borrowings sourced from banks, financial institutions, and development financial institutions. It also reported a reduction in borrowing costs across FY26 quarters, with Q4FY26 cost of borrowing at 10.87% and incremental cost at 10.13%.

On the balance sheet, borrowings were INR 5,018 crore as of March 31, 2026, while cash and bank balance stood at INR 1,090 crore. Networth increased to INR 2,533 crore and CAR improved to 42.2%.

The ALM table in the presentation states that cumulative inflows exceed outflows across all disclosed tenor buckets, and explicitly notes no ALM mismatch.

FY27 guidance: higher RoA targeted through lower opex and credit costs

The investor presentation provides explicit FY27 guidance. AUM growth is guided at 25% to 30%. NIM is guided at 14.25% to 14.75%. The opex cost ratio is guided to decline to 8.25% to 8.75% from 9.6% in FY26. Credit cost is guided at 3.5% to 4.0%.

Management also outlined a three-year vision that targets a normalized credit cost of 3.25% to 3.75%, RoA of 4.0% to 4.5%, RoE of 17% to 20%, and AUM CAGR of 28% to 33%.

Separately, during Q and A, management said it is evaluating at least one new product launch for the same customer segment, with gold loans and solar-based lending cited as possible ideas, subject to market survey work.

Takeaways

Aye Finance enters FY27 with stronger end-of-year collection performance and a stated intent to convert that momentum into lower credit costs and better operating efficiency. The near-term investor monitorables are whether PAR metrics continue to improve, whether credit costs move into the guided range, and whether the company can deliver a structurally lower opex ratio without slowing AUM growth. The company’s guidance is explicit, and FY27 is positioned as a year in which a higher RoA becomes the central deliverable.