- IPO priced at a 1.3x post‑issue P/BV – below peer average.
- Net interest income surged 37.9% YoY, signaling strong top‑line momentum.
- Qualified Institutional Buyers (QIB) subscribed 1.39×, indicating smart‑money interest.
- Grey market premium flat at ₹0 – the market is waiting for a catalyst.
- Peer P/E spread: SBFC Finance at 27.3x vs Five‑Star at 12.1x – where does Aye sit?
You ignored the fine print on Aye Finance’s IPO – that could cost you a winning trade.
Why Aye Finance’s IPO Pricing Beats Peer Valuations
At the upper price band the issue trades at a post‑issue price‑to‑book (P/BV) of 1.3x, comfortably under the sector median of roughly 1.7x. The lower valuation reflects two real risk factors: elevated Gross Non‑Performing Assets (GNPAs) and higher credit costs. Yet, the discount creates a risk‑adjusted entry point for investors who can tolerate moderate credit exposure.
Comparatively, SBFC Finance is valued at a P/E of 27.3x, while Five‑Star Business Finance sits at a modest 12.1x. Aye’s implied FY25 earnings multiple hovers around 14x, placing it squarely between the two. This mid‑range multiple suggests the market perceives Aye as a growth story with manageable risk, rather than a distressed asset.
How the NBFC Sector’s Recovery Shapes Aye Finance’s Growth
The non‑banking financial company (NBFC) sector has been emerging from a period of heightened stress, driven by tighter liquidity and regulatory scrutiny. Recent RBI data shows a gradual improvement in asset quality across the sector, with GNPA ratios slipping back toward 4%‑5% from double‑digit peaks.
Aye Finance has ridden this recovery, expanding its asset under management (AUM) by 47.4% between FY22 and FY25 to ₹6,027.6 crore. Its net interest income (NII) jumped 37.9% YoY, reflecting both volume growth and a slight improvement in yield. The company’s focus on micro‑scale MSMEs—an under‑banked segment—offers a built‑in growth engine as the Indian economy continues to formalise its small‑business base.
Peer Comparison: SBFC Finance vs Five‑Star Business Finance vs Aye Finance
When measuring profitability, Aye’s return on equity (ROE) and return on assets (ROA) have trended downward, indicating mounting operational pressure. In contrast, SBFC Finance maintains a healthier ROE of around 12% due to a more diversified loan book, while Five‑Star Business Finance enjoys higher ROA thanks to tighter credit underwriting.
However, Aye’s loan book is heavily weighted toward unsecured working capital loans—a high‑growth, high‑margin niche. This specialization can translate into superior net interest margins (NIM) if credit risk remains contained. The trade‑off is higher exposure to economic cycles that affect MSME cash flows.
Historical Patterns: What Past NBFC IPOs Teach Us
Looking back at the 2019‑2021 wave of NBFC listings, three patterns emerge:
- IPO pricing at a discount to peers often yields a 12‑18% first‑year upside once the market digests the fundamentals.
- Companies with strong AUM growth but lagging ROE tend to catch up after 12‑18 months as operational efficiencies improve.
- Grey market premiums (GMP) that start at zero can surge post‑listing if earnings guidance is met or exceeded.
Aye’s current GMP of ₹0 suggests the market is waiting for earnings confirmation. If Aye can sustain its NII growth, a modest premium could develop in the weeks following the February 16 listing.
What the Grey Market Premium (GMP) Signals for the Listing
A flat GMP indicates two possibilities: either investors are pricing in the disclosed risks, or they lack sufficient information to take a stance. In past cases, a zero GMP has been followed by a breakout rally once post‑IPO financials are released and meet expectations.
Given Aye’s solid profit growth—₹175.3 crore net profit in FY25 versus ₹171.7 crore the prior year—there is room for a positive re‑rating if the company maintains its loan‑growth trajectory.
Investor Playbook: Bull vs Bear Cases
Bull Case: The IPO’s 1.3x P/BV offers a margin of safety. Continued AUM expansion and a recovering NBFC sector could lift earnings, driving the P/E toward the peer median and delivering 15‑20% upside within 12 months.
Bear Case: Elevated GNPAs and a modest decline in ROE signal operational strain. A slowdown in MSME credit demand or a resurgence of credit defaults could compress margins, leading to a flat or negative performance in the near term.
For long‑term investors comfortable with measured credit risk, the “Subscribe for Long Term” rating aligns with a strategic allocation to the MSME lending niche. For short‑term traders, the lack of GMP and modest retail subscription (0.70×) suggest caution until price action confirms momentum post‑listing.