Aye Finance Surges 5% Following IIFL Capital's Initiation of Coverage with a Buy Rating

Aye Finance Share Price Sees Healthy Buying Interest Following IIFL Capital's 'Buy' Rating

On Tuesday, 19 May, shares of small-cap non-banking financial company (NBFC) Aye Finance witnessed significant buying interest in intraday trade. This follows the initiation of coverage on the stock by domestic brokerage firm IIFL Capital, which has assigned a 'buy' rating to Aye Finance shares.

Aye Finance shares opened at ₹130.05 against their previous close of ₹128.20, and rose as much as 4.7% to an intraday high of ₹134.25. At around 11:10 am, the small-cap NBFC stock was 4.41% up at ₹133.85, indicating a strong potential for further gains. This marks the second consecutive session of gains for Aye Finance, following a 2.3% rise in the previous session.

IIFL Capital's coverage on Aye Finance has set a target price of ₹180, implying a 40% upside potential for the stock. According to the brokerage firm, Aye Finance trades at similar multiples to microfinance institution (MFI) peers and 30-50% discount to micro, small, and medium enterprise (MSME) peers, despite having a more secured book and superior asset quality (AQ) outcomes versus MFIs and comparable returns trajectory versus MSME peers.

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The key statistics highlighted by IIFL Capital indicate that Aye Finance currently trades at FY28 price-to-book (PB) and price-to-earnings (PE) multiples of 0.9 times and 7 times, respectively. However, IIFL expects the stock to trade at FY28 PB and PE multiples of 1.4 times and 10 times, respectively, by the end of FY29, based on an expected return on assets (ROA) and return on equity (ROE) of 4.1% and 14.5%, respectively.

IIFL Capital has also highlighted that Aye Finance is a middle-layer NBFC lending to underpenetrated micro-MSMEs, with assets under management (AUM) of ₹7,000 crore and a granular ticket size of ₹2 lakh. The brokerage firm has underscored the stock's geographic diversification, with the top 5 states contributing 57% of AUM, compared to 67-97% for peers. This is supported by 100% in-house sourcing and cluster-based underwriting designed to address the informal nature of the segment.

Aye Finance has been witnessing healthy buying interest recently, following its listing on 16 February this year. Over the last month, the stock has gained 13% compared to a 4% fall in the Sensex. The stock hit its record high of ₹161.50 on 11 May after hitting a record low of ₹88.40 on 2 April this year. The current market capitalisation of the stock is around ₹3,300 crore, categorising it as a small-cap stock in India.

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