Aye Finance shares fall 8% as sequential profit drop offsets YoY surge

Aye Finance shares fell 7.6% to an intraday low of ₹175.15 on the BSE on Wednesday after the release of its April-June earnings. The sharp selloff occurred even as the small-cap non-bank lender posted a 144% year-on-year increase in net profit to ₹74.5 crore, up from ₹30.6 crore in the same period last year.

The market's negative reaction was anchored in sequential metrics, which pointed to a distinct deceleration. Profit after tax fell 13.3% from ₹85.91 crore in the preceding quarter. Total revenue also declined 7.3% sequentially to ₹477.37 crore, despite posting a 17.7% year-on-year gain. For market professionals, the immediate trajectory often carries more weight than long-distance annual comparisons.

Underlying credit metrics provided a constructive offset to the top-line and bottom-line moderation. Gross non-performing assets dropped 28 basis points from the prior quarter to 4.49%. Net non-performing assets fell 12 basis points to 1.67%. Furthermore, credit costs narrowed for a sixth consecutive quarter, falling to 4.01% from 4.30% in Q4. Management stated it expects this downward trend in credit costs to persist through the current financial year.

The lender continued to expand its balance sheet, adding 44,736 new borrowers during the quarter. This 38% year-on-year jump in customer onboarding drove a 28% annual expansion in assets under management to ₹7,324 crore. Disbursements reached ₹1,219 crore, up 22% year-on-year, keeping the company on track for its targeted 25% to 30% growth for the full year.

“Our Q1FY27 performance reflects the robustness of our cluster-based underwriting model in serving India's micro-enterprise segment. We delivered 144% improvement in PAT and 28% growth in AUM YoY, with a 29bps reduction in our credit costs," said Sanjay Sharma, Managing Director, Aye Finance. "The improvement in asset quality alongside strong profitable growth demonstrates the management’s philosophy of scaling up with good credit discipline.”

Nevertheless, the stock's decline highlights how investors in India's small-cap non-bank finance space remain highly sensitive to sequential momentum. While the lender is successfully lowering its credit costs, a gross bad loan ratio near 4.5% remains elevated by sector standards. As Aye Finance pushes to maintain its disbursement targets, the market will require further proof that this asset quality improvement is sustainable.