Google’s investment fund CapitalG backs small business lender Aye Finance; leads new funding round

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Updated: Jun 24, 2020 5:18 PM

Credit and Finance for MSMEs: The investment was led by Google’s private equity fund CapitalG while existing investors LGT Lightstone, Falcon Edge Capital, A91 Partners and MAJ Invest also participated.

Launched in 2014, Aye Finance has disbursed Rs 3,000 crores to micro-enterprises.

Credit and Finance for MSMEs: MSME lender Aye Finance has secured Rs 210 crores in its Series E round of funding. The investment was led by Google’s private equity fund CapitalG while existing investors LGT Lightstone, Falcon Edge Capital, A91 Partners and MAJ Invest also participated. The latest round has taken Aye Finance’s total equity funding so far to more than Rs 690 crores. Launched in 2014, the lender has disbursed Rs 3,000 crores to micro-enterprises so far and “has shown improving operating ratios in the first quarter of FY20-21,” it said in a statement. This comes amid a cautious investment approach by small business lenders such as banks and NBFCs due to the Covid impact.

“This equity investment will further add to liquidity that will enable us to emerge strong from the Covid crisis and continue to benefit millions of micro-enterprises across India,” said Sanjay Sharma, Managing Director, Aye Finance in a statement. CapitalG, which had earlier backed Aye Finance in 2018 and 2019, has been betting on “their underwriting methodology, which combines an optimal mix of data science with a physical presence in the field, and their ability to empower a huge, unaddressed market,” said Sumiran Das, Board member and Partner at CapitalG.

Also read: Amazon, Flipkart, Snapdeal, others now must show country of origin amid China boycott calls

Investment from small business lenders has been encouraging for MSMEs impacted severely due to the Covid pandemic and lockdown. To help them revive their businesses in the post Covid world, the government had last month announced multiple measures including a Rs 3 lakh crore collateral-free loan scheme. As of June 20, 2020, banks have been sanctioned over Rs 79,000 crore under the scheme while the amount disbursed to MSMEs stood at Rs 35,000 crore, according to the data shared by the Finance Minister on Tuesday. This is 799.2 per cent up from Rs 3,892 crore disbursed as of June 1, 2020. On Wednesday, MSME Minister Nitin Gadkari also launched Rs 20,000 crore scheme, announced under the Rs 20 lakh crore stimulus package, for small businesses to take debt from banks to invest more in their stressed or NPA accounts as equity.

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