Aye Finance, a startup which provides loans to small and medium sized enterprises, has raised Rs 10 crore recently by selling part of its SME loan portfolio to Mahindra & Mahindra Financial Services. The deal was also facilitated by IFMR Capital.
What is securitisation?
Securitisation is a fund raising instrument which essentially involves creating a bond that earns interest from the cash flow coming from an asset. In Aye’s these are the loans worth Rs 10 crore which get regular repayments from borrowers. The rate of interest issued to the bondholders will be less than 12%.
What the MD has to say
Sanjay Sharma, MD of Aye Finance said “Securitisation is a very transparent and cost-efficient fundraising option which is not very popular in India but in markets like the US, where it is much more popular than getting direct loans from a third party“ .
Aye Finance is supported by SAIF Partners and Accion has raised $8 million from Blue Orchard and $3.1 from SBI.
They stated that the funds raised will be used for providing loans to MSMEs (Micro, small and medium industries).