Pine Labs IPO: Strong Growth in Merchant Payments but Expensive Valuations - Should You Subscribe?

Pine Labs is a merchant commerce and digital payments platform offering point-of-sale (POS) acquiring, issuing & processing, and consumer engagement solutions across India and select overseas markets. Through subsidiaries like Qwikcilver and Fave, it enables prepaid/gift, pay-later, loyalty and omni-channel acceptance for retailers and online merchants. The group has expanded from card-present solutions into unified acceptance [cards, UPI, BNPL(Buy Now, Pay Later)] and software-led merchant services, while also providing issuing/processing to Banks/fintechs. Key milestones include scaling merchant count and transaction volumes, adding international corridors (e.g., Southeast Asia), and integrating acquisitions to deepen software and stored-value capabilities.

IPO Details

Industry Outlook

India’s fintech and digital payments industry has expanded rapidly, with total payment value (TPV) reaching approximately Rs 116.8 trillion (USD 1.4 trillion) in FY2025, growing at a 36 per cent CAGR from FY2020. The market is projected to reach Rs 256–276 trillion (USD 3.0–3.3 trillion) by FY2029, a 22–24 per cent CAGR, supported by affordability solutions, card usage, and maturing digital ecosystems. The evolution from cash-based to AI-driven, data-led systems is enhancing personalization and reliability in payments. Increasing UPI adoption, card issuance, and fintech innovation continue to make India one of the world’s fastest-growing fintech markets.

Objects of the Issue

Net proceeds from the Fresh Issue of Rs 2,080.00 crore will be used for (i) repayment/prepayment of borrowings ~Rs 532.00 crore; (ii) investment in subsidiaries ~Rs 60.00 crore; (iii) investment in IT assets, product development and technology infrastructure ~Rs 760.00 crore; and the balance towards general corporate purposes.

SWOT Analysis

Strengths: Large installed merchant base; diversified revenue across acquiring, issuing/processing, and stored-value/loyalty; strong brand with bank/fintech partnerships; expanding software stack that deepens monetisation.

Weaknesses: Historic net losses; working-capital intensity; exposure to regulatory and scheme-fee changes; dependence on partner banks and networks.

Opportunities: Ongoing shift from cash to digital; UPI/card growth at POS; cross-sell of gift/prepaid, BNPL and loyalty; international expansion in SE Asia; rising SaaS adoption by MSMEs.

Threats: Competitive pressure from large fintechs/banks; pricing compression; cyber/fraud risks; policy changes (KYC, MDR, UPI economics); macro-sensitivity of SME spends.

Financial Performance

a) Profit & Loss Statement

b) Balance Sheet

Peer Comparison

Outlook & Relative Valuation

Pine Labs operates in India’s large and rapidly expanding merchant-payments ecosystem, supported by growing adoption of digital and software-led solutions such as gift cards, loyalty programs, and BNPL services. Although the company remains loss-making, its improving operating cash flow and strategic expansion across software and processing services indicate steady progress toward scalability.

In FY25, Pine Labs reported a net loss of ₹145 crore with a negative ROE of 2.83%, but demonstrated strong revenue growth and margin improvement. The balance sheet remains healthy with low leverage (0.14x debt-to-equity). However, its EV/EBITDA of 109x is significantly higher than Paytm (89.7x) and Zaggle (27.2x), making it relatively expensive despite operational progress. While the company benefits from a leading position in merchant payments and strong growth potential, the current valuation appears aggressive and may offer limited upside unless profitability strengthens meaningfully in the coming years.

Recommendation

Avoid. Despite its strong franchise in merchant payments and emerging software-led revenue, Pine Labs remains loss-making. Continued net losses, execution risks, and regulatory uncertainty make valuations demanding. Investors may revisit the opportunity once there is clear profitability visibility; risk-averse participants should stay on the sidelines.