Well-known fintech player Pine Labs’ IPO is live and open for subscription until Tuesday. This is a combination of a fresh share issue worth Rs 2,080 crore and an offer for sale (OFS) worth Rs 1,820 crore. The company is professionally managed without a promoter holding, and a host of investors, including the likes of Peak XV Partners (Sequoia), Macritchie Investments (Temasek), PayPal and Mastercard, are set to offload a portion of each of their stakes in OFS.
Founded in 1998, Pine Labs is a leading player in digital payments with a B2B business model. Its revenue model will be discussed in detail later. According to Redseer’s analysis at RHP, it operates in the lucrative, high-growth fintech industry, whose market size (in terms of payments) will double in the next four years from $1.4 trillion (Rs 117 lakh crore) by FY25. Only those sub-segments that are comparable to Pine Labs’ business model are considered here.
The company has shown good growth in key revenue drivers such as number of sellers, transactions and gross transaction value (GTV), resulting in a 19 percent revenue CAGR between FY23 and FY25. It was profitable at adjusted EBITDA (mainly adjusted for ESOP cost) during FY23-25 and in Q1FY26, but turned PAT positive only in Q1FY26. However, this return can be attributed to a deferred tax credit.
At the top of the issue price, the issue is valued at an enterprise value (EV) to earnings multiple of 10.3x on a post-issue basis (based on FY25 earnings). The company does have leverage that can drive its financial progress. However, given the factors that investors need to consider and the downside risk if the company does not perform well, this valuation does not represent an attractive risk-reward proposition in our view. Therefore, we recommend that investors avoid IPOs for now and wait for better entry opportunities while keeping a close eye on the company’s capabilities.
What he does
Pine Labs has two business segments: A – digital infrastructure and transaction platform; and B – Issuance and Acquisition Platform. They account for approximately 70 percent and 30 percent of consolidated revenue.
In section A, the company has three revenue models:
* Providing in-store and online payment infrastructure for merchants. This mainly involves generating revenue from subscriptions to DCPs (digital payment points or point of sale devices) lent to merchants. In FY25, it earned about Rs 380 per DCP per month on its 1.8 million DCPs as on March 31, 2025.
* Availability, value-added services and transaction processing – where, as an illustration, the company brings financial institutions’ offers such as no-cost EMI, credit card cashback, etc., to consumer durables brands through its technology infrastructure, so that brands can offer them to consumers at the time of invoicing. In addition, it also offers value-added services such as real-time approval, fraud checking and dynamic currency conversion before the transaction is completed. In FY25, it earned a commission of around 39 bps on GTV of around Rs 2 lakh crore.
* FinTech infrastructure – which includes an API-enabled platform that allows financial institutions to accept UPI payments in their own apps (eg pay MF SIPs in your broker’s app), onboard customers via eKYC, etc. Also, billers like electricity companies can use the platform to collect utility bills. Pine Labs earned Rs 0.93 per transaction based on around 70 crore transactions in FY25.
Under Section B, the company allows merchants, brands and businesses to create prepaid products such as gift cards, cash back vouchers, currency cards, etc. It even runs a marketplace to distribute such prepaid products. In FY25, it earned a commission of around 130 bps at a GTV of around Rs 52,000 crore.
What works
The company has a solid clientele of established names in financial institutions (Leader Banks), large retail chains (D Mart, Trent), consumer durables (LG, Samsung, Croma), e-commerce platforms (Amazon, Myntra) etc.
Given its scaled business model, over FY23-25, with revenue growth of 19 percent, fixed costs decreased and adjusted EBITDA increased by 35 percent. Adjusted EBITDA margin improved from 12.3 percent in FY23 to 15.7 percent in FY25 to 19.6 percent in Q1 FY26. Management believes that, given its plans to terminate the deeply discounted ESOP, the decline in ESOP value should push the company toward profitability.
Currently, Pine Labs’ debt is around INR 900 crore, and INR 532 crore from the proceeds of the new issue is earmarked for debt reduction. Interest cost was about 3.5 percent of revenue in FY25. Lower interest costs should also support its path to profitability.
Pine Labs has earmarked Rs 760 crore from its IPO proceeds for growth expenses, such as Rs 430 crore to acquire around 5.7 lakh DCPs. Another 60 crore is earmarked for investment in subsidiaries in Singapore, Malaysia and the UAE. About 15 percent of FY25 revenue came from outside India.
The rest of the proceeds – ₹ 728 crore – is earmarked for inorganic expansion and general corporate purposes. Together, they provide good visibility of the revenue stream.
Factors on the mind
In theory, given a scaling model where profits are expected to greatly exceed fixed costs, Pine Labs’ profitability should increase as it scales. In a sense, this means acquiring more merchants, brands, financial institutions and expanding GTV while keeping the competition in the already crowded fintech industry at bay.
India has seen a huge digitalization boom over the past few years and Pine Labs has benefited from this, leading to strong growth in key metrics. However, going forward, the pace of digitization may not be the same, although RHP’s industry section paints a rosy outlook. Unless Pine Labs is able to add customers or new lines of business at a healthy pace, its GTV growth will largely depend on the growth of existing customers, which in turn can only reflect private consumption growth in India. It is very important whether the company is doing well. Given the IPO valuation, investors should take this into account and temper expectations. Additionally, the market is not devoid of other fast-growing profitable companies available at valuations similar to Pine Labs.
Compared to larger global peers like Adyen (see table), which has much higher margins and a longer track record of net profitability, Pine Labs’ valuation doesn’t look cheap right now.
While not at all comparable, the performance of already listed peers Paytm and Mobikwik is not credible as they have underperformed since their IPO. Shares of both companies met a similar fate despite being highly valued at the time of IPO – Paytm trading at around 45 times revenue and Mobikwik at around 2 times. While this is due to specific factors, including regulatory risks for the sector, we mention this only for perspective – Pine Labs is not necessarily following the same trajectory as these companies.
Auditors noted that an audit trail (edit log) was not included in some key accounting programs, which did not strengthen the investment case.
Posted on November 8, 2025
