Pine Labs Limited. (Neutral)

Highlights

Pine Labs Limited (PLL) incorporated in 1998, is tech enabled company focused on digitizing commerce through digital payments and issuing solutions for merchants, consumer brands and enterprises, and financial institutions. PLL offers services such as (i) Digital Infrastructure and Transaction Platform and (ii) Issuing and Acquiring Platform.

PLL’s Digital Infrastructure and Transaction Platform comprises in-store and online payment infrastructure, affordability, value added services (VAS) such as dynamic currency conversion and transaction processing, and financial technology (FinTech) infrastructure solutions and software applications and Issuing and Acquiring Platform comprises issuing, processing and distribution of prepaid solutions and engagement solutions, along with their unified issuing and acquirer processing platforms.

Their advanced technology infrastructure helps to accelerate their digitization journey in India and a growing number of international markets including Malaysia, UAE, Singapore, Australia, the U.S. and Africa.

PLL is a technology partner for financial institutions enabling payments acceptance at merchant stores, enabling acquiring at merchant stores, and enabling credit disbursal through affordability solutions. In addition, they offer issuing and acquiring solutions to financial institutions enabling issuance of credit cards, debit cards, prepaid cards and forex cards to consumers, and enabling merchant acquiring solutions.

Out of the total proceeds of approximately Rs. 38,991 mn, Rs. 5,320 mn would be utilized for repayment of certain borrowings availed of by PPL. Rs. 600 mn would go for Investment in certain subsidiaries for expanding PLL presence outside India. Rs. 7600 would be utilized for investment in IT assets, expenditure towards cloud infrastructure, technology development initiatives and procurement of DCPs. ~Rs. 7280 would go towards funding inorganic growth through unidentified acquisitions and general corporate purposes and ~Rs. 18,199 would go towards existing selling shareholders of the company.

Key Highlights

• The total market opportunity (TAM) in India for PPL in terms of total payment value was ~Rs. 116.8 trillion FY25 and is projected to grow further at a CAGR of 22-24 pct to Rs. 256-276 trillion by FY29 and in select international geographies (Southeast Asia, the UAE, Australia and the USA) was over USD 2.0 trillion in CY24 and projected to grow at a CAGR of 10-11 pct to USD 3.1-3.2 trillion CY28.
• Since inception the company has grown organically and inorganically. In last few years, PLL has acquired Qwikcilver (now PineLabs Prepaid), Fave, Plural (now Pine Labs Online), QFix, Mosambee, Setu, Credit+ which aided PLL’s product capabilities to further strengthen their offerings and technology.
• PLL built their platform and developed offerings and use cases with own proprietary technology that is flexible, scalable and cloud-based. This platform has allowed them to stay nimble in adding new products and features and evolving with the market. A core tenet of their growth strategy is to continue integrating a broad range of constituents into ecosystem to improve the platform experience for all and enhancing network effects.
• PLL’s technology stack is built to support the scale, speed and security required in digital commerce. Their technology stack leverages a cloud-native infrastructure that facilitates high availability and elastic scalability, enabling the platform to handle substantial transaction volumes. The API-first design promotes rapid integration, interoperability, and ease of customization, making it simple for PLL ecosystem partners to adopt & build upon.
• PLL’s key strategies include (i) Scale and increase adoption of existing offerings and expand offerings suite (ii) Broaden and deepen partnership ecosystem (iii) Invest in technology platform (iv) Enter new international markets and expand within existing international markets (v) Continue to pursue strategic acquisitions and investments.
• Sales of the company has grown by 19.3 pct CAGR over FY23-25 and EBITDA grew by 538.6 pct CAGR over same period. During FY25 the sales of the company grew by 28.5 pct YoY to Rs. 22,743 mn. While EBITDA of the company increased to Rs. 2,184 mn. During FY25, the company posted loss of Rs. 1,455 mn against loss of Rs. 3,419 mn in FY24. In Q1FY26, Sales grew 17.9 pct YoY/ EBITDA fell 14.8 pct YoY/Profit came at Rs. 48 mn.

Key Risk

• PLL’s operations are subject to regulation, oversight and inspection by the RBI and the Reserve Bank Information Technology (ReBIT), and any adverse observations, proceedings or notices from the RBI or ReBIT may adversely affect PLL business.
• PLL is dependent on acquiring banks for operations, and any the failure of, or refusal by, any of these entities to maintain service quality or renew agreements could adversely affect PLL business.

Financial Performance

Valuation

Pine Labs Limited (PLL) offers services such as (i) Digital Infrastructure and Transaction Platform and (ii) Issuing and Acquiring Platform. Their advanced technology infrastructure helps to accelerate their digitization journey in India and a growing number of international markets including Malaysia, UAE, Singapore, Australia, the U.S. and Africa. At the upper end of the price of Rs. 221, the issue quotes EV/Sales of 10.8x on TTM earnings. The issue appears to be fully priced.

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