Indian fintech giant Pine Labs is making significant strides toward its initial public offering (IPO), with plans to potentially achieve a valuation of up to $6 billion while aiming to raise $1 billion through the offering. The company has filed draft IPO papers with the Securities and Exchange Board of India (SEBI) to this effect. This move highlights the growing appetite for new-age companies in the Indian stock market and underscores the expansion of the local startup ecosystem.
Pine Labs intends to issue fresh shares worth ₹2,600 crore (approximately $304 million). Additionally, existing investors, including Peak XV Partners, PayPal, and Mastercard, are expected to sell up to 147.8 million shares in an offer for sale (OFS). A pre-IPO placement of shares worth up to ₹520 crore may also be considered.
The proceeds from the IPO are earmarked for strategic investments, primarily focusing on overseas expansion, technological development, and debt reduction. Pine Labs aims to extend its footprint beyond India, enhancing its technology infrastructure and cloud capabilities to strengthen its competitive positioning.
Founded in 1998, Pine Labs has evolved into a leading provider of merchant commerce solutions. Its core offerings include point-of-sale (POS) terminals that facilitate card payments and a comprehensive suite of services such as loyalty programs, EMI options, and gift card solutions. The company operates on a business-to-business (B2B) model, serving over 30,000 retailers across 3,000 cities and towns in India and Malaysia. Pine Labs generates revenue through transaction fees, subscription fees, and the sale of POS devices.
Pine Labs faces competition from other prominent players in the fintech space, including Paytm, PhonePe, Razorpay and Mswipe. Other alternatives to Pine Labs include PayPal Payments, Payoneer, GoCardless, Stripe Connect, Authorize.net, and Square Payments. Despite the competition, Pine Labs holds a strong market position, driven by its wide network of merchants and innovative payment solutions.
The company's financial performance reflects steady growth, with operating revenue reaching $200.4 million in FY24, a slight increase from $189.72 million in FY23. However, losses have widened to $40.68 million from $27.24 million during the same period. Despite these losses, Pine Labs' international operations are expanding rapidly, growing at an annual rate of 50%. For the nine months ended December 2024, Pine Labs reported a net profit of ₹26.24 crore, a significant improvement from the net loss of ₹151.63 crore in the same period the previous year. Revenue from operations also increased to ₹1,273.88 crore from ₹1,006.56 crore.
Pine Labs' decision to pursue an Indian stock market listing is supported by the approval to shift its domicile from Singapore to India. This move is expected to enhance business efficiency and create synergies, facilitating a smoother listing process.
Market analysts suggest that while Pine Labs initially aimed for a valuation between $4 billion and $5 billion, investor sentiment indicates a more realistic valuation range of $2.5 billion to $3 billion, with a potential stretch to $3.5 billion under favorable conditions. This adjustment reflects a pragmatic alignment with market realities and lessons learned from previous IPOs, such as Paytm's, where a fair valuation is crucial for long-term investor confidence.
With its planned IPO, Pine Labs aims to solidify its position as a key player in the fintech industry, driving innovation and expanding its reach in the evolving digital payments landscape. Morgan Stanley, Citi, and Jefferies are acting as the book-running lead managers for the offering. The IPO is anticipated to be a landmark event for the Indian fintech sector, potentially setting a precedent for other startups looking to tap into public markets.
