Pine Labs IPO: Brokerages see long-term potential but flag valuation concern despite profitability turnaround

Amrish Rau, CEO, Pine Labs

Investor interest in Pine Labs Ltd has surged as the merchant commerce platform’s Rs 3,900-crore IPO opened for subscription on November 7, buoyed by a strong response from anchor investors. Yet, while analysts acknowledge the company’s scale, diversified revenue streams, and improving profitability, they flag that the offer is valued at a premium to peers.

Robust business, but Pine Labs IPO valuation a concern

HDFC Securities describes Pine Labs as a ‘leading player in the digital commerce and payments space in India and beyond’, positioned to benefit from India’s accelerating digital payment adoption. The brokerage highlights its deep merchant network and integrated model spanning point-of-sale payments, card issuance, and affordability solutions.

HDFC Securities said that Pine Labs operates in a market estimated at Rs 116.8 trillion in FY25. This is projected to grow 22-24 percent annually to Rs 256-276 trillion by FY29, supported by financial inclusion and rising digital penetration across smaller cities. However, HDFC Securities cautions that competition and regulatory risk remain key overhangs.

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Angel One, in its report, assigned a Neutral view, pointing out that while Pine Labs has transitioned towards operating profitability, it remains loss-making at the net level. The firm’s FY25 revenue rose 28.5 percent year-on-year to Rs 2,274 crore, with EBITDA margins improving to 15.7 percent. Its PAT loss narrowed to Rs 145 crore from Rs 342 crore in FY24. Angel One said that on an EV/EBITDA basis, Pine Labs trades at a premium to listed peers, leaving limited valuation comfort despite its strong positioning and market potential.

Both brokerages highlighted the company’s strong merchant base of 9.9 lakh merchants, relationships with 177 financial institutions, and over Rs 11.4 trillion in gross transaction value processed in FY25 -- key indicators of scale and platform stickiness.

Digital payments sector view and growth outlook

According to HDFC Securities, the Indian fintech landscape remains at a structural inflection point, with card-based and merchant payments expanding rapidly across Tier-2 and Tier-3 cities. It said Pine Labs’ omni-channel model positions it well to capitalise on this digitalisation wave and rising consumer adoption of EMI and prepaid solutions.

However, both HDFC Securities and Angel One flagged vulnerabilities typical of the sector -- high dependence on merchant and financial partners, intense pricing competition, cybersecurity demands, and evolving regulatory frameworks that could affect growth trajectories.

Pine Labs IPO details and investor response

Ahead of the issue, Pine Labs raised Rs 1,754 crore from 71 anchor investors, including SBI MF, Aditya Birla Sun Life AMC, Mirae Asset, ICICI Prudential, Axis MF, Tata MF, and Franklin Templeton, as well as global institutions such as Morgan Stanley, Nomura, and BNP Paribas. Nearly half the anchor allotment went to domestic mutual funds through 30 schemes.

At the upper end of the Rs 210-221 price band, the company’s post-issue valuation is estimated at Rs 25,000 crore. The IPO, comprising a fresh issue of Rs 2,080 crore and an offer-for-sale of Rs 1,820 crore, will close on November 11, with allotment expected on November 12 and listing on November 14.

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