Pine Labs IPO: Differences seen on valuations

Bankers add that while the company may be ready to complete the documentation for the IPO by the end of June, the thorny aspect is valuation.

Touted as one of the marque listings in the digital payments space, Pine Labs is said to be facing hurdles on the valuation front ahead of its multi-billion-dollar initial public offering (IPO). Sources say there may be a reasonable mismatch in the valuation expectations of the company and what investors are willing to shell out for its IPO at this juncture.

According to news reports, the company seems to be aiming for a valuation of at least $4–5 billion (Rs 34,000 – 42,500 crore, assuming Rs 85 as conversion rate for USD) for the upcoming IPO.

However, based on inputs received after a few rounds of international and domestic roadshows conducted by bankers to gauge the multiples which investors are willing to shell out for the company, the valuation could be about $2.5–3 billion (Rs 21,250 – 25,500 crore).

“At best, we may be able to stretch the valuations to $3.5 billion (Rs 29,750 crore), given the present market conditions,” said a banker on condition of anonymity.

Bankers add that while the company may be ready to complete the documentation for the IPO by the end of June, the thorny aspect is valuation. “Between now and when the approval comes through, which may be in about 3 – 6 months, we don’t foresee anything compelling that could take the valuations of Pine Labs to the USD 4 – 5 billion as expected by the company,” said another banker.

In November last year, Moneycontrol reported that Axis Capital, Citi, Morgan Stanley, Jefferies, and JP Morgan are bankers to the IPO (https://www.moneycontrol.com/news/business/ipo/pine-labs-picks-bankers-for-1-bn-ipo-gears-up-to-go-public-in-first-half-of-fy26-12875709.html).

An email sent to Pine Labs seeking comments on valuations for the IPO remained unanswered till publishing the article.

Citing the example of Paytm’s 2021 listing, it is understood that bankers are advising the company to settle for a lower valuation for the IPO to leave some money on the table for investors. “The market is just about getting an idea about digital payments and fintech companies. It’s better valuations are discovered by the market through a fair-priced IPO process rather than imposing valuations on the market. That would give room to freely access capital from the market at a later day,” said a person involved in the listing process.

However, this has not been perceived well by the management as the valuations suggested by bankers is at least 40 – 50 percent lower than the last funding round of the company in 2022, pegged at USD 5.05 billion. Subsequently, in April 2024, Baron Funds rerated Pine Labs valuation to USD 5.8 billion, while Invesco valued the company at USD 4.8 billion. “Such a markdown in asking price may not go down well with the existing investors but seeking for very high valuations may hurt the IPO and the company’s share price post listing,” said another banker working on the issue. Key investors in Pine Labs include Actis Capital, Temasek, PayPal, and Mastercard.

Pine Labs is aiming for listing when global valuations for fintechs, especially those in payments, has seen some correction. According to bankers, EBIDTA multiples for payments companies globally is about 12–30 times. “Assuming India is a growth market and warrants multiples double the global benchmarks, the valuations are unlikely to exceed $3.5–4 billion,” said a senior executive in the payments business, with respect to Pine Labs IPO.

Pine Labs is yet to disclose its FY25 financials. It closed FY24 with a loss of Rs 187 crore, almost 3 times more than FY23. The company’s EBIDTA (earnings before interest, depreciation, taxes and amortization) stood at Rs 286 crore (about USD 34 million) in FY24.

Last week Moneycontrol reported that Pine Labs' group CFO quit the company ahead of its IPO. (https://www.moneycontrol.com/news/business/startup/pine-labs-group-cfo-marc-mathenz-quits-ahead-of-planned-1-billion-ipo-13110764.html)