Pine Labs is more than a POS terminal company; software services now account for 71% of revenue
Over the years, the Mumbai-based payments company's has evolved from a hardware provider to a software and services platform.
Amrish Rau, CEO of Pine Labs, has spent years telling investors that the company is more than just a point-of-sale (POS) terminal company. During the firm's first earnings call since going public, Rau finally had the numbers to back up his assertion.
Subscription and rental revenues from traditional POS devices now make up just 29% of Pine Labs' total revenue, down from over 40% two years ago. That means the remaining 71% now comes from transaction processing fees, consumer financing partnerships, online payment processing, and prepaid card services.
These numbers reflect the Mumbai-based payments company's evolution over the years from a hardware provider to a software and services platform.
Pine Labs was founded in 1998 by Lokvir Kapoor, Rajul Garg, and Tarun Upadhyay, as a provider of card-based payment solutions for petroleum companies. It now processes consumer installment loans on behalf of banks and financial institutions without taking on the credit risk itself. It also runs payment gateways for ecommerce sites, operates prepaid card programmes for airlines and retailers, and provides bill payment infrastructure.
The company's management expects this trend to accelerate, with issuing, value-added services, affordability, and online businesses eventually generating roughly three-quarters of overall revenue as they continue growing at over 30% annually.
The 'issuing and acquiring' segment is emerging as one of Pine Labs' strongest engines. The segment—which includes prepaid card programmes, digital wallets, and gift card distribution for airlines, retailers and corporate clients—jumped 33% to Rs 210 crore in the quarter, outpacing growth in the core digital infrastructure business, which rose 12% to 440 crore rupees.
Overall revenue from operations grew 18% year-over-year to Rs 650 crore in the September quarter, while adjusted EBITDA increased 62% to Rs 122 crore. The company posted its second consecutive quarter of profitability with a net income of Rs 6 crore.
The issuing, affordability and online payment businesses grew over 30% year-over-year, said Chief Financial Officer Sameer Kamath. International revenue, which now represents 17% of the total, increased about 30% annually.
These faster-growing segments are increasingly driving the incremental growth for Pine Labs, according to the company's investor presentation.
While the installed base of 1.9 million terminals will remain "a large and strategic pillar—anchoring merchant relationships and powering transaction volumes," company executives said the primary drivers of future growth and margin expansion will be platform revenues and technology-led services delivered on top of this infrastructure.
Only 25% of Pine Labs' terminals currently generate 'value-added service' revenue, indicating significant room for expansion within the existing base.
Value-added services comprise several revenue streams beyond basic payment processing. They include running loyalty programmes, enabling currency conversion for international cards, and displaying merchant offers at checkout
The company's 'affordability' products allow shoppers to split purchases into monthly payments, similar to 'buy now, pay later' services. Pine Labs connects merchants with banks and finance companies that extend the credit, earning fees on each loan originated.
Pine Labs also operates prepaid infrastructure, managing digital wallets and gift card programmes for major airlines like Air India and retailers.
The company's clients include India's top-five banks, the top-five retailers, and the three largest petroleum companies. In ecommerce, it provides services to Myntra, Meesho, BigBasket, Swiggy and Lenskart.
Pine Labs is also expanding internationally, with processing arrangements at Emirates NBD in Dubai, partnerships with retailers like Woolworths in Australia, and relationships with 18 airlines globally.
Product innovations
In his shareholder letter, Rau said small retail investors at roadshows in Ahmedabad and Rajkot had asked about Pine Labs' research and development budget, seeking reassurance that profitability would not come at the expense of product innovation.
"While we are getting financially stronger, we are not sacrificing new product development," he wrote in the letter, adding that the company intends to "continue to operate as a startup" and every earnings call will feature at least two product demos.
During the latest earnings call, executives demonstrated a 'programmable currency' wallet system that allows businesses to issue refunds or vouchers with specific restrictions—such as limiting when airline credits can be redeemed during peak travel periods or restricting government benefit payments to healthcare providers only.
Rau showcased Tap to Pay Online', a patented checkout product that lets consumers complete card-not-present transactions by tapping a physical card to their NFC-enabled smartphones, bypassing manual entry of card numbers, CVV, and one-time passwords. The company is working on a go-to-market plan for the service in India and overseas.
Edited by Swetha Kannan