Pine Labs, a digital payments company, has joined the exaggerating list of new-generation technology businesses that delayed their IPO. Its CEO, Amrish Rau, stated in an exclusive interview that he would postpone the IPO because of the global market downturn and wait for better conditions instead.
However, there is no window for an IPO (right now), and Rau has no hesitation in saying so.
According to Rau, the company has a concrete financial position, having raised more than $1.1 billion. Pine is not in rush to go public right now.
Rau stated that the business ended the fiscal year 23 with net revenues of Rs 1,600 crore and positive EBITDA.
This is the first time the payments company, funded by Sequoia Capital and Mastercard, has commented on its IPO intentions. It had registered for a $500 million secret IPO with the US Securities & Exchange Commission in January 2022 but has been prolonging its listing plans because global macroeconomic conditions worsened.
The investors of the firm believe that a firm like theirs should not go public during a hurricane. When there is a good breeze and a fair sale, and everyone wants the weather to clear before going for an IPO’, said Rau, who took over to be the Chief Executive Officer of the fintech business in 2020.
The Lab was recently valued at $5 billion following a $50 million investment from private entity Vitruvian Partners in May 2022.
Paytm and PayU, two Indian fintech, have recently been under intense regulatory scrutiny. PhonePe has shifted its corporate headquarters back to India. This choice hasn’t been made for Singapore-based Lab, but it will be influenced by where a giant share of their business comes from.
The choice to shift should not be based on values or taxation. Whether the technology is being developed for global or domestic markets should be determined. That is the discovery that the company is working on. According to Rau, the company will decide on the perfect location for the firm based on the results of those tests. Rau voiced that if the company would list domestic or global entities would be heavily influenced by “where the main segment of money lies.” Currently, nearly 15% of the firm’s revenues come from global markets, which stay beneficial.
Shareholding of Pine Labs.
- Sequoia Capital – 20.6%
- Actis – 7.8%
- Temasek – 7.7%
- ESOP Pool – 7.1%
- PayPal – 6%
- Mastercard – 5.2%
- Lone Pine Capital – 3.8%
- Alpha Wave Global – 3.4%
- Lokvir Kapoor (founder) – 2.3%
- Others include investors, including Sofina, Altimeter Capital, Moore Venture, IIFL, Marshall Wace, and SBI- 36.1%
International expansion and growth acceleration.
While most fintech is hunkering down in the current macro environment, The Lab has been stepping up its acquisitions, making five of its six purchases between 2021 and 2022.
It now makes efforts to expand its gift card issuing business, a key income generator for the company, and its payments instalment stack and services, centred on QR code payments, to the US and European markets.
According to company CEO, Pine will have a sales outpost in the United States & Europe this year, with folks vigorously promoting their technology in those regions.
Pine is active in five Southeast Asian countries and has expanded into the United Arab Emirates.
Furthermore, the company may continue to seek acquisitions to expand or enter newer geographies.
The entity does not have immediate plans. The company is mulling and spreading its product line, which may include merchant loyalty and customer relationship management. According to Rau, the firm may think of global acquisitions to expand into new areas.
Unlike many of his contemporaries, Rau stated that Pine Labs has no plans to enter the credit market at this time.
Rau stated of the firm receiving an NBFC licence, “This was a move when he came in.” However, no attempts have been to build an NBFC since he arrived. The firm may get there, but not right away.”
Income and profitability.
The company’s acquisition fever has caused a delay in turning PAT positive. On the other hand, Rau stated that the business hopes to become PAT-positive by the conclusion of the current fiscal year (FY24).
Without those acquisitions, the company would have been PAT-positive by now. According to Rau, the company is profitable at 20% EBITDA and makes efforts to keep it that way in the future. He stated that the company’s revenues increased by more than 50% year on year in FY23, with acquisitions accounting for 7-8% of that increase.
The firm approach to diversifying its revenue streams has been successful, with the PoS business accounting for less than 1/2 of its total revenue. Other lucrative income streams include gift card issuing, instalment payment services, and payment gateway operations.
However, due to macroeconomic conditions, like all other fintechs, Pine might be unable to maintain revenue growth in FY24.
Conclusion.
FY24 will be difficult for Pine because growth rates will be nowhere near the company’s FY23 growth rates. The firm would sacrifice low-margin sales in order to pursue high-margin revenues, so while revenue growth may slow, EBITDA growth may seem to be stronger, stated Rau of the company’s revenue strategy. The CEO spoke that the net sales growth would be at least 10% lower in FY24 compared to the earlier fiscal year.
Edited By, Naveenika Chauhan
