Abhishek Sinha
Shares of fintech company Pine Labs came under selling pressure on Thursday, November 20, after domestic brokerage firm Emkay Global initiated coverage on the counter with a ‘reduce’ recommendation and a target price significantly below the IPO issue price.
Pine Labs shares declined nearly 2.8% intraday to ₹235.30, compared to the previous close of ₹242.10. Emkay’s target price of ₹210 implies a potential downside of around 13% from the latest close and takes the stock below the IPO issue price of ₹221.
The scrip continues to trade 17% lower than its listing-day high of ₹283.70, which remains the peak level for the counter since market debut.
Why is Emkay cautious on Pine Labs?
The brokerage highlighted three key reasons behind its bearish stance:
1. Rising competitive intensity
Pine Labs maintains a strong presence in the enterprise PoS (point-of-sale) business and is a leader in EMI aggregation. However, competition is rising as new players aggressively enter the segment. At the same time, India’s payment ecosystem is shifting rapidly from physical PoS devices to QR-based solutions, posing a structural headwind.
While Pine Labs has been pushing low-end Mosambee smart devices to target small merchants, Emkay believes its distribution reach remains weaker than rivals, limiting growth opportunities.
The brokerage estimates a modest revenue CAGR of 18.8% for FY25–FY28 for its core Digital Infrastructure and Transaction Processing (DITP) business due to competitive and structural challenges.
2. Limited scalability in the gift-card business
Pine Labs’ gift-card segment in India is profitable but growing at a tepid pace. Instead, international operations are driving expansion, with a 192% CAGR between FY22 and 9MFY25 — but margins have been highly volatile, ranging from 0.5% to 56.3% during this period.
With domestic growth muted and overseas margins inconsistent, Emkay sees limited long-term growth visibility from this business.
3. Premium valuation despite risks
At prevailing prices, Pine Labs trades at:
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28.1× FY28E EV/EBITDA
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56.4× FY28E P/E
The brokerage notes that given its maturing POS business, stiff competition, and declining market share, the stock’s valuation looks expensive, making the risk–reward proposition unfavourable.
As a result, Emkay Global initiated coverage with a target price of ₹210, valuing the company at 24.2× FY28E EV/EBITDA.
IPO performance so far
Pine Labs debuted strongly on the stock exchange last Friday, closing with a 14% premium over its issue price of ₹221. The stock surged nearly 29% intraday on listing day.
The response to the IPO was modest, with an overall subscription of 2.46×, driven primarily by QIB participation.
Proceeds from the fresh issue are earmarked for:
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Debt repayment
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Investment in IT assets and cloud infrastructure
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Technology development initiatives
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Procurement of digital checkout points
Outlook
While Pine Labs continues to enjoy strong brand equity in the merchant payment ecosystem, analysts believe the near-term outlook may remain subdued due to:
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Intensifying industry competition
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Shift of merchants toward low-cost QR solutions
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Slower scalability in domestic gift-card operations
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Elevated valuation multiples
Market participants are expected to closely monitor the company’s merchant acquisition growth, revenue traction and margin profile in upcoming quarters to assess whether earnings progress can justify current valuations.
