A UBS report forecasts Pine Labs' revenue will grow 20% annually, reaching Rs 2,763 crore by FY28, driven by its fast-growing credit and merchant payments businesses. The report favorably compares Pine Labs to Paytm, noting Pine Labs has significantly higher current profitability (EBIT margin of 12% vs. 1.5%) and expects its margins to expand to 28% in five years.
It highlights structural differences, stating Pine Labs' B2B focus is easier to monetize and has lower employee and ESOP expenses relative to revenue than its peers. Despite this stronger profitability profile, Pine Labs' stock is trading at a discount to Paytm, which UBS sees as an upside opportunity due to Pine Labs' entrenched business contracts and ecosystem.
The main topics covered are: financial projections for Pine Labs, comparative analysis with Paytm and PhonePe on metrics like profitability and expenses, and an investment outlook on Pine Labs' stock.
Merchant payments major Pine Labs revenues are expected to grow 20% per annum over the next three years, according to a report published by UBS, a brokerage.
The brokerage has predicted that in FY28, Pine Labs will reach revenues of Rs 2,763 crore, compared to Rs 1,603 crore in FY25.
Its credit and merchant payments businesses will grow the fastest â 32% and 20%, respectively â in the same time frame, thereby driving the overall growth of the Noida-headquartered firm, the report stated.
Comparing Peak XV Partners-backed Pine Labs with digital payments major Paytm, the report observed that the formerâs Ebit (Earnings before interest and taxes) margin was much higher, 12%, compared to 1.5% for Paytm in the September quarter of the current financial year. UBS expects Pine Labsâ margins to expand to 28% over the next five years.
The report noted that from a loss of Rs 1,414 crore in FY24, Paytm is expected to swing to a net profit of Rs 2,959 crore in FY30. Pine Labsâ net profit is expected to stand at Rs 1,080 crore in FY30, compared to a Rs 341 crore loss in FY24.
PhonePe, which has filed its updated draft documents with the Indian stock market regulator for its IPO, has very high Esop expenses relative to its revenues, the report stated. In FY25, this stood at 43.4% for Phone Pe compared to 16.8% for Paytm and 5% for Pine Labs.
Overall, Pine Labsâ employee expenses as a share of its revenues are on par with PhonePe, around 37%, while for Paytm, itâs 45%, the report noted. Pine Labs has around 4,500 employees, compared to around 10,000 for PhonePe and almost 40,000 for Paytm.
Paytmâs high employee base was needed to serve its large merchant ecosystem spread across the country, said UBS.
UBS noted that Pine Labsâ stocks are trading at a significant discount compared to Paytm; the brokerage believes there is an upside potential in Pine Labs given its strong business contracts.
âIn a domestic context, we believe B2B businesses are easier to monetise and are further along in their profitability journey than B2C-heavy businesses,â the report noted.
UBS attributes this to greater competition in the consumer payments space and higher switching costs for banks and retailers as they are deeply integrated into the Pine Labs ecosystem.
The brokerage has predicted that in FY28, Pine Labs will reach revenues of Rs 2,763 crore, compared to Rs 1,603 crore in FY25.
Its credit and merchant payments businesses will grow the fastest â 32% and 20%, respectively â in the same time frame, thereby driving the overall growth of the Noida-headquartered firm, the report stated.
Comparing Peak XV Partners-backed Pine Labs with digital payments major Paytm, the report observed that the formerâs Ebit (Earnings before interest and taxes) margin was much higher, 12%, compared to 1.5% for Paytm in the September quarter of the current financial year. UBS expects Pine Labsâ margins to expand to 28% over the next five years.
The report noted that from a loss of Rs 1,414 crore in FY24, Paytm is expected to swing to a net profit of Rs 2,959 crore in FY30. Pine Labsâ net profit is expected to stand at Rs 1,080 crore in FY30, compared to a Rs 341 crore loss in FY24.
PhonePe, which has filed its updated draft documents with the Indian stock market regulator for its IPO, has very high Esop expenses relative to its revenues, the report stated. In FY25, this stood at 43.4% for Phone Pe compared to 16.8% for Paytm and 5% for Pine Labs.
Overall, Pine Labsâ employee expenses as a share of its revenues are on par with PhonePe, around 37%, while for Paytm, itâs 45%, the report noted. Pine Labs has around 4,500 employees, compared to around 10,000 for PhonePe and almost 40,000 for Paytm.
Paytmâs high employee base was needed to serve its large merchant ecosystem spread across the country, said UBS.
UBS noted that Pine Labsâ stocks are trading at a significant discount compared to Paytm; the brokerage believes there is an upside potential in Pine Labs given its strong business contracts.
âIn a domestic context, we believe B2B businesses are easier to monetise and are further along in their profitability journey than B2C-heavy businesses,â the report noted.
UBS attributes this to greater competition in the consumer payments space and higher switching costs for banks and retailers as they are deeply integrated into the Pine Labs ecosystem.
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