Earlier this year, a Boston Consulting Group report on India's fintech industry predicted a threefold increase in value for the sector within five years. One Indian fintech, Noida-based point of sales (POS) player Pine Labs, looks set to achieve, if not exceed, a similar rate of growth.
Established in 1998, Pine Labs became a unicorn (a privately funded firm valued at a billion dollars or more) in January 2020, after receiving a funding infusion from MasterCard. A later financing round led by Lone Pine Capital in December 2020 resulted in the company being valued at over $2 billion. In July this year, Pine Labs secured $600 million and a valuation of $3 billion in a round led by Fidelity Management & Research Co. and BlackRock Inc.
Just months later, CEO Amrish Rau announced his company had raised a further $100 million from US-based investment firm Invesco via its Developing Markets Fund. The latest funding comes amid talk of a possible IPO.
"The Invesco Developing Markets Fund is pleased to invest in Pine Labs, a leading fintech services company in India that fits our strategy of seeking high-quality companies that have durable long-term growth potential," said Justin Leverenz, Invesco’s CIO of developing markets equities, in a press statement.
What Does Pine Labs Do?
Pine Labs supports 10 million consumers across over 140,000 merchant establishments and 350,000 cloud-linked POS terminals in almost 4,000 Asian and Middle Eastern cities. Its platform processes $30 billion worth of transactions annually and offers several payment methods, including a "buy now pay later" (BNPL) solution.
In addition, Pine Labs integrates with over two dozen banks and financial and technology partners. This gives the company a significant advantage over many of its competitors, who only connect to a single institution—also the reason you often see multiple payment terminals at stores in the region.
In anticipation of its IPO, Pine Labs has been on an acquisitive streak. For example, its 2019 acquisition of Qwikcilver has provided a strong footprint in the prepaid/stored value technology sector. Another Indian success story, Qwikcilver’s SaaS gifting platform provides brands and retailers with unique gift-card and stored-value solutions. In April 2021, Pine Labs acquired Southeast Asia's most prominent consumer fintech platform, Fave, for $45 million.
"Over the last 18 months, we have scaled our prepaid issuing stack, online payments, and also the BNPL offering. We continue to make progress in the larger Asian markets with our BNPL platform. Very excited to have a marquee investor like Invesco join us in the journey,” said Rau, the company’s CEO, in a press statement.
The Growth of the Indian Payments Market
The fintech industry in India has seen strong growth since the COVID-19 pandemic forced so many consumers online for shopping. The National Payments Corporation of India (NPCI), which is operated by India’s central bank and facilitates all digital payments in India via its UPI platform, regularly processes 2.5 billion transactions a month. The platform is replacing cash, but its impact on credit cards is difficult to assess as the restaurants, hotels, movie theaters, and malls where they are often used have been disrupted by the pandemic.
However, last year, the Reserve Bank of India announced that it would accept applications from private companies to set up national payment networks to compete with the NPCI. Along with ICICI Bank, Axis Bank, Visa, and Amazon, Pine Labs is part of a consortium of companies that have applied for a New Umbrella Entity (NUE) license to create such a network. In total, six consortiums of private companies are applying for NUE licenses.
However, Rao seemed to downplay the significance of his company’s participation in the creation of an NUE. He would not comment to the press on the larger vision of the NUE his company and its consortium partners are seeking to create. He also clarified that an NUE license is not a new bank license nor a consumer internet platform, but a “public convenience entity with broad-based shareholding.”
Planned IPO
In addition to its latest investors, Pine Labs counts Sequoia Capital, Temasek Holdings, PayPal, and Actis among its earlier funders. By all accounts, it is looking to go public on the New York Stock Exchange within the next 18 months.
Earlier this year, the company's Singapore-based holding company was renamed Pine Labs Limited and converted to a public company, indicating the IPO planning is near to completion. Morgan Stanley and Goldman Sachs were chosen as Pine Labs’ IPO advisors and will be seeking a valuation of $6 billion for the company, according to TheEconomic Times.
After Paytm and MobiKwik, Pine Labs will be the third Indian digital payment startup to apply for an IPO. India is the world’s second-largest internet market, and Pine Labs is its
third-highest-valued fintech firm. Risk-averse investors have flocked to the sector since regulations on the Chinese investment market have tightened.