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Powering payments: Monetization in motion!Strong roots, expanding canopy of products

* Pine Labs is a leading merchant commerce platform offering payment acceptance, affordability and issuing solutions. Its digital infrastructure and transaction platform (DITP) and issuing and acquiring platform (IAP) generate a healthy mix of recurring and transaction-linked revenue, aided by longstanding enterprise relationships and scalable technology.

* With a merchant base of over 1m, gross transaction value (GTV) of INR17.2t, and 7.4b transactions in FY26, Pine Labs continues to expand across merchant segments, aided by acquisitions and a growing international issuing franchise.

* DITP is the largest revenue contributor, and we estimate the segment to deliver ~24.5% revenue CAGR over FY26-28. The introduction of a 0.4% MDR on eligible peer-to-merchant (P2M) transactions would further benefit Pine Labs given its strong merchant payment franchise.

* IAP business has started to scale up meaningfully, with FY26 GTV growing 24% YoY to INR640b. We estimate the business to maintain healthy momentum and post ~25% GTV CAGR over FY26-28E, aided by prepaid programs and increasing traction across international markets. Accordingly, we estimate 23% revenue CAGR over FY26-28E.

* Overall, we estimate Pine Labs to deliver a healthy CAGR of 24%/46%/129% in revenue/adj. EBITDA/PAT over FY26-28E, while adj. EBITDA margin is expected to improve to 28.7% by FY28E from ~9% in FY24. We initiate coverage on Pine Labs with a BUY rating and a TP of INR250, based on 25x FY28E EV/EBITDA.

At the intersection of multiple monetization rails

* Pine Labs has created a complete merchant commerce platform across payment acceptance, affordability, issuing, and fintech infra. The company serves over 1m merchants, 750+ brands & enterprises, and 200+ financial institutions, processing INR17.2t in GTV across 7.4b transactions in FY26.

* Beyond the core business, Pine Labs has broadened its platform across gifting, online payments, fintech infrastructure and issuing, adding capabilities such as Plural, Setu, Qwikcilver and Fave. The wider stack allows it to address more use cases and widen its monetization opportunities.

* International markets are emerging as an important growth driver for Pine Labs. Partnerships with global retailers, financial institutions and platforms, including Amazon, are strengthening its issuing franchise across Southeast Asia, Australia, and the Middle East, supporting a 23% GTV CAGR over FY26- 28E.

DITP to remain the key earnings engine, with monetization driving growth

* DITP is Pine Labs' largest business, bringing together payment acceptance, affordability, merchant software and other value-added services on a single platform. The breadth of offerings allows the company to generate revenue from subscriptions, transaction processing, and merchant services, reducing dependence on any single revenue stream.

* The business has delivered a 16.8% revenue CAGR over FY23-26, and we estimate growth to remain healthy at ~24.5% over FY26-28 and contribution margin to remain around ~82-83% by FY28E.

Merchant expansion to shift toward the long tail

* Digital checkout points (DCPs) are the foundation of Pine Labs' merchant franchise. We estimate a ~17% CAGR in DCP additions over FY26-28E, with incremental deployments increasingly skewed toward small- and mid-sized merchants, where digital payment penetration is relatively low; thus, they are the key source of market share gains.

* Large enterprises and organized retailers have already achieved high adoption of integrated checkout solutions, limiting incremental demand largely to store additions, device replacement, and higher device density.

Valuation and view: Initiate coverage with Buy rating and TP of INR250

* Pine Labs is well positioned to benefit from India's accelerating digital payments ecosystem. Its diversified product suite and deep relationships with merchants, brands and financial institutions provide multiple monetization levers beyond traditional payment processing.

* We estimate a healthy revenue CAGR of ~24% over FY26-28E, driven by stable growth in DITP, continued traction in affordability solutions and online payments, and a faster scale-up of IAP business. DITP will remain the largest revenue contributor, accounting for ~68% of revenue, while IAP business is set to outpace the broader portfolio.

* The introduction of a 0.4% MDR on eligible P2M transactions should benefit Pine Labs given its robust merchant-acquiring and payments franchise. As the revenue mix gradually shifts toward higher-margin, transaction-led businesses, we estimate adj. EBITDA margin to improve meaningfully from ~9% in FY24 to ~29% by FY28E, aided by improving operating leverage.

* We estimate Pine Labs to deliver a healthy CAGR of 24%/46%/129% in revenue/ adj. EBITDA/PAT over FY26-28E and adj. EBITDA margin would improve to 28.7% from 9% in FY24. Initiate with BUY and a TP of INR250 (25x FY28E EV/EBITDA).

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