Pine Labs' Software Turn Shows Its True Colours
For much of its two-decade journey, Pine Labs was viewed, and often valued, as a premium point-of-sale hardware and payments company.
But in the run-up to its IPO, the company worked hard to reposition itself as a full-stack fintech platform, spanning issuing, acquiring, crossborder payments, affordability, loyalty and merchant software. This is a key transformative phase for Pine Labs, one that positions the company for the future.
It became the first of its kind in the country to secure all three key payments licenses from RBI in November last year, in time for the IPO and now with its Q3 FY26 results, Pine Labs is demonstrating how it is transitioning to its new avatar.
The overall operating revenue grew 23% YoY to INR 744 Cr in Q3, and Pine Labs also reported a net profit of INR INR 42 Cr, compared to a loss of INR 56.7 Cr this time last year.
The company had in the past, pitched a narrative of Pine Labs 2.0, where it persisted that it’s a full stack fintech player with diversified revenue streams.
It appears that the company is now acting on it through its revenue mix.
In Q3, Pine Labs’ value-added services (VAS) segment expanded at a much faster pace, growing 41% during the quarter. VAS-linked gross transaction value (GTV), including affordability, credit-linked services and other non-core payment products, crossed INR 76,000 Cr during the quarter, compared to around INR 54,000 Cr in Q3 last year.
The faster pace of growth is where incremental monetisation is increasingly coming from, even as the company continues to process large volumes of core payment transactions via its POS business, which still accounts for roughly two-thirds of overall revenue.
Notably, revenue from its digital infrastructure and transaction platform, which includes POS subscriptions, terminal rentals and in-store payment processing, stood at around INR 496 Cr in Q3, accounting for roughly 67% of total operating revenue.
The company ended the quarter with 19.3 Lakh active digital checkout points, up 11% YoY.
However, monetisation within the POS base remains uneven. Only about 28% of active terminals generated any value-added services or affordability volumes during the quarter, up from around 21% a year earlier.
This means more than two-thirds of the installed base continues to be monetised largely via fixed subscriptions and basic transaction processing, limiting revenue per terminal growth. While terminal additions continue to support topline expansion, the numbers suggest that future growth from the POS business will depend less on adding devices and more on increasing service penetration within the existing base.
Notably, VAS includes affordability products such as EMI and pay-later, credit-linked services, dynamic currency conversion (DCC), loyalty offerings and UPI transactions processed on Pine Labs’ own technology stack. These services carry higher monetisation per transaction compared to plain payment processing.
During the quarter, Pine Labs processed $51 Bn in gross transaction value, taking its cumulative processed GTV to over $200 Bn since inception. While GTV grew in the mid-teens year-on-year, revenue growth outpaced GTV growth, indicating a steady improvement in revenue yield per transaction.
In its post-earnings call, Pine Labs said that transaction volumes remained broad-based across geographies and merchant segments, with mid-market and enterprise merchants contributing an increasing share of total volumes. Large-format retail, electronics chains and organised lifestyle brands together accounted for a disproportionate share of incremental GTV added during the quarter.
However, the fact that revenue growth is materially outpacing GTV growth also indicates that Pine Labs is earning more per transaction through services layered on top of payments rather than from payments alone. This shift is visible in the rising contribution from affordability, cross-border services and software-led merchant tools.
“The core metric for this industry is platform GTV– which is almost doubling compared to FY25 levels. Once GTV doubles, customer acquisition costs are expected to decline significantly, which directly impacts profitability across verticals,” said Yogesh Birla, an independent markets analyst.
Further, affordability solutions remain a key contributor within VAS. EMI and pay-later products continued to see strong adoption in categories such as consumer electronics, lifestyle retail and large-format stores, where average ticket sizes are typically above INR 8,000–10,000. Management said affordability-led transactions grew at over 35% YoY during the quarter, outpacing overall in-store payment growth.
As per company disclosures, affordability-led transactions now form a meaningful share of in-store payment volumes, accounting for close to one-third of eligible high-ticket transactions on Pine Labs’ POS network.
Merchants are increasingly treating these products as a core part of their sales strategy rather than optional add-ons. This has helped Pine Labs maintain stable take rates despite rising competition in consumer credit and BNPL.
“The non-POS businesses, including Southeast Asia and the Middle East, are growing rapidly. I expect these segments to grow at around 28-32% and contribute a much larger share of total revenue, thereby diversifying the risk associated with dependence on the Indian market,” said Birla.
Diversification Picks Up Outside Core POS PaymentsAnother contributor is Pine Labs’ foreign exchange and cross-border offerings, particularly dynamic currency conversion. With international travel and cross-border card usage recovering, DCC transaction volumes increased sequentially during the quarter, aided by higher outbound travel from India. Management indicated that cross-border card spends were up in the high-teens year-on-year.
While Pine Labs did not disclose segment-wise margins, it claimed that its cross-border and DCC transactions typically generate 2-3X higher monetisation compared to domestic card payments, contributing positively to overall contribution margins even at lower volumes.
Meanwhile, the company’s decision to process UPI transactions on its own technology stack also featured prominently in the quarter. While UPI remains a zero-MDR instrument, Pine Labs said that owning the stack enables it to offer value-added layers such as reconciliation tools, analytics, automated reporting and merchant level insights.
These capabilities do not directly generate transaction fees but support monetisation through adjacent services, including credit eligibility assessment, loyalty programmes and merchant software subscriptions, which together contributed meaningfully to VAS growth.
From a financial perspective, Pine Labs reported a contribution margin of INR 551 Cr in Q3, translating to a contribution margin of around 74–76%, broadly stable compared to recent quarters despite a higher mix of issuing and fintech infrastructure revenues.
Adjusted EBITDA rose 48% YoY to INR 171 Cr, with EBITDA margins improving to 23% from around 18% a year earlier. The stability in margins, even as VAS scales faster than core payments, suggests that growth is not being driven by aggressive pricing or higher incentives.
While employee costs increased about 4.7% on an absolute basis, they declined as a percentage of revenue by around 11 percentage points compared to Q3 FY24, reflecting operating leverage as revenue scaled faster than headcount growth.
The company attributes part of this efficiency to increased use of automation and AI across engineering and operations. As per Pine Labs, around 21% of new code written during the quarter involved AI-assisted development, while close to 60% of routine POS and support-related issues are now handled through automated workflows.
However, management also said that cost savings from AI and automation are largely being reinvested into product development, platform upgrades and new service rollouts rather than flowing directly to the bottom line.
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That’s all this week. We’ll be back next Sunday with another edition of Inc42 Markets
Till then,
Lokesh Choudhary
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