Why Pine Labs’ head believes Ebitda is a better measure of the company’s value

“We have been adjusted Ebitda positive for five consecutive years and we are one of the only companies to do it," says Rau, who is also the managing director and chief executive officer. The company’s revenue has grown at over 20% for the last three years, says the chairman, adding that the adjusted Ebitda margin rose from single digit to around 20% in the first quarter of this fiscal year.

Rau is, however, uncertain of when the business will become sustainably profitable. “There is no way in which I can time when PAT (profit after tax) positive actually happens," he told Mint.

While both are financial metrics to measure a company's profitability, Ebitda focuses on operational performance and PAT includes all expenses, providing a comprehensive view.

Rau said that the company had set in motion its plan for the IPO a year ago. The decision to list was led by the size and scale of the company and the growth delivered so far, he said. “We think that the way our financials have transitioned, we do believe we qualify to be a publicly-listed company."

Highlighting that the market looks at a private company very differently from the financials of a public company, Rau said there is now a lot more confidence and strength in the brand, making it the right time to go for an IPO.

“When it comes to being public, will it help me develop a new product? Maybe the answer is no. But then you also have to believe you've achieved a certain maturity in terms of product innovation, because that will be harder to do now," he said, adding that the company will continue to look at market opportunities for acquisitions to enter into newer product segments where it does not have in-house capabilities.

Pine Labs' IPO will be open for subscription 7-12 November. The company cut the portion offered by existing investors by 44% and new shares by 20% in its updated prospectus filed on Friday.

Attributing the reduction in IPO size to shareholders’ decision to sell “less", Rau said investors have decided to “stay back", which Pine Labs considers a positive reflection of its growth potential.

“The entire ecosystem has supported Pine Labs till date. I think there is general goodwill around Pine Labs. Nobody thinks that Pine Labs is a company which is hated or anything like that. So, we wanted to give out a pricing structure where we feel we have the support of the ecosystem," he said.

“My GTV (gross transaction value) wouldn't have been growing at 60%, number of transactions compounding wouldn't have been growing at 50%. The market is accepting the various products that Pine Labs is releasing and actually getting connected to it," he said. “Unlike what people believe, I really don't worry about competition at all because I think our growth rates are very, very good today."

In its draft prospectus for the IPO, the company guided that it will use a significant portion of the proceeds to repay part of its outstanding debt of over ₹900 crore. However, Rau said the company’s debt-equity ratio is “completely fine"; it can continue to sustain this level of debt and that there is no rush to reduce the debt liability. “I would rather use any dilution in my equity for growth and for growing businesses."

Focus on Ebitda

Between FY24 and FY25, the adjusted Ebitda grew about 100%. Net loss for the company narrowed to over ₹300 crore in FY24 to about ₹140 crore in FY25. The first quarter of the current fiscal year was the first time the company’s bottomline turned positive, with a net profit of over ₹4 crore.

However, the company continued to be cash flow negative, which Rau attributed to costs related to employee stock options, amortization costs pertaining to recent acquisitions and other non-cash line items such as timing or seasonality related cash flow delays.

“In a payments company, there are always situations where sometimes you settle early to the merchant only to receive money one or two days later from Visa or Mastercard, etc. Because of that, there are instances where you might be cash flow negative for that period," he said, adding that a holistic-level net cash has been “accruing rather than getting reduced" over this period.

When a company’s Ebitda is positive, there usually isn’t too much of a gap between Ebitda and cash flow, except for certain non-cash items that come in because of accounting practices or fair value adjustments, said Prashant Singhal, partner and India markets leader at EY India, adding: “Ultimately, people look at whether you’re generating enough cash—do you have cash to make investments, for capex and to fund operations?"

Singhal said retail as well as institutional investors now place far greater emphasis on a company’s ability to generate cash from operations, with long-term debtors or negative working capital seen as red flags. He noted that investors are also becoming more discerning, with the earlier “FOMO-driven mentality" giving way to a sharper focus on fundamentals.

“People are reading financials and understanding that success isn’t just about topline growth anymore. Earlier, when startups went public, the focus was heavily on revenue growth, even if profitability was missing. That has changed now. Investors want to see sustainable business models where revenue growth also translates into earnings," Singhal said.

Business basics

The payment gateway has a payment aggregator licence from the Reserve Bank of India, a pre-paid payment instrument (PPI) permit for its wallet management business, and an account aggregator licence through its subsidiary Agya Technologies, where it holds around 25% stake.

Founded in 1998 by Lokvir Kapoor, Tarun Upadhyay and Rajul Garg, Pine Labs began as a card-based payments and loyalty solutions firm in the petroleum sector before pivoting to point-of-sale (PoS) technology and has now expanded to more broad-based payment services. As of June 2025, it served over 1 million merchants across retail, grocery, lifestyle, healthcare, travel, and e-commerce segments.

“I wouldn't call this a pivot, but what I would call this is expansion of the canvas that we want to work on," Rau said. “There is no reason why we are not going to win in the online payment space."

A bulk of the company’s revenue, around 70%, comes from three verticals–offline payments, online payments and value-added services, whereas the remaining 30% comes from issuance of credit, debit and gift or prepaid cards and the wallets managed against these card balances.

“All of that transaction processing is being done by us. End of the day settlement happens, recon happens, statements get created–that entire back-end is managed by us. We also manage the frontend wherein the card is being created and distributed by us," he said.

Of the payments-related business, which contributes 70% revenue, the offline business includes infrastructure deployment of point-of-sale machines, new merchant onboarding and tie-ups with large merchants for PoS deployment and store expansion, wherein Pine Labs receives commission from both banks and merchants.

This, Rau said, allows merchant partners the flexibility to work with various banks and also enables Pine Labs to offer customised solutions to large retail players such as mall owners for the various stores they are working with. The second pillar of online payments is more small ticket and volume-driven, he added.

The third vertical of value-added services entails merchant or platform specific discounts and offering differentiated payment options such as EMI-based card payments. Pine Labs had also acquired a company called ‘Setu’ that offers regulatory technology solutions such as compliance, e-KYC, e-Signature, bill payments and account verification.

“We've invested heavily in these (segments) because we think that more and more transactions will become API-first, will become invisible. We need to have capabilities out there. That's what we have invested in," he said.

Asked about which segment within these three is the most profitable, Rau declined to comment. He said one of the reasons the company wants to keep this private is that even though the management is building a public company now, it does not want to share “granular data" for the competition to play with.

Future growth will stem from expansion of overseas operations even as the company continues to develop new products and solutions for its clients. “I think there is a lot more work to be done in India, which I want to accelerate. But if you are asking me if we are going into a completely new segment, such as CBDC (central bank digital currency), the answer is no."

Currently, a purely business-to-business company, Pine Labs might also experiment in the business-to-customer space, but it will not be a focus revenue growth area as of now, he added.

Apart from India, the company currently has clients in Australia, Southeast Asia, West Asia and the US.