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

“We have adjusted Ebitda positive five years in a row and we are one of the only companies to do this,” says Rau, who is also managing director and chief executive officer. The company’s revenue has increased by over 20% in the last three years, he said, adding that adjusted EBITDA margin increased from single digits to around 20% in the first quarter of this fiscal year.

But Rau isn’t sure when the business will become sustainably profitable. “I have no way of determining when the PAT (profit after tax) positive actually occurs,” he said Mint.

While both are financial metrics that measure a company’s profitability, Ebitda focuses on operational performance while PAT provides a comprehensive view by including all expenses.

Rau said the company implemented its IPO plan a year ago. He said the decision to go public was driven by the size and scale of the company and the growth achieved so far. “We believe that the way our financials have transitioned, we qualify to be a public company.”

Emphasizing that the market looks at a private company very differently from the financial statements of a public company, Rau said that there is now much more trust and power in the brand, which makes it the right time for an IPO.

“Will going public help me develop a new product? Maybe the answer is no. But you also have to believe that you’ve reached a certain level of maturity in terms of product innovation, because it’s going to be harder to do that now,” he said, adding that the company will continue to look for market opportunities for acquisitions to enter newer product segments where it doesn’t have in-house capabilities.

Pine Labs’ IPO will be open for subscription from November 7-12. In its updated prospectus submitted on Friday, the company cut the share offered by existing investors by 44% and new shares by 20%.

Rau, who attributed the decrease in IPO size to shareholders’ decision to sell “less”, said that investors decided to “step back” and that Pine Labs considered this a positive reflection of its growth potential.

“The entire ecosystem has been supportive of Pine Labs to date. I think Pine Labs has generally good intentions. No one thinks Pine Labs is a hated company or anything like that. So we wanted to offer a pricing structure where we felt like we had the support of the ecosystem,” he said.

The entire ecosystem has supported Pine Labs to date. I think there is general goodwill around Pine Labs. —Amrish Rau

“My GTV (gross transaction value) would not have increased by 60%, the number of compound transactions would not have increased by 50%. The market is accepting and actually connecting to the various products that Pine Labs has launched,” he said. “Contrary to what people believe, I’m not worried at all about competition because I think our growth rates today are very, very good.”

In the draft prospectus for the IPO, the company stated that it would use a significant portion of the proceeds to repay some of its outstanding debt. ₹900 crore. But Rau said the company’s debt-to-equity ratio was “perfectly fine”; It can continue to maintain this level of debt and is in no rush to reduce its debt obligation. “I would prefer to use any reduction in equity for growth and growing businesses.”

Focus on Ebitda

Between FY24 and FY25, adjusted EBITDA increased nearly 100%. The company’s net loss narrowed by over 100,000 ₹300 crore to approx in FY24. ₹140 crore in FY25. The first quarter of the current fiscal year was the first time the company’s net profit turned positive; ₹4 crore.

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

“There are always situations in a payments company where you decide early on to the merchant to get money, sometimes a day or two later from Visa or Mastercard etc. So there are situations where your cash flow for that period might be negative,” he said, adding that at a holistic level during that period, net cash “accumulates rather than decreases.”

Prashant Singhal, partner and India market leader at EY India, said that when a company’s Ebitda is positive, there is usually not much of a gap between EBITDA and cash flow, except for some non-cash items that come in due to accounting practices or fair value adjustments, adding: “Ultimately, people look at whether you are generating enough cash; do you have money to invest, capex and fund operations?”

Institutional investors, as well as retail investors, now place much greater emphasis on a company’s ability to generate cash from operations, with long-term debtors or negative working capital seen as red flags, Singhal said. Investors are also becoming more selective, he noted, as the old “FOMO-driven mindset” gives way to a sharper focus on fundamentals.

“People read financial statements and realize that success is no longer just about top-line growth. Earlier, when startups went public, the focus was mainly on revenue growth, even if profitability was missing. This has now changed. Investors want to see sustainable business models where revenue growth also translates into earnings,” Singhal said.

business basics

The payment gateway holds a payment aggregator license from the Reserve Bank of India, a prepaid payment instrument (PPI) permit for its wallet management business and an account aggregator license through its subsidiary Agya Technologies, in which it holds around 25% stake.

Founded in 1998 by Lokvir Kapoor, Tarun Upadhyay and Rajul Garg, Pine Labs started as a card-based payment and loyalty solutions company in the oil sector before moving into point-of-sale (PoS) technology and has now expanded into broader-based payment services. As of June 2025, it served more than 1 million merchants in the retail, grocery, lifestyle, healthcare, travel and e-commerce segments.

“I wouldn’t call it a pivot, but I would call it a broadening of the canvas we want to work on,” Rau said. “There’s no reason why we can’t win in the online payments space.”

The bulk of the company’s revenue (about 70%) comes from three payment verticals (offline payments, online payments, and value-added services), while the remaining 30% comes from credit, debit, and gift or prepaid cards and wallets managed with those card balances.

“All of this transaction processing is done by us. At the end of the day, reconciliation happens, discovery happens, disclosures are created; the entire back end is managed by us. We also manage the front end, where the card is created and distributed by us,” he said.

Of the payments-related businesses that contribute to 70% of revenue, the offline business includes infrastructure deployment of point-of-sale machines, new merchant onboarding, and tie-up with major merchants for PoS distribution and store expansion; Here, Pine Labs receives commission from both banks and sellers.

Rau said this gives merchant partners the flexibility to work with a variety of banks and also allows Pine Labs to offer large retail players, such as mall owners, customized solutions for the various stores they work with. He added that the second leg of online payments is focused on smaller tickets and volume.

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

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

Asked which segment of these three is the most profitable, Rau declined to comment. He said one of the reasons the company wanted to keep it secret was that management didn’t want to share “detailed data” that competition might play, even though it’s now a publicly traded company.

Future growth will come from the expansion of overseas operations as the company continues to develop new products and solutions for its customers. “I think there is a lot more work that needs to be done in India that I want to accelerate. But if you are asking me whether we will enter a completely new segment like CBDC (central bank digital currency), my answer is no.”

He added that Pine Labs, currently a purely business-to-business company, may also experiment with business-to-business, but that this will not be an area of ​​focus on revenue growth at this time.

Besides India, the company currently has customers in Australia, Southeast Asia, West Asia and the USA.