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Pine Labs: Unicorn Fintech

Pine Labs is Noida based startup, started in 1998 by Rajul Garg & Tarun Upadhaya. Pine Labs, a payments solutions startup, became unicorn company in year 2020 with funding from Mastercard.

The journey of the company from 1998 to 2020 and to becoming unicorn is very interesting. During this period, the company’s founders left & also startup changed its business model.

Founders, Rajul Garg & Tarun Upadhaya left the company in 2004. Lokvir Kapoor, who worked closely with the founders of Pine Labs took over as CEO.

Pine Labs Pvt Ltd offers cloud-based point-of-sale (PoS) payments solutions that not only allows merchants to accept credit & debit card payments but also from e-wallets, QR codes & unified payments interface (UPI). Pine Labs’ services are used by merchants across sectors like electronics, pharmacy, food & beverage, fashion, telecom & airlines.

About the Founders of Pine Labs

(i) Rajul Garg

He is one of the founders of Pine Labs. Moreover, he co-founded GlobalLogic, sold for $420M in 2013 to Apax partners in the largest deal of the year in India. Mr. Rajul built the operation ground up in India & then expanded through global acquisitions, until 2008. Rajul then consulted with top tier venture capital firms such as Sequoia Capital and Aavishkaar, where he got exposed to the education sector.
He serves on several Boards, including publicly traded S Mobility, a leader in digital mobility. He is an active mentor to several startups, a sought after angel investor & a participant in several industry bodies such as TiE, NASSCOM, IIT Mentors & others.

(ii) Tarun Upadhaya

Currently, he is CTO at hCentive, Inc – a company he co-founded in 2009. Prior to hCentive, Inc, Mr. Tarun was co-founder & CTO of Globallogic – a global product outsourcing outfit which was sold to a private equity group in 2013. He is also the co-founder of Gallop.

(iii) Lokvir Kapoor

Mr. Lokvir holds a Bachelor of Engineering degree from Indian Institute of Technology (IIT), Kanpur and a Master’s in Business Administration (MBA) from IIM, Bangalore. Lokvir also worked with Schlumberger in the roles of financial management & business development in India and overseas. He worked closely with the other 2 founder since inception. Eventually he took over as CEO when the other 2 founders left the startup company in 2004. Now he is the Executive Chairman of Pine Labs & guides all strategic decisions of the business.

Over the Years

1998:

Pine Labs Pvt Ltd incorporated for the purpose of providing cards for petrol pumps also called petrocards.

2004:

The startup shifted its business from petrocards to point-of-sales (PoS) payments solutions.

2012:

The company then built cloud-based unified point-of-sales platform.

2016:

Mastercard tied-up with Pine Labs to roll out more than 26,000 contact-less point of sale terminals over the next 12 months.

2017:

By mid of FY17-18, had over 70,000 merchants & 2,50,000 PoS machines in India. Pine Labs launched services in Malaysia. Further announced plans to enter Southeast Asian markets.

Moreover, during the years, Pine Labs started providing short-term (0-90 days) financing to merchants for meeting their working capital and inventory needs.

2018:

Google partnered with Pine Labs to capture the Indian digital payment space with Google Pay. The company expected to expand consumer adoption of its Unified Payments Interface (UPI)-based Google Pay.

In addition, Pine Labs expanded operations internationally to Dubai & Malaysia.

Moreover, during 2018, Pine labs appointed Mr. Vicky Bindra as the Chief Executive Officer. Prior to this, he worked extensively in the financial services & fintech sector, in several roles at Visa, MasterCard, Citi Bank & GE Capital.

Now, Mr. Lokvir Kapoor is the Executive Chairman of Pine Labs.

2019:

In March 2019, Pine Labs announced a collaboration with Google India to enable offline transactions for their digital payments service, Google Pay. With this collaboration, Google can have access to over 330,000 point-of-sale terminals in over 3000 towns in India.

2019:

Also, the company announced a definitive agreement to acquire Bangalore-based gift card solutions provider, Qwikcilver, for USD 110 million. The transaction received funds from the company’s cash reserves & additional funding from existing investors.

Further in August 2019, Pine Labs announced that it now successfully enables EMI offering via credit & debit cards for 85,000 merchants across 120,000 stores in India. Pine Labs’ network is over 90 brands & 19 banks & financial services organizations that power EMI transactions for customers. The service further extended with SBI collaboration as well.

2020:

In March 2020, the company appointed Mr. B Amrish Rau to lead the company as CEO. He replaced Mr. Vicky Bindra who shifts back to San Francisco. Prior to this, Mr. B Amrish headed PayU India’s fintech investments & partnerships. Mr. Amrish was also the MD for First Data Asia & built a market leading payments JV with ICICI Bank.

Morover, Honda Motorcycles & Scooter India Pvt Ltd (HMSI) signed a Memorandum of Understanding (MoU) with Pine Labs, to provide EMI options to the buyers who have debit & credit cards.

Business Model of Pine Labs

Products:

Company provides PoS machines, working capital loans, no cost EMI directly at the PoS, billing apps, gifting cards, loyalty plans & gifting cards.

Revenue Model

In order to provide integrated payment gateway services to merchants, Pine Labs has tie ups with payment partners in exchange of fee.
Pine Labs earns revenue by leasing its devices and subscription charges. The company provides services to many large corporates.

Pine Labs charges fee from the merchants, which has fixed as well as variable cost. Initial fixed cost is of INR 2,500 ($34) along with a monthly variable cost (for maintenance & value-added services) ranging between INR 500-650 ($7-9). (These are approximate numbers) Moreover, the company provides enterprise solutions as well.

Pine Labs provides online & offline last-mile retail transactions for over 100 brands.

Presently, it processes payments of $30 billion per year & serves around 140,000 merchants across about 450,000 network points.

Recent App launches:

Plutus Smart

Last year, the company launched Plutus Smart; an Android-based point of sale machines & company claimed that they deployed over 50,000 Plutus Smart in nine months. This solution not only helps merchants in processing entire sales transaction using a single hand-held device, but also contains an in-built catalog for detailed comparison of EMI offers for different banks & tenures, customer feedback mechanism & an in-built IMEI number/barcode scanner.

Company’s point-of-sale (PoS) payments solutions enables merchants to accept credit and debit card, e-wallets, QR codes & the unified payments interface (UPI). This PoS machine does more than just process your payment. That machine is connected to the cloud for keeping the record of transactions.

App – myPlutus’

Company also developed an app called ‘myPlutus’ to give merchants real-time access to sales transaction data, payments related insights & customer analytics.

BusinessPlus

Another solution BusinessPlus, gives merchants real-time marketing tools & automated customer engagement programs to help them increase sales & drive repeat buying.

For EMI & Business loans segment, the company has tie-ups with NBFCs & lending partners.

Financial Performance of Pine Labs

Pine Labs’ total revenue increased by 50% to INR 503.2 crore in FY19 from INR 336.1 crore in FY18. Losses of the company also widened to INR 13.7 crore in FY19 as compared to INR 2.5 crore in previous financial year. The company got profit of INR 3.8 crore in FY17.
Company has two main expenditures – Employee cost and service & maintenance cost. The cost of service & maintenance is for device purchase and repair, payment gateway charges, setup cost, software cost & SMS costs.

Key Funding Rounds

March 2009:

Sequoia Capital India (more companies in which Sequoia Capital invested) provided seed funding of $1 million to the company to expand operations.

April 2017:

Madison India Capital invested an undisclosed amount in Pine Labs.

March 2018:

Pine Labs raised $82 million from private equity fund Actis Capital & California-based investment company Altimeter Capital.

May 2018:

In another round of funding, company raised $125 million from the global digital payments player PayPal and Singapore-based Company Temasek.

July 2019:

Company received $102.6 million from its Singapore-based parent company Pine Labs Pte for expansion & acquisition.

January 2020:

Global payment gateway provider Mastercard provided funds to the company which makes the company’s valuation around $ 1.6 billion. Thus, Pine Labs is now a unicorn startup.
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Competitors of Pine Labs

Pine Labs’s main competitors include Mswipe & Ezetap.

Found by Manish Patel in 2011, Mumbai based Mswipe, is a PoS provider & payment gateway provider. With acquisition of PayU India’s offline business in 2017 company started providing in-house payment gateway services for merchants. Startup does not offer devices for sale. Instead of it company charges a one-time fee for its device along with a subscription fee for services. Mainly MSME are the users of the startup.

Ezetap is Bengaluru based startup found by Abhijit Bose, Bhaktha Keshavachar, Sanjay Swamy & Shripati Acharya in 2011.

Apart from these, the other competitors are Innoviti, Mosambee & Payswiff. Walmart-backed, PhonePe is also entering the offline space. PhonePe has been deploying a PoS device for offline vendors & claims to have over 1 million offline merchants.

SoftBank-backed Paytm, also launched point-of-sale device which accepts Paytm wallet, debit/credit cards, all UPI apps &also offering EMI options.

Other fintech startups like Razorpay & PayUMoney are also providing payment solution services.

Future Course of Action

Pine Labs expects its total payment volume (TPV) increase by four times to $100 billion from $23 billion (TPV by June 2019). Company is replacing its traditional PoS devices with mobile phones PoS. Under this, merchant can track the transactions on his own mobile device & his assistant can use another phone for accepting payments.

Company has planned to increase Android PoS machines to 1.5 lakh by the next fiscal.

Mr. Vicky Bindra stated that the company has three goals. Firstly, focus on building a strong cloud-platform. Secondly to penetrate deeper into international markets. Thirdly is make the company profitable for the purpose of IPO by 2020-21.

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Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for the information of the readers about the industry/company stated.

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