Pine Labs Limited analyst Q&A

Thank you very much, Sir. Ladies and gentlemen, we will now begin the question and answer session. We will take the first question from Kaushik Agarwal. Please go ahead.

Thank you for the opportunity and congratulations on a good set of numbers. So a couple of questions from my side. Firstly, if you can help just decode this 29% GMV growth that we have reported on a Y-o-Y basis in this quarter, it is more of a market share play that is playing out in our favor because most of the payments instrument you see like credit card spending has not been going up so great even on the UPI side the growth is broadly in the range of 22 % to 25%, so that was one. Second thing I wanted to understand is that has there been any communication from the regulator regarding the PIDF incentive income because there was some media article recently floating around indicating that scheme will not continue. So what would be the proportion of such incentive income as part of our revenue and third piece would be your take rates on the affordability , VAS side. So I did some back of the envelope calculation and noted that the take rates for your affordability , VAS business is slightly coming down. So how should one look at it? So, ye s, these were the three things from my side.

So Amrish, you want to take it or should I go ahead with it?

Let me address the first part. Yes, so what is clear is that we are continuing to win market share. We are continuing to expand our presence in the market. You also need to remember that when we go out globally and we go into newer market that effectively always becomes a net new market for us. So when we are showing a 29% growth in terms of GTV, that is largely because our payment platform continues to win in the marketplace in India and also because of the global markets that we are opening up, new volumes are coming on board. Sameer, you can take the next two.

Kaushik, c oming to the second question, I think affordability, we report the total number of Rs.74,000 Crores, which combines multiple things. It combines three to four things. Affordability is a one third of our volumes, but i t is roughly about two third of our revenues and the take rates there in that segment have remained fairly in the same range. I think we have seen no compression of margins there. Likewise, there is UPI volumes that we do on our own stack. There is DCC and a lot of other value -added services. I think sometimes it is a mixed chain but intra segmental we have not seen any yield more or less even at a headline level if you see and if you work out the broad math , I think it is easily possible the ranges are more or less in the same level. The third question you asked me about PIDF, as we have said, that that is not a segment that we operate in , we serve the mid market and the enterprise segment and not in the villages where typically this incentive was largely for. In our own P&L, the numbers with regard to PIDF for a month, rather for a quarter, would be not more than about Rs.1 Crore . So the impact of any change of the government regulation with PIDF will have almost a negligible impact on our top line and our profitability.

I am just going to add out there by just giving a little bit more specifics. I think what we think the PIDF kind of an impact on our business is less than like Rs.4 Crores or Rs.5 Crores on a quarterly basis. So it is not that big a number at all for us, if any. Point number one. Point number two, I think what will be interesting to see what comes out in the union budget and in the union budget if there is any play to incentivize payment transactions. The way I see this personally is that I do not see there would be any charges which will come on the long tail merchant base in India. If there are any charges which were to come, it will largely come on to the organized sector and that would generally be the area that we are playing in today. So if there is an MDR to come in, I do believe it might come into the space that we are present in and not into the long tail of the market. But this is all speculation. Let us just see what comes out. But I am just trying to highlight out here is I do generally believe that the government of India and the regulator continue s to be extremely supportive to grow digital payments across the country.

Kaushik, does it answer your questions?

Yes. That answers my question. Just one followup. So on GTV side, if you can just provide some mix around what would be the mix of Domestic and International? You have given on top line side, but on GTV, it will be.

Kaushik, we do not have it handy right now.

Sure. Okay. No problem. Thank you.

Thank you. That question was from Mr. Kaushik Agarwal of Haitong. We now move to our next question that is from Khush Shah of Niveshaay Investment Advisors. Please go ahead.

So my first question would be, should we think any gateway side as a medium term opportunity or any internal milestone over the next 12 to 14 months if we are expecting some revenue towards gateway system, gateway payments side?

You know, on the online side, there are two parts of our business. One part of the business is when it comes to online classic payment processing for e -commerce companies. Other is what happens when it comes to bill payment services. In both of these services, I think we have actually called out here in our earnings report is our online payments platform. The volumes have actually grown by more than 50% on a year -on-year basis. We have already highlighted the fact that today Flipkart, Myntra, Blinkit, not Blinkit, Zepto, Big Basket all of these guys use our services on the online payments platform today.

So online is a clear focus area for us, K hush, and we are seeing growth here. I think we have been sustainably growing there. We have been adding new products like Apple Pay for international. So I think it is a business that is showing a very high growth for us.

Fair enough. My second question would be on the Japan side international market where there is an UPI pilot rollout. So, is there any side of any possibility or we can gauge around , we would be expanding on that region?

Which one? Which region?

Japan. On the Japan side, there is an UPI pilot rollout.

We do not have any presence in Japan. We continue to do some business development work around it, but no we do not have any presence in Japan as of now.

Sir in coming future we are any expecting from Japan side revenue or any?

I would not speculate on that one right now.

Where all we are present and how we are looking at it I think is presented earlier in the slide so that gives you a sense of where we are playing right now.

Yes, so I was just seeing around Japan that a UPI rollout is going to happen, so I guessed.

I think, K hush, I am going to take an opportunity to just clarify to you what we are not just doing is taking Indian payment platforms and going global. We are actually going into global markets, their own unique payment system. So for example, when it comes to Malaysia, Malaysia has their own real -time payments infrastructure. Singapore has its own real-time infrastructure called PayNow and in UAE, there is a real -time payments infrastructure, which is called Aani. We power all of those payment transactions. So our approach to it is that we want to be a full stack payments provider in that market. So it is not just that we are following what UPI does and which countries UPI is going to.

Okay. My third question would be, from a long -term perspective, how do we access the structural opportunity in the gifting and prepaid instrument ecosystem in India as there is not a proper market size to gauge how big is the market around the gifting side.

In the RHP, we have actually given that information because we have done some market study on that. We also highlighted in some earlier conversations that we continue to process about 3.5 to 4 million transactions on a daily basis when it comes to prepaid. So there is a lot more information in the RHP.

Thank you. Thank you very much.

Thank you. Our next question is from Sucrit Patil from Eyesight Fintrade Private Limited. Please go ahead.

Yes. Good evening to the team. My name is Sucrit Patil from Eyesight Fintrade Private Limited. So I have two forward looking questions. My first question is, as Pine Lab operates a broad merchant payment infrastructure and Fin tech platform spanning POS, online payments, credit, and value added services amid strong digital adoption, how are you planning the product innovation and monetization across these verticals to strengthen competitive differentiation, especially as the merchant expectations evolve and new digital rails emerge across the global market? That is my first question. I will ask my second question after this. Thank you.

Sucrit two broader question. Honestly, I do not think so. I am going to take that question up at this point of time. I think, given a lot of information in the RHP. Today, I want to be focused on the Q3 earnings only.

Thank you. Best of luck.

Thank you. Our next question is from Srinivasu K from TIA. Please go ahead.

Congratulations for the strong set of numbers. My question is about the VAS activation that you said is 28% now. What is the target by FY2027?

I think you have seen the trend at which we are moving, Srinivas. I think the idea is we see a lot of potential for enabling merchants. In fact, we have a large sales force which actually goes and activates merchants across these areas. I think the beauty of our business is, as Amrish said earlier, we work with enterprise and mid market who have complex needs, who have multi products, and each of our value -added services are actually well entrenched for doing in each of these areas. So I think we are continuously working on it. We w ill not give a forward guidance here, but I think if you see on a year -on-year basis from about 21% of a growing base, we moved up to 28 % and that is the reflection of where we are seeing on the VAS business also growing at about 41% as far as the GTV is concerned.

So when it comes to the transaction process the transaction will happen within ChatGPT in this product that we have created. So what you could do is you could go into the ChatGPT, you can pretty much give a command or a prompt , which says that you want to pay a bill , let know the utility provider and your mobile number and the transaction will get completed. The second part in terms of privacy, I do not have that answer for you just now.

Okay. Thank you and best of luck.

Thank you. Any participant who wishes to ask a question may click on the raise hand icon. We will take our next question from Vidhin Shah from Motilal Oswal Financial Services. Please go ahead.

Congratulations on the good set of numbers and thanks for this opportunity. My first question is, Sir, depreciation on DCP as a percentage of revenue fell due to refurbished terminals. Do we expect net capex needs to structurally decline henceforth in the coming quarters and in FY2027, Sir? And I will ask my second question later Sir.

So to answer your question, yes, depreciation, both in absolute terms, will remain range bound and as a percentage to top line will reduce because of two to three things. One is the business mix itself, where a lot of international business across issuance, across the Fin tech infrastructure online does not require device intensity. And within our own segments, we have realized that we are a tech platform. So I think we want to ensure that some of these devices, etc., are directly bought by merchants and by banks and therefore unless we see a strategic reason to sell and lock in a merchant to us, we will not do that. So that is a structural shift we have done and going forward also, you will see depreciation and capex being fairly range bound and as a percentage to top line coming down.

All right. That is helpful, Sir. Coming to my second question, Sir, you disclosed that approximately 50% to 60% of the efficiency gains, and as mentioned by Amrish Sir earlier and that the code is written through AI if I remember correctly, 21%. So can you quantify, if possible, as to how many Opex dollars are saved and how much flows to EBITDA versus reinvested?

No, we have not started to do that as yet and honestly, the answer related to this is we continue to invest into new products. We continue to invest into new geographies. So no, we do not do that calculation which says that because of this 21% of the code which is being written using AI what could be the potential saving from net account standpoint. What we have very clearly calling out is it is not that we are saying that we will be reducing our team size going forward because there is enough and no more project work expansion work , product work which is coming our way, that is where we go ahead and use the existing capabilities from an engineering standpoint. So specific to your questions, no, we do not calculate it in that fashion.

Understood, understood. That will be all, Sir. Thank you so much and all the best for the future.

Thank you. That was the last question. I hand the call back to Mr. Amrish Rau for closing comments. Over to you, Sir.

Thank you very much. Look again, like last quarter, I started to give some indication of how Q3 is going. Q3, as I have shown you, has been a terrific quarter, has been a record breaking quarter both on the revenue side as well as at a PAT side. Payments is a very interesting business that you can actually get to see almost what is going to come up over the next nine months or 12 months period. We are in an environment where we think we are continuing to win businesses. Volume keeps on increasing on our platforms. So we are feeling extremely good, for example, what we are getting to see both at the economy level as well as market level. So hopefully, we should be gathering again in Q4 in a similar buoyant mood. Thank you.

Thank you, everyone. And if you have any further questions, feel free to reach out to the investor relations desk. I think the contact details are given on our website. Thank you and have a good day. Bye.

Thank you, members of the management. Ladies and gentlemen, on behalf of Pine Labs, I would like to thank each one of you for taking time out and joining the call today. We now conclude the call. You may now click on the leave button to exit the meeting. Thank you all for your participation.