Motilal Oswal Initiates Pine Labs Coverage With Buy Rating, Sees 30% Upside

Shares of merchant commerce platform Pine Labs rose 2% to Rs 196 on the BSE on Monday following the initiation of coverage by Motilal Oswal Financial Services. The brokerage issued a Buy rating with a target price of Rs 250, representing a potential 30% upside from current levels. The bullish outlook is anchored in the company's diversified revenue streams and its strategic shift toward high-growth segments within India's digital payments ecosystem.

Section 10A of the Payment and Settlement Systems Act, 2007 mandated a Zero-MDR regime prohibiting merchant discount rates on UPI and RuPay debit card transactions. The Reserve Bank of India also issued a Discussion Paper on Charges in Payment Systems to examine cost recovery and fee structures across digital payment systems.

Pine Labs operates a diversified revenue mix across terminal subscriptions, affordability solutions, and issuer distribution, along with online processing. Meanwhile, Paytm derives revenue from mass merchant soundbox subscriptions and loan distribution, while Zaggle generates revenue from corporate SaaS and card interchange fees.

Motilal Oswal highlighted that Pine Labs has successfully transitioned from a traditional point-of-sale (POS) rental business into an integrated merchant commerce platform. The company now provides a comprehensive suite of services, including payment acceptance, affordability solutions, issuing infrastructure, and fintech services. This broader stack, which includes capabilities from acquisitions like Plural, Setu, Qwikcilver, and Fave, allows the firm to address a wider range of merchant use cases and reduce reliance on any single revenue source.

According to the brokerage, Pine Labs serves over 10 lakh merchants, 750 brands, and 200 financial institutions. In FY26, the platform processed a gross transaction value (GTV) of Rs 17.2 lakh crore across 740 crore transactions. The firm's Digital Infrastructure and Transaction Processing (DITP) segment remains its largest revenue contributor, with analysts projecting a 24.5% revenue CAGR through FY28.

While traditional POS subscription revenue is expected to see a modest 11% CAGR over the FY26-28 period, Motilal Oswal identifies affordability solutions, such as EMI and Buy Now Pay Later (BNPL) services, as the primary growth driver. The brokerage estimates this segment will deliver a 27% revenue CAGR, supported by deep merchant adoption and strong issuer relationships.

International expansion is also emerging as a critical growth pillar. Partnerships with global entities, including Amazon, are bolstering the company's issuing franchise, providing a scalable path for revenue growth outside of its domestic base. The brokerage projects that the Issuing and Acquiring Platform (IAP) business will outpace the broader portfolio in the coming years. As the company scales, Motilal Oswal expects total revenue to grow at a CAGR of approximately 24% through FY28, with contribution margins for the DITP segment projected to stabilize between 82% and 83% by the end of that period.