Pine Labs Shares In Focus As Emkay Initiates Coverage With A 'Reduce' Call — Check Target Price And Key Risks

Shares of newly-listed fintech major Pine Labs Ltd. will be in focus on Thursday's trading session after Emkay initiated coverage on the counter, offering a rather cautious note.

The brokerage firm has initiated coverage with a 'reduce' rating while setting a price target of Rs 210, which suggests a potential downside of almost 13%.

Shares of Pine Labs listed on the bourses on Nov. 24 at Rs 242, at a 9.5% premium over its issue price of Rs 221. The stock has since remained steady in and around that range.

In its latest note, Emkay pointed out that while Pine Labs has enjoyed dominance within the enterprise point of sales (PoS) business, it is now facing increased competition.

The firm also listed "premium valuations amid rising competition" as key risks for investors looking to invest in Pine Labs.

Emkay also raised concerns about the monetisation model of Pine Labs' gift card division. The firm noted that revenue in this segment is significantly driven by interest income earned on consumer funds rather than purely through transaction fees.

This reliance does make Pine Labs sensitive to interest rate cycles and regulatory changes.

Emkay's note stands in contrast to optimism surrounding Pine Labs' IPO earlier. The company, which counts Peak XV and Mastercard among its backers, raised Rs 3,900 crore from the primary market.

Pine Labs plans to use the net proceeds from its IPO for several purposes. A part of the funds will be used to repay or prepay certain borrowings of the company and its subsidiaries.

Another portion will go toward investments in its overseas subsidiaries in Singapore, Malaysia and the UAE. The company will also invest in IT assets, cloud infrastructure and technology development.

The remaining funds will be used for general corporate purposes and potential acquisitions.