Welcome to the Pine Labs Limited Q3 FY 2026 earnings call. Please note all participants will be in the listen-only mode, and this call is being recorded. Joining us from the Pine Labs management team are Mr. Amrish Rau, CEO, and Mr. Sameer Kamath, Group CFO. The call will begin with opening remarks from Mr. Amrish Rau, along with a couple of product demos, and then he will discuss the business highlights. Mr. Kamath will then discuss the company's financial performance, followed by a Q&A session. Before we begin, please note that some of the statements made during the course of this discussion may be forward-looking in nature. Actual results may vary significantly due to various external factors. This Zoom conference call is intended solely for investors and analysts. If you're joining from a media organization, we request that you please disconnect.
Please reach out to the company's investor relations team for any questions. With that, I hand over the call to Mr. Rau. Over to you, sir.
Thank you very much. Everybody, thank you for joining us on this Q3 earnings call. Look forward to a good conversation. As I start off, and as I had promised in the last earnings call, what I would like to do is I'm gonna focus on what Pine Labs does and some of the products and services that Pine Labs is innovating, building, and taking out to the market. I've got two product demos for you, one for two minutes, the other for one minute, but I do want to take you through that. Let me talk about the first one. If some of you have been following Blinkit, you would get to see... Yesterday, Albinder tweeted that on Blinkit you can go and buy a card, which is called Bharat Yatra.
Bharat Yatra is a national mobility card entirely powered by Pine Labs platform for prepaid services. You could go to Blinkit, you could go to Zepto, Flipkart, or for that matter, you could actually go to any of the metros, and you could buy that card, load money on it. And then we built a really cool technology where money could get transported from your mobile app onto the card, and you could do transactions. What that does is, you don't need to go to the ticketing counter, you can just simply use the card, tap, and complete the transaction. That's the video that we are going to show you. The person running it runs our prepaid business today, on the sales side, and that is Sam. Ritesh, if you can just start the video, please.
You have probably used prepaid today, maybe without realizing it. A prepaid wallet for a seamless checkout, instant refund for goods returned, a gift card bought using bank loyalty points, a meal card at work, a Forex card when you travel abroad. Prepaid is programmable money in its simplest form, already embedded in our daily lives. But one experience still hasn't caught up: public transit. What should be a quick ride often starts with waiting. That's why Government of India introduced National Common Mobility Card, a common payment infrastructure for public travel across the country. So the question became simple: How do you make this infra usable every day for millions of Indians? This is exactly what Bharat Yatra card is built for. One contactless transit card for everyday travel across cities in India.
We made sure you don't have to stand in line, not to buy the card, not to recharge it, not while you travel. You can even get it delivered to your doorstep in minutes via all major quick commerce apps like Blinkit and Zepto. Once you have the card, setup is real quick. Let me just show you. You open the Bharat Yatra app, link your card, activate with your mobile number, load money using any UPI app, and the money is added. And now watch this. Just tap your card, your balance updates instantaneously through NFC on your Android phone. No counters, no machines, no waiting. You're ready to travel with just a tap. Pine Labs Bharat Yatra. This is daily commute simplified for Bharat.
Thank you. Sorry, I've had to just change my position very quickly. The second demo is another interesting one. As you know, in the online space, we continue to win volumes, we continue to sign on new merchants. One of the use cases that we've been focused on is in terms of cross-border transaction and being able to capture the DCC opportunity. So what we did was we actually enabled for Apple Pay. So if you're a consumer sitting outside of India, want to make a purchase with an Indian merchant, the Indian merchant would want to give capabilities like Apple Pay so that the consumer can easily make that payment transaction. That is something that we have enabled on our online platform, and we wanted to show you that experience.
What we decided was, instead of showing it from a merchant standpoint, let us show it to you from a consumer standpoint, a foreign consumer coming onto an Indian merchant, how this would be beneficial to the consumer. Obviously, the merchant, who's our client, benefits with this. We're going to run you that demo, too, now.
I live in Singapore and was planning a trip to India. I was really excited to visit Udaipur, the City of Lakes and Palaces. I wanted to book a two-night stay at Wyndham Hotel, and they sent me a payment link. And here's the thing, normally with international payments, I would worry about whether OTP would be arriving, whether the cards will be working, and whether the site is even trustworthy in the first place. Now, this time round, when I clicked on the payment link, I was so excited to see that they had Apple Pay. And so I clicked on it. Here's the funny thing, it was done within seconds, and no card, no OTP. It was just facial recognition. Everything was done. It's as simple and safe as paying at home.
So these are two of the products, two of the products which I wanted to show you today. Every one of these earnings release, we will carry some products that we would want to show to you. With that, I will just move on to the earnings release and the document that we sent out earlier in the day. Ritesh, would you be presenting?
Yeah.
Again, I'm just going to reiterate a few topics out here. We've got a very clear vision statement, which is to build the best payments and commerce platform from Asia for the world. Next. I also wanted to take this opportunity to, again, remind everybody that Pine Labs is a multi-product business. If you actually see out there, we have very strong presence in in-store, online, everything around prepaid issuance. We do credit card processing. We actually announced some very big deals on the credit card processing side just in recent days. But as a company, we want to be a multi-product company. Second, we also want to be a multi-segment company. So if you look at our revenues and the breakdown of our revenues, we have revenues coming from all the three stakeholders.
That is, merchants or banks and financial institutions, and at the end of the day, corporates and brands. And finally, we don't want to be just India-centric. We continue to invest heavily to take our products into global markets. We are showing some very good win. So we do want to be a very broad fintech player. If you see what Stripe is doing, what Adyen is doing, a very similar playbook is being followed here in Pine Labs, and that's what makes us unique. This is a slide which I used last time. In the market, in India, we continue to win with all the large clients. All the top five banks has Pine Labs as their number one payments partner. All the three petroleum companies has some sort of a relationship in Pine with Pine Labs.
The top five retailers, may that be the Tata Group, the Reliance Group, DMart, all of them have Pine Labs as their preferred payments partner. The same goes when it comes to the top three e-commerce companies. All of them have Pine Labs as their payments partner, may that be on the gift card or prepaid or online payment processing, or for that matter, for delivery-related services. A question which was asked to us last time was, "How are we looking to go international?" I wanted to put a slide to that one. What we have done is we've said, anytime that we go into a new market, what we will do is we will first go and see the territory. The first country that we went international was in Malaysia, and that was in about 2019 or 2020.
Then what we did was we first partnered with CIMB. We had a software-led deal with them. It was a fairly large deal, but over a period of time, we have actually expanded our presence in the Malaysian market. Now we work with 11 bank issuers in Malaysia. We've got tens of thousands of POS machines deployed in the Malaysian market. That business has been continuing to grow at about 40%. But the idea there is first, get a large partnership in place, get our software on the market, then we put boots on the ground. We commit to the market by putting in our sales team, which can go and win merchants also, and that's how we go on increasing that scale. We started with Malaysia. We've also gone into the Singaporean markets, and also we are now present in the Middle East markets.
We are currently present in almost 20 countries around the world. Just reminding everybody in terms of financials, in the international markets only, and that's what you have there at the bottom. The last piece before I get into the financials and an update in terms of Q3, I wanted to also highlight very specific cases where AI is being used within Pine Labs. I recently commented, where about 21% of all code which is written in Pine Labs is now being written using AI. But where is this being applied? These are the 6, 7 areas where this AI is being applied, and that's really trying to create new products. Next time, maybe I'll show you a demo which is related to payments in AI. Second, purely from sales effectiveness, we have started to use AI.
When it comes to merchant and transaction fraud prevention, we've already brought AI in out there. On the operational efficiency side, which is a very easy area, what we have done is we've actually opened up the data related to all our SOPs, our product information, and the classic tickets that we get to see, and we have entirely automated using AI. So these are very real use cases that we are doing using AI today, and that is ensuring that we really don't need to scale in terms of hiring more engineers. Again, I'm very clear, at this point of time, we've got enough engineering talent within the company. I don't see Pine Labs increasing the number of engineers, going forward. If any, it could actually go down, but surely not increase. Coming to the financials, in Q3, I think we had just a powerful, powerful quarter.
This is the second time I'm going to say this, I think we crushed it in Q3. Q3 obviously was a quarter which has a lot of festivities in it, but even within that, I thought Pine Labs' performance was very, very strong. One very important fact to share with all of you is, in the Q3 quarter, our technology platforms have to remain up at all points of time, and we literally can't afford a one-minute downtime. May that be in the offline platforms, online platforms, on the prepaid platforms, or for that matter, on the BBPS and, the bill payments infrastructure. That's what we delivered, we did not even have one minute of downtime.
Second, all the major merchants and all the major brands continued to use almost 85% of their transaction throughput on the Pine Labs platform, so that was extremely strong. All of the various services that we drive on top of our platforms, and may that be in terms of affordability or in terms of, DCC, or for that matter, anything which is related to offers, that continue to perform extremely well. We've given some more information about that in the rest of the deck, but I can tell you that we had one of the best, best, Q3s in Pine Labs' history. And that meant that we actually came in with about INR 744 crore of revenues, which was about 23%-24% in terms of year-on-year growth. The contribution margin came in at about INR 551 crore.
I think I explained this to you earlier, I'm a firm believer that you run your business from a contribution margin standpoint, and that's the one that I tend to focus on. Because from the contribution margin, your EBITDA gets played out, and again, I'm going to reiterate that later on in our presentation. On an adjusted EBITDA basis, we came in at about INR 171 crore, adjusted only for the ESOP costs. The PAT came in at about INR 42 crore. There, obviously, we had to consider for some of the impact related to the recent labor law. Now, while these are numbers, and Sameer will go into a detail, I just wanted to give you a flavor of what is happening in the market.
In the market, what we are getting to see is that a lot of merchants are coming up with complex payment requirements. A lot of merchants have started to ask for various services over and above the payments platform that we have built, and our solution is best fitted to deliver this in the fastest possible manner. That is point number one. Point number two, what we are getting to see is consumers using prepaid cards and prepaid instruments, and storing currency on those prepaid instruments continues to rise, and that means number of transactions are also continuing to increase. And we are getting to see this not just in terms of gift cards and closed-loop prepaid, but also in terms of open-loop prepaid.
Be that in terms of forex prepaid, or for that matter, credit card processing, or what I just explained to you when it comes to the Bharat Yatra product. And again, our responsibility is to capture all of that into the financials, and obviously bring it down to the PAT line. The other piece which, which I do want to share is, we continue to get some very significant wins. You know, recently, we announced a deal with Wio Bank. Wio Bank is the fastest growing digital bank in all of Middle East, and arguably is one of the fastest growing digital banks anywhere in the world. They actually wanted to bring in a next-generation modern payments platform. They went through a very deep evaluation process.
We competed with global, global companies on that front, and we actually ended up winning there. Just today, coincidentally, along with our, earnings release, in the morning, we announced another deal in Sri Lanka, where a card-issuing platform has decided to go with us, and we will be actually doing all of the payment processing for them, too. So through the Q3 process, we continue to win deals. Now, unlike these other companies where, order value and revenue value, there is a direct co-relationship, we charge by the transaction, we don't charge by the project. Once the client comes on board, as the transactions go on building, we end up making more money. That's the philosophy that we have captured.
We brought in almost about 120 new brands in Q3 onto our platforms, may that be in terms of offers, affordability, or for that matter, anything related to prepaid services. So our payments platform continues to win. One important point I do want to talk about, which is not directly linked to the revenues of the business is, we ended up processing about $51 billion of payment volumes on our platform. So that takes us past the $200 billion number when it comes to transaction processing on our platforms. With this, what I'm going to do is I'm going to hand it over to Sameer, and Sameer will go deeper into the numbers.
Thank you, Amrish, and welcome everyone to our Q3 earnings call. As Amrish said, that typically Q3 is a strong quarter for us, and we have come out with a stellar set of numbers, given the seasonal impact, et cetera. Coming to the next slide on revenue, as you can see clearly, over the last year-on-year basis, we reported a revenue of INR 744 crore, which is a growth of 24%, over INR 600 crore we reported a year back. This has been healthily contributed by all our business segments. We report our business broadly into two segments: the digital payments business, which includes in-store, the online business, the value-added services, including affordability and the fintech infrastructure business.
The second line of business, which is issuance, which is the card business, the demo which you saw in the first demo we saw during the day, I think. Across both these businesses, we have reported healthy growth rate. Our digital business grew by about 16%, and our issuance business grew to about 42%, contributing to an overall growth of about 24%. The contribution margin has been in a steady state of about 76% on a nine-month basis. The marginal fluctuation between the quarters you see is largely because of sometimes the mix change you see between the issuance business and the digital payments business. Our digital payments business typically works at about an 82% gross margin, given that there is very little direct cost involved with that business other than certain connectivity costs, et cetera.
Whereas the issuance business largely is driven into two revenue streams, the processing that we do for all our prepaid cards, and one very critical component of that business is also the distribution strength that we bring to the brand, which becomes a big moat for us as we penetrate new brands and build size and scale for them. The contribution margins, typically, of the distribution business, which is a critical moat for us, is lower than that of the processing business because there are partners involved, including resellers, the marketplaces where we list some of the products, and therefore, a mix change causes some bit of variations between the quarters. But on a steady state basis, for nine months, we are at about 76%, which is in line with our 76%-78% guided growth rate.
So our contribution margin has also shown a healthy growth rate at about INR 550 billion of contribution margin. Ritesh, go to the next slide. As we had indicated in our earlier presentations as well, we believe that there's significant operating leverage and scale in our business. Every incremental INR 100 of contribution will translate between INR 50-INR 60 of adjusted EBITDA, and a flow-through to PAT will also be similar. PBT will also be of a similar nature, about 40%-45%. I think that's held true for this quarter as well. We have seen margins expand from about 16% a year back to about 23%, as we had guided earlier as well. I think this is contributed by a robust top line growth, effective cost management, and operating scale that we have seen in our businesses.
We believe these margins are sustainable going forward as well, and this has translated into a significant flow-through to our PAT as well. We had reported 2 quarters of positive PAT for this financial year in Q1 and Q2, at about INR 5 and 6 crores respectively. However, this flow-through has come through with a INR 42 crore PAT for this quarter. This is after factoring in the INR 12 crore exceptional item adjustment, as Amrish said, for the labor code reforms that came in. Had it not been for that one-time impact that we have taken, our reported PAT would have been close to about INR 52 crores. This is a swing of about almost INR 100 crores on a year-on-year basis, giving a sense of size, scale, and change that we are seeing with the operating leverage kicking.
Going a little deeper into where the operating leverage comes from, I think we've been able, as Amrish said, we're fairly well-staffed, and I think now it's about sweating the, sweating the workforce and delivering the throughput through technology, AI, and some of the other initiatives we spoke about earlier on. Our headcount has marginally gone up by about 6%, and with the same headcount and more or less, I think the wage inflation which has come in, I think our people costs have grown at about 6 to 8%, which has translated into a significant operating leverage. From about 42% to top line two years back, we have shown a steady operating leverage kick in here. We were about 37% same time last year, and this year, we have come to about 31%.
I think a steady state of about 34%-35% is what one should expect through the year, given that Q3 was a strong quarter. So that's one big operating leverage that has played out in the adjusted EBITDA change that you see from about an 18%-19% in the earlier two quarters to about 23% that we have reported in this quarter. Likewise, as, as Amrish said, ESOPs is something we show below the adjusted EBITDA line item before PBT. Philosophically, as we went into the public market space, one big change we have brought about is that new issuances of ESOPs will always happen at closer to FMV, and I think that has translated into a more reasonable P&L impact as far as ESOPs cost is concerned.
Adjusted for a one-time reversal that was there in Q3 of last year, or two years back, we are seeing the ESOPs cost, both in absolute terms and as a percentage to top line, show a steady decline. We are currently at about 4% to top line, with an ESOPs cost of about INR 31 crore, and that's a number which will steadily start creeping down, both in absolute sense and as a percentage to top line, which results in a better flow-through to—from adjusted EBITDA to PBT. As we had indicated earlier, as our businesses build scale, technology will be a big driver. We have been making a conscious effort to make our business asset light, which means sometimes directly selling devices to the merchants or to the large banking partners that we have.
This makes our balance sheet asset light. While it may have a short-term impact in terms of the gross realizations, as far as the payments business is concerned, our overall depreciation line item has been fairly flat, with a rising top line, and therefore, the percentage, as a percentage of top line, has seen a steady decline from about 11% two years back to about 4%, and this has translated in a higher PBT and a PAT translation for this quarter as well. This is a slide we spoke about. I think this is a reference point we'll always use to guide through how one should look at the operating leverage with every incremental INR 100 of contribution. As we had said that, every incremental INR 100 of contribution results in about 50-57 rupees of flow-through to adjusted EBITDA.
And given the changes we're making in ESOPs and depreciation, a further flow-through will also translate to PBT. So every, almost 50% of the incremental, contribution margin will actually flow through to the PBT line item. Coming to, business-specific details, we have seen a robust growth of about 11% on the digital checkout points, which is a critical variable we look at. This is, one important variable we track within this, is how we monetize value-added, businesses on top of the rails that we laid out, because we are very well entrenched across the merchants, which are in the enterprise segment and the mid-market. There is significant potential to monetize a lot of these merchants beyond the merchant rental fees that we get.
One variable that we've been tracking and reporting to the street is the fact that how many of these digital touchpoints are actually activated for value-added services, and I'm happy to report that that's a number that is continuously trending upward. This number was about 21%, a year back, and that's about 28%. The value-added services, as is clearly reflected in the volume growth of about 41% on a year-on-year basis at about INR 76,000 crore, comprises various things within it. We are market leaders as far as affordability is concerned, and the season, the season brought in a good amount of volumes. Almost about one-third of that INR 76,000 crore comes from the affordability business, where we are powering buy now, pay later across the consumer durable segment, the mobile segment.
We've also seen very healthy high-digit growths across the non-consumer durable segment, which is a category first for us, which is also driving a lot of this growth. Our margins continue to remain strong, our take rates continue to remain strong, and I think this is a key lever for us. Overall, I think we've grown at about 25% plus, and I think that's a healthy number to kind of go forward. Fintech infrastructure business, I think we are doing a lot of innovative things in the fintech infrastructure side. We are one of the largest rail providers for the Bharat Connect, which is the BBPS system, which connects the utilities to the consumer through the BOUs and COUs. I think we process almost about 31 crore transactions. We monetize it based on number of transactions.
We also have a UPI switch and an Account Aggregator, which helps us penetrate deep into the ecosystem as far as identity and some of the other use cases are concerned. We continue to innovate in this space because we believe there's a lot of potential here. A couple of new innovations that we have done, while we have not showcased it in the product demos, is integrating the bill payment with the ChatGPT equivalent, which helps you make payments in through agentic e-commerce in a very seamless way. Likewise, we are also in the process of simplifying payments and making it seamless. A couple of initiatives we have done is also to make identity verification, which is otherwise a cumbersome process, as far as physical is concerned or for gig workers is concerned.
We have made it extremely seamless through Aadhaar integration, through mAadhaar integration, and it makes it absolutely seamless. So I think we continue to work on multiple use cases here. I think there is significant opportunity, given the complex workflows we solve, and solve it as a solution across our ecosystem to take this to the next level. Coming to the issuance business. The issuance business wrappers registered a very strong growth of transactions at about 28%. We continue to see strong growth across brands that we signed up. We have added a significant amount of brands across geographies, which trust Pine Labs' offering for its prepaid solutions, which is a great stored value platform for attracting customers, for managing refunds, for managing new client acquisition, for actually driving channel loyalty, and all of those use cases.
We are winning not just in India, but across markets. We have a large anchor brand in Australia. We have multiple brands across Southeast Asia. We have won recent mandates with Miniso in US and also with Google Waymo in the US. I think these are markets, as Amrish mentioned early on, where we are making fresh entry, and I think we are able to participate in these markets, given the size, scale, and platform capability that we have distributed. I think one key point I want to bring out here is we are not just a processing platform, but we also provide a holistic solution where we work with the brands and OEMs in not just providing a world-class processing stack, but also customizing use cases to their requirements. And second is, distribution is a big strength.
One of the big growth drivers for this quarter has also been our focus on distribution. We have also said in other quarters that distribution is something that we want to bring in. Because when a brand looks at us, they look at us as an integrated provider for not just processing the cards or the virtual cards or pre-paid stored-value cards, but also taking it across the hinterland and both in India, and also similar tie-ups for global markets to drive that growth. So we have seen a strong distribution. We have led a lot of channel-led programs as well. And across both India and overseas, we have seen strong revenue growth of upward of 40%. I think that's where we are as far as the issuance business is concerned. I'll take a pause here.
I think we have broadly covered the broad highlights of the business. We have covered some of the key aspects that have driven this quarter's performance. Our business remains to be extremely robust, strong. Our cash flows remain strong. We have seen there will always be, given the nature of our business, where we process GTV as an account aggregator, we will see some seasonal volatility as far as cash flows are concerned. But on a steady state basis, I think we have guided earlier as well, when we came out with our RHP, that roughly 15%-16% of our working net working capital top line is a guided view we should take. I'll pause here. Happy to take questions and any other queries that you had regarding our Q3 performance.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click on the Raise Hand icon from the bottom toolbar of your screen. The operator will announce your turn in the queue. We will wait for a moment while the question queue assembles. Ladies and gentlemen, if you wish to ask a question, you may click on the Raise Hand icon. We'll take the first question from Kaushik Agarwal. Please go ahead.
Hi, Kaushik.
Yeah. Hi. Hi. I hope I am audible.
Yes.
Yes, yes, please go ahead with the question.
Yeah. Thank you for the opportunity, and congratulations on a good set of numbers. So couple of questions from my side. Firstly, if you can help, just, decode this 29% GMV growth that we have reported on a YOY basis in this quarter. Is it 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, hasn't been going up so, great. Even on the UPI side, the growth is broadly in the range of 22%-25%. So that was one. Second thing, 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, 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, yeah, these were the three things from my side.
Yeah. So, Amrish, you want it again, 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 be... continues to win in the marketplace in India, and also because of the global markets that we're opening up, new volumes are coming on board. Sameer, you can take the next two.
I think, coming to the second question, I think, the value added and affordability segment has seen-
Sorry, Mr. Kamath, we're not able to hear you clearly.
Okay, just, just one second.
Yeah, now that's good.
I think, yeah, now it's good.
Yeah, you can hear me now? Okay, sorry. Yeah. Kaushik, coming to your second question, I think affordability, we report the total number of INR 74,000 crore, which combines multiple things. It combines three, four things. Affordability is one third of our volumes, but it's 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's 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's 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 are... We operate in the mid-market and the enterprise segment, and not in the, in the villages, where typically this incentive was largely for. In our own P&L, the numbers with regard to PIDF for a month is, rather for a quarter, would be not more than about INR 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'm just gonna add out there, by just giving a little bit more specifics. I think what we, what we think the PIDF kind of an impact on our business is less than, like, INR 4-INR 5 crore on a quarterly basis. So it's 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 don't see there would be any charges which will come on the long tail merchant base in India.
If there is any charges which were to come, it'll largely come onto 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'm just trying to highlight, I do generally believe that the Government of India and the regulator continues to be extremely supportive to grow digital payments across the country.
Kaushik, does it answer your questions?
Yeah, yeah, that, that answers my question. Just, one, one follow-up. 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 don't have it handy right now.
Sure.
Yeah.
Okay. No problem. Thank you.
Thank you. That question was from Mr. Kaushik Agarwal of Haitong. We now move to our next question. That's from Khush Shah of Niveshaay Investment Advisors. Please go ahead.
Yeah, hi, I am audible?
Yes.
Yes, Khush, go ahead, please.
Yeah. So my first question would be, should we think any gateway side as a medium-term opportunity or any internal milestone over the next 12-14 months if we are expecting some revenue towards gateway system, gateway payment 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've already highlighted the fact that, today, Flipkart, Myntra, Blinkit... Not, not Blinkit, Zepto, BigBasket-
Maybe-
- All of these guys use our services on the online payments platform today.
So online is a clear focus area for us, Khush, and we are seeing growth here. I think we've been sustainably growing there. We've been adding new products like Apple Pay for international back. So I think, it's a business that is showing a very high growth for us.
Fair enough. 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 opportunity or we can gauge around key, we would be expanding on that region?
Which one? Can you repeat which region you're talking about?
Japan, Japan. So on the Japan, Japan side, there is an UPI pilot rollout where-
No, we, we don't have, we don't have any presence in, in Japan. We, we continue to do some business development work around it, but no, we don't have any presence in Japan as of now.
So in coming future, we are any expecting from, Japan side revenue or any?
I wouldn't speculate on that one right now.
Okay. Uh,
Khush, we have given a lay of where all we are present and how we are looking at it, I think earlier in the slide, so that gives you a sense of where we are playing right now.
Yeah.
Yeah. So I was just seeing around the Japan that UPI rollout is going to be happen. So I guess-
I think, Khush, I'm 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's not just that we are following what UPI does and which countries UPI is going to.
Okay. Okay. My second question, third question would be, from a long-term perspective, how does we assess the structural opportunity in the gifting and a prepaid instrument ecosystem in India, as there is not a proper market size to gauge that, how big is the market around the gifting side?
In the RHP, we've actually given that information because, you know, we have done some market study on that. We also highlighted in some earlier conversations that we continue to process about 3.5-4 million transactions on a daily basis when it comes to prepaid. So there is a lot more information on the in the RHP.
Okay. Okay.
Thank you.
Thank you very much.
Thank you. Our next question is from Sucrit Patil from Eyesight Fintrade Private Limited. Please go ahead.
Good evening to the team. My name is Sucrit Patil from Eyesight Fintrade Private Limited. Am I audible?
Very clearly, Sucrit. Go ahead.
Yeah. Thank you. So I have two forward-looking questions. My first question is, as Pine Labs operates a broad merchant payment infrastructure and fintech 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 merchant expectations evolve and new digital rails emerge across the global front? That's my first question. I'll ask my second question after this. Thank you.
Sucrit, too broad a question. Honestly, I don't think so. I'm gonna take that question up at this point of time. I think, we've given a lot of information in the RHP. Today, I want to be focused on the Q3 earnings only.
Okay, thank you. Best of luck.
Thank you.
Thank you. Our next question is from Srinivas Sukhi from TIA. Please go ahead.
Hi, Srinivas, please go ahead.
Hi. Congratulations for the strong set of numbers. My question is about the VAS activation that you said it is 28% now. What is the target by FY27?
See, look, I think-
Is it possible to quantify?
I think you've 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 won't 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've moved up to 28%, and that's the reflection of where we are seeing on the VAS business also growing at about 41% as far as the GTV is concerned.
Okay. The next question is about you launched agentic bill payment on LLMs. So how are you going to monetize this? And, like, and what is the privacy like? How much data reaches LLMs, and how much stays within your safe setup?
So, when it comes to, the transaction process, the transaction will happen within the, within ChatGPT in this, in this product that we have created. So what you could do is you could go into the ChatGPT, you can, you know, pretty much give a command or a prompt which says that you want to pay a bill. Let know the, the utility provider and your mobile number, and the transaction will get completed. The second part, in terms of privacy, I don't have that answer for you just now.
Okay. Thank you and best of luck.
Thank you.
Thank you.
Thank you. Any participant who wishes to ask a question may click on the Raise Hand icon. We'll take our next question from Vidhin Shah from Motilal Oswal Financial Services. Please go ahead.
Hello, sir. Am I audible?
Yeah, Vidhin, please go ahead.
Hi, sir. Congratulations on the good set of numbers, and thanks for this opportunity. My first question is, sir, so, 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 FY 2027, sir? And I'll 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, three things. One is the business mix itself, where a lot of international business across issuance, across the fintech 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, et cetera, 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.
That's a structural shift we have done, and going forward also, you'll see depreciation and CapEx being fairly range-bound and as a percentage to top line coming down.
All right. Okay, that's helpful, sir. Coming to my second question, sir. You disclosed that approximately 50%-60% of the efficiency gains, and as mentioned by Amrish, sir, earlier, is that the code is written through AI. Like, 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 haven't started to do that as yet. Honestly, the answer related to this is we continue to invest into new products. We continue to invest into new geographies. So no, we don't do that calculation, which says that, because of this 21% of the code which is being re-written using AI, you know, what could be the potential saving from a headcount standpoint? What we are very clearly calling out is, it's 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's where we go ahead and use the existing capabilities from an engineering standpoint. So specific to your questions, no, we don't calculate it in that fashion.
Understood. Understood. That'll be all, sir. Thank you so much, and all the best for-
Thank you
... the future.
Thank you, Vidhin.
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, you know, I started to give some indication of how Q3 is going. Q3, as I've 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's going to come up over the next 9 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're 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.