June 24, 2022

Pine Labs acquires Setu to strengthen online presence

NEW DELHI : Pine Labs has acquired fintech infrastructure provider Setu for $70-75 million to strengthen its online payments and lending platform.
Amrish Rau, chief executive at Pine Labs, said the buyout of the Bengaluru-based firm, which provides API or application programming interface infrastructure solutions for billing, savings, credit and payments was a strategic move.
“Setu’s offerings, including the interface for account aggregator, open network for digital commerce and open credit enablement network framework made Setu an attractive bet for us," Rau said during a virtual press briefing on Thursday
Mint first reported on 2 February that Pine Labs was in advanced negotiations to acquire Setu.
Setu, launched in 2018 by Sahil Kini and Nikhil Kumar, is a technology service provider in the account aggregator ecosystem, enabling users to securely share their financial data with banks and other financial institutions.
“Embedded financial services and open banking are going to be the way forward and the embedded finance market value is expected to exceed $138 billion by 2026 as APIs intensify the competitive fintech landscape,“ Rau added.
Setu is the third acquisition for Pine Labs in 2022. The Sequoia-backed fintech unicorn had bought a majority stake in payments company Mosambee in April and Mumbai-based payments startup Qfix in February. “Pine Labs is expanding rapidly into new areas with the launch of a new payment gateway, Plural, and acquisitions like Qwikcilver, Mosambee, Fave and QFix. In short, it is obsessed with building India’s boldest fintech. By partnering with them, we get access to India’s largest merchant network and the benefit of deepening our relationships with the financial ecosystem," Setu co-founders wrote in a blogbost.
Last valued at $5 billion, Sequoia-led Pine Labs has been looking to diversify beyond merchant payments. The Noida-based point-of-sale firm is investing to scale Plural and is bullish on its lending business after building a strong EMI portfolio. It is also expanding its buy-now-pay-later business in India and Southeast Asia.
Both Kumar and Kini had worked on the Indiastack projects, including Aadhaar and UPI. Kumar had a stint as a fellow in iSPIRT Foundation, which built the unified payments interface (UPI) ecosystem, while Kini was with Aspada Investments.
Setu has raised $18.5 million in funding so far. In 2019, it raised $3.5 million from Lightspeed India Partners and Bharat Inclusion Seed Fund. In 2020, it secured $15 million from Falcon Edge and existing investors.
In FY21, Setu reported operating revenue of ₹3.31 crore, compared to just ₹144 in 2019-20. It had earned ₹5.7 crore from interest on bank deposits. Its net loss, however, widened to ₹19 crore in FY21, from ₹7 crore in FY20.
Setu has 90-100 employees. According to the terms of the deal, Setu will retain its brand identity and team, with the founders continuing to lead the company independently, Pine Labs said.
Setu competes with the likes of Decentro and M2P Fintech, currently the most-valued API infrastructure firms in which Rau is also an investor.
Bloomberg reported earlier that Pine Labs had filed for a US listing, seeking to raise about $500 million.
VCCircle, however, reported later that it may defer the initial share sale process to the second half of the year due to “weak market sentiments". It was planning to launch the listing process in either January or February and had hired Goldman Sachs and Morgan Stanley to formalize it.