The Groww puzzle: Can explosive growth justify its price tag?
Groww's orders grew 14% sequentially to 474 million, with the growth rate accelerating from 10% in the September quarter.
Billionbrains Garage Ventures Ltd’s (Groww) December quarter (Q3FY26) results are impressive, with broking orders continuing their upward trajectory. Most broking orders fetch a flat rate of ₹20 per order, and hence, are a key parameter.
Orders grew 14% quarter-on-quarter to 474 million, with the growth rate accelerating from 10% in the September quarter. This is despite a lower number of trading days in Q3 at 62 versus 64 in Q2 and 61 in Q1.
Groww largely remains a discount broking platform company as of now. Platform or broking revenue grew 15.7% q-o-q to ₹946 crore, mirroring the growth in broking orders, and contributing 75% of its total revenue. Growth was led by equity derivatives brokerage, which grew 9.5% q-o-q to ₹668 crore, likely driven by faster growth in trading volumes as the active user base grew at a slower rate of 5% to 1.48 million. On a smaller base, cash market brokerage grew at a faster rate of 11.5% q-o-q to ₹227 crore.
The share of equity derivatives in broking revenues dropped to 71% from 75%, thanks to the launch of commodity trading towards the end of Q2. Commodity trading gained traction with its share in broking orders rising to 4.6% from 0.3% in Q2. The buoyant sentiment for gold and silver has aided the commodity trading market in general.
The financial services pivot
Despite all the talk around how Groww has reduced its reliance on equity derivatives with rising brokerage from cash market trading, the latter’s share in broking revenue has declined q-o-q to 24% from 24.9%. Groww must have benefited from a higher average daily turnover in the cash market on the National Stock Exchange by 4% to ₹99,270 crore, partially due to increased interest in trading in newly listed initial public offerings (IPOs).
In Groww’s broking business, almost the entire incremental revenue flows to Ebitda as it has to spend just 12.5% of its revenue from a client as variable cost of servicing. Ebitda grew 21% q-o-q to ₹757 crore. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.
Groww is making efforts to move from a platform company to a financial services powerhouse, including asset management and wealth management. On Wednesday, it sold a 5% stake in subsidiary Groww AMC to the world’s fourth-largest asset manager, State Street Global Advisors, for ₹580 crore. State Street could help Groww in scaling up the AMC business faster.
Groww must sustain its current high growth rate to justify the premium valuation at 38x of its FY27 Bloomberg consensus earnings per share (EPS) estimates.
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