Groww’s valuation matches BSE Ltd’s, but does it have the moat to justify this?
Both the discount broker and the stock exchange trade at almost identical price-to-earnings ratios for FY26. But BSE Ltd has far higher barriers to entry.
Billionbrains Garage Ventures Ltd (Groww) stock has been on a roller coaster ride since its listing on 12 November. The stock listed at ₹112 on NSE vis-à-vis the issue price of ₹100. It rallied until 18 November, when it closed at ₹189, only to tumble for two consecutive days after that to ₹157. The stock is up marginally since its results were announced during early trading hours on Friday.
The main question is whether the stock’s volatile movement is in sync with the fundamentals. Shareholding data from NSE shows Groww has 6.17 billion total outstanding shares, but only 440 million or about 7% are available for trading (the free float). A low free float leads to high volatility in a stock’s price, and the scarcity can also hamper fair price discovery that reflects the fundamental value of the stock.
Groww is a stock broking company, more specifically a discount broker. So, a comparison with other discount brokers makes sense. Discount brokers offer only a trading platform at a low brokerage rate (a flat rate in most cases).
Groww’s maiden results since listing show the year-on-year comparison is affected by one-offs. Quarter-on-quarter, consolidated revenue from operations for the three months to September (Q2FY26) increased 11% to ₹1,019 crore, mainly led by nearly 10% growth in broking orders. Ebitda (adjusted for one-offs) grew by 23% to ₹624 crore. Net profit came in at ₹471 crore.
Annualizing Groww’s Q2 net profit translates to a profit of ₹1,900 crore for FY26, which means the stock trades at a price-to-earnings ratio of 51. For perspective, Angel One Ltd—India’s third-largest stock broking firm by active client base after Groww and the unlisted Zerodha—is primarily engaged in discount broking, and trades at a price-to-earnings ratio of 27, as per Bloomberg estimates.
Is the high valuation justified?
The sheer size of Groww’s market capitalization, almost ₹1 trillion, has sparked comparisons with other capital-market-related plays such as BSE Ltd, the only listed stock exchange, valued at ₹1.16 trillion. Now, can a stock broking platform with almost no entry barriers be worth as much as a stock exchange, which has far higher entry barriers and only NSE as competition? Well, both Groww and BSE trade at almost identical price-to-earnings ratios for FY26.
To justify the high valuation, optimists would argue that Groww’s profit growth could be exponential in future. That may be true to a certain extent due to the huge operating leverage available. Groww spends just 12.5% of its revenue from a client as variable cost of servicing.
But the critical factor to watch out for is the stickiness of clients, who are quick to migrate from one broker to another. Even when the industry’s active client base fell in October, Groww added 138,000 active clients. This suggests some of its gains have come at the expense of others. For perspective, Zerodha and Angel One lost 62,000 and 35,000 clients last month, respectively.
The industry’s active client base may have the potential to increase, considering its low penetration levels and demographic profile, but the growth may not be linear. In fact, the base has fallen from 50.2 million at the start of 2025 to 45.3 million at the end of October. Even if growth resumes, it may be difficult to retain leadership as a new player could do to Groww what it did to Zerodha.
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