Groww’s market cap vaults past BSE as low supply sparks trading frenzy
A severe short squeeze triggered by tight share supply has sent Groww’s value soaring just days after listing, placing India’s largest retail broker by clients within touching distance of BSE’s market cap.
A series of short squeezes, driven by soaring demand and low trading float, has propelled digital investment platform Groww’s market value past that of one of the exchanges it listed on, making it the only broker to hold this feat.
The stock was listed on both BSE and NSE last Wednesday. In just a week of trading, its market value catapulted from ₹0.7 trillion at listing to ₹1.166 trillion on Tuesday, around ₹12 billion above the BSE’s ₹1.154 trillion. The other exchange Groww listed on, the National Stock Exchange or NSE, is not listed.
Brokers tracking the counter said short squeezes caused amid a limited supply of freely available shares have pushed Groww’s market capitalization sharply up.
Despite a high public shareholding of 72.19%, only about 11% of Groww’s shares are actually tradeable. That’s because foreign investors (57.15%) and mutual funds (4.06%) cumulatively hold 61.21% and typically don’t sell often, while promoters hold another 27.81%.
The brokers added that until lock-in of part of the anchor investor portion takes place early next month, the share supply could remain tight. Half of the anchor investor portion of 298.4 million shares will be unlocked on 10 December. The lock-in for the remaining 50% will end after 90 days from the date of allotment, which was 10 November. Anchor investors are large institutional buyers that buy company shares before it goes public.
“Until then, traders selling the shares can get trapped by bidders fully aware of the prevailing tight supply, forcing the former to square off at higher prices," said a broker on condition of anonymity.
“Valuations look absurd currently and prices will moderate once the anchor lock-in ends," said Ambareesh Baliga, independent market analyst.
Groww is slated to release its September quarter results on Friday, which could again move the share price.
On Tuesday, Groww’s stock rose 8.04% to ₹188.82, while the benchmark BSE Sensex fell 0.33% to close at 84,673.02. Since closing on listing day, Groww stock has climbed 44%.
High-risk trades
A short squeeze occurs when bears are forced to close out their sell positions by buying the shares back at higher levels. This drives prices higher .
Let’s take an example to understand the mechanics. Say, a trader sells a stock intraday at ₹100. If a buyer picks it up at that price, the trader must deliver the shares by the end of the session.
If the trader cannot source the stock at ₹100, he may be forced to buy it at, say, ₹110 and still deliver it at the agreed price of ₹100—effectively taking a ₹10 loss per share. In practice, the trader simply pays the ₹10-per-share difference to the buyer, who also squares off by day-end.
The short squeeze is also clearly reflected by an auction held by NSE for 3.08 million shares on Tuesday. These shares were supposed to be delivered by the shorts who didn't own the shares at the time of their trades last week . These shares are purchased by the exchange through an auction in the open market , with the price difference between the sale price of those unable to deliver and the auction price being borne by them. The shares will be handed over to the buyers who didn't get delivery one day post their trade.
The high demand for shares on both BSE and NSE is reflected by robust delivery volumes of 30% to traded volumes on the counter during the four sessions through Monday. Against this, its closest listed peer Angel One's delivery to traded volumes over the same period stood at just 12% on both the bourses.
“Post listing, trading interest in the stock has gripped the counter," said Narinder Wadhwa, managing director of SKI Capital, a Mumbai brokerage.
Groww is the country’s largest brokerage by clients. As of October-end, its user base stood at 12 million, ahead of rivals Zerodha (7 million) and listed peer Angel One (6.85 million).
However, profitability remains far lower than that of unlisted peer Zerodha. Groww posted a net profit of ₹1,824 crore in FY25, according to data from its offer documents . Comparatively, data from unlisted Zerodha showed that its net profit stood at ₹4,200 crore in the same fiscal year.
Optimistic outlook
Despite the price surge and costly valuation of 59 times price-to-earnings multiple, against Angel One’s 33 times, analysts remain optimistic and attribute the stock’s surge to strong fundamentals.
“Markets are now viewing Groww not just as a broking firm, but as a consumer tech company with exponential growth potential," said Shripal Shah, managing director & CEO of stock broking firm Kotak Securities. “This shift is resulting in strong demand at the counter."
Another brokerage recently noted that despite strong growth, Groww’s journey still relies on continued market expansion and client acquisition.
“Its innovative approach – including the launch of ‘W by Groww’ for affluent users and a widening product suite – positions it to retain leadership in India’s investment ecosystem, though it remains vulnerable to market volatility and shifts in investor sentiment," Ventura Securities noted in a report on 3 November.
“Groww’s entry into asset management with its 2023 acquisition of Indiabulls AMC further underscores its push into diversified financial products," the report added.
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