Groww faces earnings test after stock surge makes it expensive brokerage

Groww is likely report net income doubled to ₹660 crore in the three months through March from a year earlier, according to analyst estimates

By Alex Gabriel Simon

 

Investors will watch Billionbrains Garage Ventures Ltd.’s earnings Monday for evidence its results justify a 100 per cent jump in the stock since its November initial public offering — a surge that has made it the world’s most expensive brokerage.

 

The company, doing business as Groww, will likely report net income doubled to ₹660 crore ($71.1 million) in the three months through March from a year earlier, according to analyst estimates tracked by Bloomberg. Investors will also closely track the firm’s efforts to diversify from discount broking into wealth management and consumer lending.

 

Groww’s market share climbed to 28.3 per cent in the fiscal year ended March 31 from 26.26 per cent a year earlier, bucking a slowdown in retail trading on the National Stock Exchange, data from the nation’s biggest bourse show. 

 

 

The expansion has driven Groww’s valuation to 43 times its one-year forward earnings — well above Robinhood Markets Inc., Interactive Brokers and local peer Angel One Ltd. — to make it the priciest broking stock among peers with market value of more than $2 billion, according to data compiled by Bloomberg.  

 

“Groww is well positioned to outpace industry growth,” BofA Securities analyst Madhur Sharma wrote in a report, pointing to its strong focus on new-to-investing customers and increasing product adoption among existing users. 

 

BofA expects the company to grow revenues at 30 per cent annually until March 2028 even though uncertainty around a regulatory crackdown on options trading and sensitivity to market cycles are key risks.

 

The firm came into prominence as India’s growing retail investor base saw individuals dabbling in equity derivatives and pouring money into monthly stock mutual fund plans. Groww has about 13 million active clients, according to the NSE, making it the nation’s top broker. Optimism around Groww’s growth prospects propelled its shares to fresh highs last week. 

 

Groww should benefit from a rise in cash and options orders as volatility surged during the March quarter, Jefferies analysts led by Supratim Datta wrote in a note, featuring it among their preferred plays in non-lending financial firms.