Groww shares jump 20% in 3-days! What's driving the surge?
What's the story
Shares of Billionbrains Garage Ventures, the parent company of popular investment platform Groww, have witnessed a massive surge. The stock jumped by as much as 7% to hit a day's high of ₹172 on Monday. This is the third consecutive session of gains for the company and takes its total increase to over 20% in this period.
Market analysis
Jefferies's bullish outlook on Groww
The surge in Groww's shares comes after international brokerage Jefferies initiated coverage on stock with a 'Buy' rating. The firm compared India's largest retail broker by active clients to Robinhood, and predicted a 35% compound annual growth in earnings over the next three years. This is expected as new products scale up and margins improve. Jefferies has set a target price of ₹180 for the stock, suggesting a potential upside of 12% from its last close on BSE at ₹161.
Business strategy
Market dominance and growth drivers
Jefferies highlighted that Groww has become India's largest broker by active clients, despite entering the broking space only in FY21. The firm holds a 26% market share, ahead of its nearest competitor at 16%. Jefferies credited this rapid rise to Groww's mutual fund-led customer acquisition funnel, intuitive platform design and strong word-of-mouth traction.
Product expansion
Expanding product portfolio and revenue growth
Jefferies was particularly bullish on Groww's expanding product portfolio, which it compared to Robinhood's "product velocity" strategy. The brokerage expects Groww's revenues to grow at 29% annually over FY26-28, driven by the launch and ramp-up of products such as margin trading facilities, wealth management services, commodities, bonds, and loans against securities. Nearly 50% of Groww's client assets are currently parked in mutual funds that generate no revenue for the platform.
Business valuation
Wealth management business valuation and profitability
Jefferies assigned a ₹38 billion valuation to Groww's wealth management business, assuming a 30% revenue CAGR and an improvement in the cost-to-income ratio to 67% by FY30. This assumes a 10% penetration of wealth products within Groww's overall client asset base. The brokerage also noted that Groww's adjusted EBITDA margin has already expanded from 36% in FY23 to 59% in FY25, beating both Robinhood and domestic peer Angel One.