Groww’s revenue rises 3.5 times, net profit grows 10x to Rs 73 crore

The improving active client base from around 40 lakh early last year to 60 lakh this year has helped Groww to improve its financial metrics, ICRA said

Nextbillion Technology Private Limited, which runs Groww, has recorded a revenue of Rs 1,294 crore in FY2v3, more than three-fold growth from Rs 367 crore in FY22, according to the financial information shared with credit rating agency ICRA.

The Bengaluru-based discount broking firm's net profit for FY23 stood at Rs 73 crore, compared with Rs 6.8 crore it had registered in the previous fiscal.

The improving active client base from around 40 lakh early last year to 60 lakh this year has helped Groww to improve its financial metrics, ICRA said in the note.

“NBT has, under the brand ‘Groww’, emerged as one of the leading discount brokers in India as it made substantial client additions during FY2022-FY2023 amid industry tailwinds and record retail investor participation, especially in FY2022,” the report added.

Venture capital-backed Groww is set to surpass Zerodha, the country's largest equity investment and trading platform, in terms of user count in the next couple of months. However, in terms of revenue, Groww is far behind Zerodha, which reported close to Rs 7,000 crore in revenue and Rs 3,000 crore in profits.

While Zerodha charges for demat account opening as well as maintenance,  Groww does not, which has helped the latter to acquire customers at a faster clip even as the overall demat investors in the country have declined over the last 18 months.

NBT is a subsidiary of Billionbrains Garage Ventures Private Limited (BGV), which in turn is wholly-owned by the ultimate parent, i.e. Groww Inc. NBT is the Group’s flagship operating entity and a key contributor to the income stream of the parent (BGV) for the services offered, the ICRA report said.

Groww’s net worth stood at Rs 590 crore as on March 31, 2023.

“The company’s net worth remains comfortable for the current scale of operations and the near-term growth plans. There were no borrowings outstanding as of March 2023, although the company has availed overdraft facilities which are utilised for intermittent, short-term funding requirements,” the report said.

Foray into Margin Trading Facility

While there are around 12 crore demat accounts in India, only around 30-45 lakh are those active users who trade in intra-day equity as well as in Futures and Options. Most discount brokers make close to two-thirds of their income from these traders.

Groww started as a platform that focussed on attracting new customers with long-term investment products and mutual funds, especially systematic investment plans (SIPs) and then moved on to direct equity investment on its broking platform. Its entire customer acquisition and marketing strategy is anchored on this premise. However, the company is trying to attract daily as well as F&O traders.

Groww is also entering the margin trading facility (MTF) segment, the report said.

“ICRA notes that NBT is preparing to foray into the margin trading facility (MTF) business, which will lead to higher borrowings, although ICRA expects the financial leverage to remain comfortable,” the report said.

This comes after HDFC Securities on September 25 announced the launch of HDFC SKY, a  discount broking all-in-one app for investing and trading at one-price slab of Rs 20.

During the launch of HDFC Sky, the company’s management said that the platform would launch MTFs for users.

MTFs allow an investor or trader to buy shares and increase their buying capacity of shares and securities by paying only a small amount which is the margin and the balance is funded by the broker.

Possible risks and outlook for Groww

Groww’s high dependence on capital markets can be a key risk, the report highlighted.

“The many positives are, however, offset by NBT’s high dependence on capital markets, which are inherently volatile and cyclical in nature…the Group is yet to diversify the income stream as a sizeable share of the broking revenues is from futures and options (F&O) broking (over 80% of broking income in FY2023),” the report said.

The report said that Groww’s ability to maintain the momentum of client additions while improving its revenues and profitability and maintaining comfortable capitalisation would remain critical from a credit perspective.