Groww convenes EGM for shareholder approval of GIC, Iconiq investment

Groww convenes EGM to approve funding

Wealth management firm Groww has convened an extraordinary general meeting (EGM) of its shareholders to approve a series F investment from GIC and Iconiq Capital, according to a company disclosure.

On May 26, Bengaluru-based Groww confidentially filed for an initial public offering (IPO) with markets regulator SEBI  (the Securities and Exchange Board of India) under the pre-filing mechanism. Moneycontrol had  reported that Iconiq is likely to pump in $150 million in the broking firm’s pre-IPO funding round of $300 million, at a valuation of $7 billion.

The Iconiq investment is coming through its vehicle ISP VII-B Blocker GW Ltd, and the Singapore firm GIC is coming through Viggo Investment Pte Ltd.

Both companies are getting 1.4 percent stake for Rs 867 crore each, in a cumulative fund raise of Rs 1,735 crore, or around $200 million. This values Groww at $7.1 billion.

The pre-IPO round is around $300 million, and another $100 million tranche is coming, possibly at slightly different terms or valuation, according to a source aware of the matter.

Groww, the country’s largest stockbroker by active investors, is likely to take a conservative IPO valuation of $7-8 billion, considering the market sentiment and volatility.

Based on the valuation, a typical 10-15 percent equity dilution could imply an IPO size of around $700-920 million. Details such as total issue size, and the fresh issue and offer-for-sale breakdown have not been disclosed yet.

Robust growth

The Bengaluru-based wealth-tech firm competes with Zerodha and Upstox in online discount broking and offers mutual funds and other financial products. It was last valued at $3 billion in 2021 during its series E round. Its key backers include Tiger Global, Peak XV Partners, and Ribbit Capital.

Groww has around 1.3 crore active investors, far ahead of Zerodha and Angel One, which have 78  and 75 lakh active investors, respectively.

Groww has more than doubled its FY24 revenue to Rs 3,145 crore at a consolidated level. The company’s FY25 numbers are not yet public but are likely to be part of the updated DRHP.

Its consolidated operational profit rose 17 percent to Rs 535 crore in the year that ended  on March 2024, compared with the Rs 458 crore it had reported a year prior. Its consolidated revenue for FY23 stood at Rs 1,435 crore.

The one-time domicile tax of Rs 1,340 crore resulted in Groww posting a Rs 805-crore net loss at the consolidated level. Groww moved its registered office from Delaware in the US to Bengaluru during FY24.

Tough times for brokers

Groww’s IPO process is starting at a difficult time for most brokers, as a few regulations have hurt the industry. Negative investor sentiment has also resulted in all four top brokers seeing a third straight month of decline in active investors in April.

Groww saw around 75,000 fewer active investors in April, while the second-largest broker, Zerodha, saw its active investor base decline by more than 55,000.

For Bengaluru-based Zerodha, which pioneered the discount broking / zero brokerage in India, this was the fifth consecutive month of decline in investors. Broking firms are bracing for higher taxes on trading, lower exchange rebates, and stricter restrictions on retail futures and options trading since late last year. Most broking firms could see a 30-50 percent hit to the topline during the second half of FY25.

Angel One, which is listed, reported a 49 percent fall in net profit in Q4FY25, to Rs 175 crore, compared to Rs 340 crore reported in the corresponding quarter in FY24. Consolidated revenue sank 22 percent to Rs 1,056 crore, from Rs 1,357 crore posted in the same period last year.