Financial services firm Groww’s active user base is likely to cross 10 million or one crore in May of 2024 amid increased activity in the equity markets as well as a spurt in startup initial public offerings (IPOs), sources close to the development told Moneycontrol.
“Groww crossing 10 million active users is due to two main reasons, one is the platform’s user experience, which is hassle-free and there has been a lot of activity in the primary and secondary markets in the last few months,” a source aware of the development told.
Groww overtook Zerodha back in September 2023 and has now built an unassailable lead over its Bengaluru-based rival founded by popular entrepreneur brothers - Nithin and Nikhil Kamath.
Technology-led startups such as Zerodha, Groww and Upstox are called discount brokers, who charge minimal of flat transaction fees while buying shares on their platform. These companies have taken market share from traditional brokers and bank-led broking institutions over the last decade or so.
A senior executive with one of the broking firms said that Groww's approach to education and investment helped them stand out from the trading-focused competitors.
“Groww’s product is solid, however, the push in active users might be coming from their strong marketing strategies. Groww also consistently asks its existing users what products and features they wanted to see on the platform and developed those rather than a top-down approach,” the executive told.
Another industry source said that Groww’s customer base is also coming from Indian’s tier 2 and tier 3 towns. “Groww’s marketing as well as word of mouth has helped them scoop customers from India’s tier 2 and tier 3 cities as well,” he said.
In fact, in April 2024, Groww grabbed a bigger slice of the market pie to command nearly a quarter of active investors on the NSE as most of its peers' stock brokers either grew slower or suffered a churn in customer base.
During FY 24, a few brokers such as Zerodha and HDFC Securities have seen a loss in market share despite a growing customer base, while others such as Upstox and ICICI Securities have recorded an erosion in users.
As of April, Groww’s active investor base went up to 9.9 million active investors up 77.5 percent from a year ago, according to NSE data. Its market share has expanded to 23.4 percent, from 16.5 percent last year. Zerodha’s active user base went up to 7.39 million active users in April of 2024.
Angel One too has also seen an expansion in its market share to 15 percent, with an active investor base of 6.11 million in April - a growth of 42 percent on-year.
Also Read: Groww grabs market share from rival discount brokers, traditional platforms
Profitability game
While Groww will likely win the game in terms of market share, Zerodha’s focus on the trading community is likely to help the company to be the largest company in terms of revenue and profit in the near future.
As of FY23, Zerodha reported a 38.5 percent growth in revenue for the financial year 2022-23 at Rs 6,875 crore compared with the previous financial year. It also reported a 39 percent growth in profits, which stood at Rs 2,907 crore in FY23.
Also Read: The F&O edge: Why Zerodha will sit pretty at top
Groww on reported a profit after tax (PAT) of Rs 448 crore mainly on the back of its higher operating revenue which grew nearly 266 percent year-on-year to Rs 1,277 crore in the financial year ending March 2023, showed documents sourced from the Registrar of Companies (RoC).
Both Groww and Zerodha are privately-held and their FY 24 numbers will be shared with RoC later this year.
While Groww has turned profitable, industry experts have raised concerns over the sustainability of such profits amid the company’s efforts to flip back domicile to India.
Last week, Groww’s cofounder Lalit Keshre on X said that Groww has completed the process of moving the domicile of its holding company from US to India.
However, the number of tax liabilities that Groww incurred for a merger of its US holding company, Groww Inc, with the Indian entity, Billionbrains Garage Ventures will be significant to hit the company’s bottom line.
"Unlike Zerodha, Groww has a bit of pressure to ensure returns or exit to its early investors and this will force the company to go for IPO within the next couple of years. Right now, India seems like the best place to go for an IPO. A few years ago, only thye US market had the potential to give public market valuations north of $10-20 billion to technology companies. Hence the company is going for registering in India," said a fintech consultant, whose firm works with Groww.
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