Why did Groww's Q2 net profit rise when income from operations declined?

Groww's first quarterly earnings after listing

Groww’s net profit rose 12 percent year-on-year during the September quarter of FY 26, even as the company’s revenue fell 9.5 percent.

One of the key reasons for the rise in profits during the current financial year was that the company had paid a one-time incentive to top managerial personnel during the same period last fiscal.

This resulted in lower profits for the previous financial year, thereby translating to seemingly higher profits during the September quarter this financial year.

Groww’s red herring prospectus disclosed that the company had paid a total of Rs 614 crore in one-time incentives to founders during the last fiscal.

CEO Lalit Keshre was paid Rs 186 crore, COO Harsh Jain received Rs 147 crore, CFO Ishan Bansal earned Rs 134 crore, while CTO Neeraj Singh drew Rs 148 crore in incentives.

“In Q2 last year, we had a provision for a one-time long-term incentive amounting to Rs 159 crore, which was reversed in Q3 FY25 along with the Rs 159 crore provision from Q1 FY25 as well,” Groww said in a shareholder’s letter.

According to the Bengaluru-based wealth-tech firm, If Groww were to exclude this, the company’s net profit would have been higher in Q2 last year, and as a result, the Q2 FY26 profits would have decreased 12 -13 percent YoY in line with the revenue decline.

Groww reported a consolidated net profit of Rs 471 crore for Q2 FY 26, a 12 percent YoY increase from the Rs 420 crore net profit in Q2 FY 25. Meanwhile, the company’s revenue from operations declined 9.5 percent YoY to Rs 1,019 crore in Q2 FY26, from Rs 1,125 crore in Q2 FY25.

To be sure, Groww had also managed to reduce its total expenses sequentially to Rs 433 crore in Q1 FY26, significantly lower than Rs 590 crore in Q2 FY25, helping the company post higher net profit during the current quarter.

Most brokerages have suffered losses after the markets regulator, Securities and Exchange Board of India (SEBI) asked exchanges to stop giving rebates to brokers based on volume called “True-to-label” pricing. SEBI had also clamped down on derivatives trading, citing huge losses for retail traders.