Groww shares rise nearly 5% in just two sessions. What’s triggering the rally?

Shares of Billionbrains Garage Ventures, the parent company of Groww, rallied another 2% to their day’s high of Rs 166 on Tuesday, after Kotak Institutional Equities initiated coverage with a Buy rating and a target price of Rs 190 per share. This implies an upside potential of 16.5% from current market levels.

The brokerage expects FY26E to see largely flat earnings, followed by strong growth of around 35% in FY27E and about 25% in FY28E. This growth is likely to be driven by a sharp ramp-up in underpenetrated segments such as marginal trading facility (MTF), commodities, incremental contribution from wealth revenues through both organic and inorganic avenues, and operating leverage that should support margin expansion.

Groww is expected to deliver a 20% revenue CAGR over FY2026–28E, supported by a business model designed for high profitability. EBITDA margins are likely to expand to around 65% by FY2028E from about 60% in FY2025, driven by scale benefits and a steady decline in cost intensity. Margin expansion will also be supported by new, higher-margin revenue streams such as MTF and commodities.

Further, Kotak added that marketing costs, as a percentage of revenue, have fallen sharply to 12% in FY2025 from 21% in FY2023 and are projected to ease further to around 10% by FY2028E. Strong internal cash generation is expected to comfortably fund growth in MTF and on-balance sheet lending, supporting capital efficiency. The balance sheet remains under-leveraged, with a healthy return on equity of around 25%.

Groww’s product‑first DNA, organic acquisition engine and tech focus have created a platform that scales faster and monetizes better than peers while continually broadening revenue streams beyond turnover‑linked broking, Kotak said in a note dated January 9. Groww’s journey so far demonstrates consistent share gains across products, pricing power, improving unit economics and a high-potential wealth pivot. Execution on wealth monetization is critical to sustain platforms like multiples historically reserved for diversified global peers.

As for risks, Kotak highlighted sensitivity to market cycles and shifts in retail investor behaviour, prolonged regulatory processes extending into other areas of broking, execution challenges in scaling its wealth management business, intensifying competition within the broking space, and the risk of mature users migrating to platforms offering more advanced tools.

Groww is India’s largest retail investment platform by NSE active users and the platform has scaled largely through organic referrals and low customer acquisition costs. Since FY2022, the addition of new transacting users has accelerated, with active users reaching about 14 million, nearly 45% of whom are under 30, indicating a long growth runway.

Customer cohorts show a steady increase in assets per customer and ARPU over time. Groww’s three-year retention stands at around 78% and is significantly higher among multi-product users. The platform commands roughly 25% share of retail cash market volumes, while its derivatives market share has expanded to about 15%. Despite price hikes, Groww has continued to lead in net active user additions and gain share in the retail cash segment, highlighting strong product appeal and pricing elasticity, Kotak added.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)