Groww shares gain 3% as Motilal Oswal initiates coverage with Buy rating. Here are 4 reasons

Shares of newly-listed Billionbrains Garage Ventures, the parent company of Groww, rallied as much as 3.2% to their day’s high of Rs 160 on the BSE on Tuesday after Motilal Oswal initiated coverage with a Buy rating, citing strong growth prospects in the coming quarters.

With a price target of Rs 185, the domestic brokerage implies an upside potential of nearly 20% from current market levels. To be sure, shares of the company are trading 20% below its all- time high of Rs 194. Here’s why experts are bullish on the counter.

Market share gains: Analysts say Groww continues to maintain a strong competitive position in the broking space, with its cash ADTO (average daily turnover) market share holding steady at 23–24%. The platform has also made sharp gains in the derivatives segment, where market share has risen to 14.4% from 9.7%, despite operating in a challenging regulatory environment. Notably, even after increasing the minimum brokerage to Rs 5 from Rs 2, active users in the cash segment have continued to trend higher across segments, indicating price inelasticity and providing Groww with a clear pricing lever to cushion against potential future headwinds.

The company is rolling out new trading tools targeted at “power traders” to deepen engagement and improve monetization. Supported by continuous product innovation, Groww’s higher-value customer base is expanding, resulting in larger order sizes and improved revenue yield. While the share of brokerage revenue is expected to moderate to 67% by FY28 from 85% in FY25, absolute brokerage revenues are projected to grow at a 16% CAGR over FY25–28.

Affluent-led wealth management entry: Groww’s affluent user base has expanded at nearly twice the pace of its overall platform growth, with around 0.3 million affluent customers accounting for approximately 33% of total assets on the platform. This skew towards higher-value customers is creating meaningful opportunities for multi-product engagement, deeper wallet share and the development of long-term wealth relationships, says Motilal.

Strengthening this strategy, Groww’s acquisition of Fisdom adds strategic scale to its wealth management ambitions. The company plans to operate a technology-driven wealth platform that enables scalability while integrating offerings such as mutual fund advisory, PMS, AIFs, private equity and unlisted securities. These expanded capabilities are expected to further enhance Groww’s value proposition, particularly for its affluent customer segment.

Robust financials: A large part of GROWW’s costs is fixed in nature, with only 9-10% of the costs being variable. This led to a robust operating margin of 59% in FY25, the brokerage said in a note. The organically built customer acquisition funnel and product expansion, which have been driving engagement, is resulting in a low customer acquisition cost of $6-1010 and short payback periods.

“We believe the company’s EBITDA margin will expand meaningfully to 66.4% by FY28, backed by the sustained momentum of core broking revenue, scale-up of non-broking revenue, and robust cost efficiency,” analysts said.

Attractive valuations: Groww, currently valued at around 22x FY28E P/E, trades at a meaningful discount to global peers such as Robinhood, which is valued at roughly 40x CY27E P/E. As Groww’s revenue mix progressively diversifies beyond broking — which accounted for about 85% of revenues in FY25, compared with 55–60% for Robinhood — towards margin trading funding (MTF), credit and wealth offerings, the valuation gap is expected to narrow over time.

In its Bull Case scenario, Motilal Oswal has pegged the target price at Rs 260, an upside of 67% from current levels. The operating revenue is assumed to grow at a 33% CAGR over FY25–28, compared with a 25% CAGR in the base case.

Profitability is also expected to scale faster, with EBITDA projected to grow at a 36% CAGR over the same period versus 30% in the base case, while EBITDA margins are seen expanding to 68% in FY28, compared with 66% under the base case assumptions. Reflecting this stronger operating leverage, PAT is expected to deliver a 39% CAGR over FY25–28, materially higher than the 30% CAGR assumed in the base case.

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