Whalesbook
Record Orders Mask Profitability Hurdles
India's retail broking sector is seeing record order volumes, with digital leaders Groww and Angel One collectively exceeding 100 crore orders in the fourth quarter of fiscal year 2026. Groww led this surge with 58.74 crore orders, a significant rise from the previous quarter, while Angel One contributed 43.07 crore. This milestone shows strong retail participation, largely fueled by the derivatives segment. However, beneath these headline figures lies a complex strategic shift. Both companies are investing heavily in wealth management, asset management, and credit businesses, aiming to build more stable revenue streams beyond transaction-focused broking. This diversification push, while necessary for long-term growth, introduces new costs and can moderate near-term margins, creating a complex outlook for investors monitoring their operations and profitability.
Investing in New Services Pressures Margins
Revenue for both Groww and Angel One still largely comes from their core broking operations, which rely on trading activity. Groww reported approximately 87-88% of its Q4 FY26 income from broking, margin trading, and float income. Similarly, Angel One's revenue growth was heavily influenced by order volumes and increased revenue per order, with derivatives and commodities playing a major role. This reliance makes them vulnerable to market swings and changes in trading patterns. The aim to diversify into wealth, asset management, and lending is meant to reduce this risk, but these ventures are currently operating at lower margins or incurring losses. Groww’s wealth arm, Fisdom, reported an operating loss of ₹10.2 crore in the quarter, expecting to break even by FY28. Angel One’s wealth management business also requires substantial investment, with the company putting in ₹150 crore during the quarter. This strategic allocation of capital to build new business lines pressures overall profitability, as these new segments are yet to significantly contribute to the bottom line. Groww’s Asset Management Company (AMC) assets under management (AUM) reached ₹4,000 crore as of March 31, 2026.
Mixed Profitability Amid Investment
Despite strong order volumes, the profitability picture is mixed. Groww's profit after tax rose to ₹686.4 crore in Q4 FY26, a significant increase from the previous year. Angel One also posted a healthy profit after tax of ₹320 crore, with an EBITDA margin of 41.7% in Q4 FY26, improving from 39.4% in Q3 FY26. However, these figures don't tell the whole story. Angel One's margins were affected by one-time expenses, including IPL spending and client reimbursements. Furthermore, the company expects potential margin moderation of 2.5-3% in future periods due to ongoing investment to grow. Groww also pointed to higher costs related to risk due to market volatility and increased general and administrative expenses for social responsibility initiatives and mergers/acquisitions. The market's reaction to these changing margin trends is seen in analyst opinions, where Groww, despite its size, faces a 'Sell' rating from JM Financial due to what they consider high valuations compared to expected FY28 earnings. Motilal Oswal maintains a 'Buy' rating with a higher target price, reflecting different views on its growth and value.
Industry Trends and Competition
Groww and Angel One operate in a rapidly evolving Indian digital broking market with intense competition. While private players like Zerodha and Upstox continue to have large market shares and influence, Groww and Angel One have established strong positions, particularly with their focus on derivatives. However, the sector is dealing with changing regulations, including SEBI's ongoing focus on data security and investor protection. The shift in retail investor interest from high-frequency trading towards more diverse investment products like mutual funds and ETFs presents a long-term challenge to models focused only on broking. Macroeconomic factors, such as interest rate movements and overall market sentiment, also play a crucial role. Higher interest rates, while potentially boosting float income, can also reduce trading volumes and increase borrowing costs for margin trading. The Indian equity market saw moderate gains in Q1 2026, suggesting that the boost from market performance might be smaller compared to previous periods. Angel One’s sustained 20.4% share of overall retail equity turnover indicates strong user engagement, yet the decline in F&O penetration for Groww (from 18% to approximately 10%) suggests possible saturation or a shift in what customers prefer within their user base, requiring them to expand into other areas.
Analyst Concerns: Valuation and Execution Risks
While record order volumes paint a picture of success, a deeper look reveals potential risks. Groww's valuation is a main concern for some analysts, with JM Financial assigning a 'Sell' rating and a target price of ₹150, citing high current valuations compared to projected FY28 earnings. This difference in analyst views highlights the risk in Groww's aggressive growth strategy and its reliance on future earnings to justify its current high valuation. Angel One, rated 'Add' by JM Financial with a target of ₹350, also faces challenges. Its expected 2.5-3% margin moderation shows the cost of diversifying. The success of their wealth management and AMC arms is vital, but these segments are capital-intensive and competitive, with break-even timelines extending to FY28. Groww’s expansion in its margin trading facility (MTF) book to ₹2,810 crore and Angel One's cumulative credit disbursements to ₹2,710 crore show increased credit risk exposure.
Looking Ahead: The Diversification Challenge
The fiscal year ahead is a key phase for both Groww and Angel One. Their ability to turn their wealth management, asset management, and credit businesses from expenses into profit drivers by FY28 will be important for their continued success. Analyst opinions are split, particularly on Groww's valuation, while Angel One appears to have a steadier growth path, though less rapid. The challenge lies in balancing the high-volume core broking business with the slower, steadier returns expected from diversified financial services, all while dealing with a competitive and changing regulatory environment in India's dynamic fintech sector.