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Profit Jumps as Groww Leverages Operations
Billionbrains, the company behind the Groww stockbroking platform, reported a sharp 122% year-on-year rise in net profit to ₹686 crore for the March quarter. This profit surge outpaced an 81% increase in total income, which reached ₹1,536 crore. The strong profit growth was driven by the company's efficient cost management, leading to wider profit margins of 44.7% in Q4 FY26. Earnings before interest, depreciation, and tax (EBITDA) also climbed significantly, up 142% year-on-year to ₹939 crore. Groww added 20% more users, now over 2.1 crore, and saw total customer assets grow 35% to ₹3 lakh crore, indicating continued trust from investors.
Groww Expands Offerings Amid Market Challenges
Groww is successfully broadening its income sources beyond traditional futures and options (F&O) trading. Its Margin Trading Facility (MTF) has grown substantially, reaching ₹2,800 crore. The new commodity trading platform attracted 2.5 lakh users in just three months, contributing about 4% to income. Other areas like loans against securities and wealth management through its Fisdom acquisition are also adding to growth. While equity derivatives' share in total income has slightly decreased, this diversification comes as overall market trading activity slows. Average daily turnover in the equity cash segment fell 6% in FY26. The F&O segment also saw reduced activity on the NSE, down 18%, partly due to tighter regulations and higher Securities Transaction Tax (STT) on derivatives.
Valuation Premium Sparks Investor Debate
Groww's strong results have pushed its market valuation to new highs, now making it the most expensive brokerage stock globally at roughly 43 times its expected earnings for the next year. This valuation premium, much higher than competitors like Angel One and global peers, is a major point of concern. BofA Securities initiated coverage with a 'Buy' rating and a ₹235 target, seeing potential upside. However, JM Financial maintains a 'Sell' rating and a ₹144 target, warning about high valuations in the sector. Groww's premium price makes it vulnerable to any slowdown in growth, new regulations, or changing investor sentiment. Its heavy reliance on brokerage fees (84.5% of FY25 revenue) adds to this risk, particularly with increased regulatory scrutiny on derivatives trading. For example, a potential increase in Securities Transaction Tax (STT) on F&O could notably impact profits; a 10% drop in F&O volumes might reduce Groww's FY27 net profit by 7%. Private rival Zerodha, by contrast, has a strong, debt-free balance sheet. Listed competitor Angel One presents a more balanced risk profile with clear earnings and a more reasonable valuation after its recent stock rise.
Mixed Outlook: Growth vs. Valuation Concerns
Looking forward, Groww is expected to maintain its growth, with BofA forecasting 30% annual revenue growth and 15% active investor growth from FY26 to FY28. However, the sustainability of its current profit margins and high valuation multiples will be critical for its stock performance. Analysts are split: JM Financial sets a target of ₹144, while BofA Securities targets ₹235. This divergence reflects differing views on whether Groww's high valuation is justified by its future growth. As the market increasingly favors stable earnings over pure growth, Groww must consistently prove it can sustain its profitability to support its current stock price.