Groww is outgrowing discount broking. Current valuations to punish execution missteps

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The markets have cheered Billionbrains Garage Ventures Ltd’s (Groww) June quarter (Q1FY27) earnings, sending the stock up over 6% in the past two trading days. Net profit almost doubled year-on-year to ₹735 crore as operating leverage across segments amplified the 66% growth in revenue to ₹1,500 crore.

Beyond the headline numbers, the quarter demonstrated Groww’s steady progress in its transformation from a discount broker into a diversified wealth platform. Equity derivatives, which accounted for over 56% of total income in Q1FY26, contributed 52% in Q1FY27.

Newer businesses continued to gain traction. The margin trading facility (MTF) contributed 8% of revenue versus 3% a year ago, while commodity derivatives contributed nearly 5%, despite being launched less than a year ago. The management expects this diversification away from equity derivatives to continue.

This matters because the regulator has been clamping down on retail participation in equity derivatives. Competition also remains intense, with rivals expanding aggressively even as retail trading activity continues to be heavily influenced by market sentiment and volatility. Result? Groww’s revenue was flat sequentially.

To be sure, the management assured that the 4% sequential fall in derivatives revenue was due to abated volatility amid easing geopolitical tensions in Q1 and that volumes have returned with volatility. The company now holds an 11% share of the segment, up from 7.2% a year ago.

Groww’s second-largest segment—stocks—contributed 16% to total revenue in Q1 and saw a sequential dip in market share to 15.1%. Revenue from stocks was flat at about ₹250 crore.

As gold prices moderated in Q1, ETF (exchange-traded fund) trading in the yellow metal declined. Also, Groww implemented certain risk controls in Q1 such as tightening of limits across MTF and intraday trading.

“We believe that these measures somewhat restrained our market share growth in stocks and MTF,” said the management.

Despite these setbacks, stock volumes rose 48% year-on-year, while the MTF book grew 3.64x. Commodity derivatives have scaled on enhanced user adoption amid strong industry momentum. Groww outran Angel One and now has almost 29% retail market share of notional commodity derivatives volume.

Groww added 115,000 net active clients on the National Stock Exchange in Q1, up 4% sequentially, taking the total number of transacting users to 22 million, even as the industry lost 260,000 clients amid weaker initial public offering activity and softer ETF participation. Angel One's total user base grew 3.2% sequentially to 38.6 million.

Groww’s management attributed this to better retention, product quality and user experience. Growing while the overall pie shrank buoyed investor confidence.

Groww also remains India's largest distributor of direct mutual funds, with ₹1.9 trillion of direct mutual fund assets under management. Sure, its recent entry into regular plans under Groww Prime, an AI-powered advisory offering for investors seeking curated mutual fund recommendations, has invited criticism. But it is expected to shore up recurring commission income and result in stickier customer relationships.

Groww AMC's assets under management have grown about 140% over the past year to ₹5,491 crore. Regulatory approval for State Street Global Advisors' strategic investment is expected to propel the segment further ahead even as the smaller wealth management business (Fisdom) remains in the gestation phase, posting an operating loss of ₹11 crore in Q1.

Following a 65% rally over the past year, the company trades at about 33 times FY28 estimated earnings, according to Bloomberg, leaving limited room for execution missteps.

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