Groww Shares Rise Nearly 5% in Just Two Sessions: What’s Triggering the Rally?
Key Factors Driving the Surge in Groww Shares
– Positive Revenue Projections: Kotak Institutional Equities forecasts a 20% revenue CAGR from FY2026 to FY2028. This growth is anchored in a business model favoring high profitability.
– Stock Performance: Shares of Billionbrains Garage Ventures, the parent company of Groww, surged an additional 2%, hitting a day’s high of Rs 166 on Tuesday. Following Kotak’s coverage initiation with a Buy rating and a target price of Rs 190, this indicates a potential upside of 16.5% from current levels.
– Earnings Growth Expectations: Earnings are projected to remain stable in FY26, followed by a robust 35% increase in FY27 and approximately 25% in FY28. This growth is expected to stem from:
– Expansion into underpenetrated market segments such as Marginal Trading Facility (MTF) and commodities.
– Increased contributions from wealth management, both organically and through acquisitions.
– Operating leverage that will enhance margin growth.
Margin Expansion and Cost Efficiency
– Improving EBITDA Margins: EBITDA margins are anticipated to rise from 60% in FY2025 to about 65% by FY2028, driven by economies of scale and declining cost intensity.
– Lower Marketing Costs: Marketing expenditures, as a percentage of revenue, have significantly reduced from 21% in FY2023 to 12% in FY2025, with expectations to further decline to around 10% by FY2028.
– Strong Cash Generation: The company’s strong internal cash flow is expected to effectively support growth in MTF and on-balance-sheet lending, enhancing capital efficiency.
– Solid Return on Equity: With a healthy return on equity at around 25%, Groww’s financial position remains robust.
Competitive Edge in the Market
– Product-First Strategy: Groww’s focus on product development and technology has resulted in a platform that scales rapidly and monetizes effectively compared to its competitors. This has broadened revenue streams beyond traditional turnover-linked broking.
– User Base Growth: Groww is currently the largest retail investment platform in India, boasting approximately 14 million active users, with nearly 45% of them being under 30 years old. This demographic indicates significant growth potential for the platform.
– User Retention and Asset Growth: Customer retention stands at about 78%, which is higher among users engaging with multiple products. Additionally, there has been a steady increase in assets per customer and average revenue per user (ARPU).
– Market Share: Groww commands roughly 25% of retail cash market volumes and has expanded to 15% of the derivatives market. Despite price increases, the platform continues to attract a significant number of net active users, underlining its strong market appeal.
Conclusion
The recent surge in Groww’s shares can be attributed to promising revenue growth projections, effective cost management, and a competitive market position. As the platform continues to leverage its strengths, including a substantial user base and innovative services, it has the potential to sustain its upward trajectory. Investors remain optimistic about Groww’s future, as reflected in market activities and projections.