Groww IPO: Can it win over long-term investors despite market and regulatory challenges?

ET Intelligence Group: Groww, the largest online investment platform by active clients on the NSE, plans to raise ₹5,572 crore through an offer for sale and ₹1,062 crore through a fresh issue that will be used to strengthen the capital base of its subsidiaries and fund cloud infrastructure and brand-building initiatives. The promoter groups' stake will decline marginally to 27.8% from 28%. The issue is priced at a premium to peers, reflecting its market leadership, strong user growth and a robust financial performance.

However, the company's performance relies heavily on retail investors and is exposed to market volatility. Regulatory risk is another factor to watch for investors. Brokerages have been affected by the clampdown on the derivatives segment. Any additional restrictions on weekly options may affect transaction volume and revenue. That makes the IPO suitable for investors with a higher risk appetite and a long-term investment horizon.

Business

Founded in 2016 by parent Billionbrains Garage Ventures, Groww allows retail investors to invest in stocks, mutual funds, derivatives, bonds, and other financial instruments. As of June 30, 2025, the industry's total active client base rose from 3.8 crore to 4.8 crore. The company has a retention rate of 77.7% for users active for over three years.

Also Read | Groww IPO Day 1: Check GMP, brokerage review and other key details

Nearly 45% of users are below 30 years of age, and another 21% are between 31 and 35 years with a median age of 31, giving the company a strong base for long-term wealth creation and cross-selling as portfolios grow. Groww is also a leading mutual fund distributor, with 90 lakh of India's 5.5 crore investors using its platform as of June 2025, capturing a 16% market share. The company does not cater to institutional investors and relies on retail clients for growth.

The total addressable market for investment and wealth management, estimated at ₹1.1 lakh crore as of March 2025, is projected to grow at a CAGR of 15-17% between FY2025 and FY2030 according to the Redseer Report.

Financials
Revenue rose by 84.9% annually to ₹3,901.7 crore between FY23 and FY25. Net profit grew to ₹1,824.3 crore in FY25 from ₹457.7 crore in FY23. It had posted a loss of ₹805.4 crore in FY24 on account of one-time tax outgo and ESOP settlements.

Average revenue per user increased to ₹3,339 in FY25 from ₹2,540 in FY23. The cost to serve customers fell to 14.6% of revenue in FY25 from 15.9% in FY23, while the cost to grow, which covers marketing and promotions, declined to 12.5% from 21%. The adjusted cost to operate dropped to 14% from 26%, underscoring the benefits of scale and disciplined spending.

Valuation
The company seeks a price-earnings (P/E) multiple of upto 34. Among listed broking firms, Angel One trades at a P/E of 20, Motilal Oswal Financial Services at 25, Nuvama Wealth Management at 27, and 360 One WAM at 45.