Valuation Vs. Value: Groww’s IPO Sparks Debate As Scale Outpaces Profitability

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Groww, India’s largest stockbroker by active clients, is preparing for a blockbuster IPO that could value the company between USD 7 to 8 billion. With over 12 million active users and a fresh issue of Rs 1,060 crore, the Bengaluru-based fintech is betting on scale, brand recall, and digital dominance to justify its lofty valuation. But as comparisons with Zerodha and Angel One intensify, questions around profitability, sustainability, and regulatory headwinds are beginning to surface.

The IPO, expected to launch in Q4 FY26, comes at a time when the retail broking industry is undergoing structural shifts. Regulatory curbs on futures and options (F&O) trading, rising compliance costs, and margin compression are reshaping business models. Groww’s ability to convert its massive user base into durable earnings will be closely scrutinized by investors.

Key Highlights From The IPO Filing

- Groww reported FY25 revenue of Rs 4,056 crore, up 49 percent year-on-year
- Net profit surged to Rs 1,820 crore, reversing a Rs 805 crore loss in FY24
- Q1 FY26 revenue stood at Rs 904.4 crore, with profit of Rs 378.4 crore
- Active client base declined from 13 million in February to 12.07 million in August
- Market share rose to 25.1 percent, ahead of Zerodha (17.1 percent) and Angel One (15.3 percent)

Comparative Performance: Groww Vs. Zerodha

While Groww leads in user count, Zerodha remains the industry’s profitability benchmark. In FY24, Zerodha posted Rs 8,370 crore in revenue and Rs 4,700 crore in net profit—more than double Groww’s FY25 earnings. Zerodha’s lean cost structure, high-margin F&O business, and conservative growth strategy have helped it maintain superior returns despite having nearly 5 million fewer active clients.

Angel One, another key player, reported Rs 891 crore in Q1 FY26 revenue and Rs 114 crore in profit, though adjusted PAT stood at Rs 192 crore. Groww’s Q1 numbers are stronger, but its reliance on retail trading and lower monetization per user raise concerns about long-term margin stability.

Revenue Model And Strategic Shifts

Groww’s revenue has historically leaned heavily on retail F&O trading, which faces tighter regulatory oversight. To mitigate this, the company is diversifying into:

- Wealth management via PMS and AIF offerings for high-net-worth individuals
- Margin funding and lending products for active traders
- Subscription-based analytics and advisory tools
- A new platform, ‘915’, targeting professional traders with advanced features

These moves signal a pivot toward higher-value clients and recurring revenue streams, but execution risk remains high. The first quarter of FY26 already reflected a dip in F&O volumes, underscoring the urgency of diversification.

Valuation Debate And Investor Sentiment

Groww’s proposed valuation of USD 7–8 billion implies a price-to-earnings multiple of over 30x based on FY25 earnings. While tech IPOs often command premium valuations, the gap between user scale and monetization efficiency is drawing scrutiny.

Key investor concerns include:

- Declining client activity amid market volatility
- Regulatory uncertainty around retail derivatives
- High customer acquisition costs and low ARPU
- Limited differentiation in core broking services

Supporters argue that Groww’s brand equity, mobile-first design, and Gen-Z appeal offer long-term upside. Its ability to onboard first-time investors and cross-sell financial products could unlock new monetization layers over time.

Looking Ahead

Groww’s IPO will be a litmus test for India’s fintech narrative—can scale alone justify valuation in a sector where profitability is increasingly hard-won? As the company enters public markets, its challenge will be to convert digital reach into durable earnings, while navigating regulatory shifts and competitive pressure.

Investors will be watching not just the listing pop, but the post-IPO roadmap: how Groww manages churn, deepens engagement, and builds a resilient business beyond trading.

Sources: Economic Times, Outlook Business, Forbes Advisor India.