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Groww shares gain 3% as Motilal Oswal initiates coverage with Buy rating. Here are 4 reasons
Bangalore, India — Groww shares experienced a notable increase of 3% following a Buy rating from Motilal Oswal, a prominent brokerage firm. This surge reflects strong growth prospects highlighted by the firm, making it a significant moment for investors. With a price target of Rs 185, Motilal Oswal suggests an…
Bangalore, India — Groww shares experienced a notable increase of 3% following a Buy rating from Motilal Oswal, a prominent brokerage firm. This surge reflects strong growth prospects highlighted by the firm, making it a significant moment for investors. With a price target of Rs 185, Motilal Oswal suggests an upside potential of nearly 20% from current market levels. The stock is currently trading about 20% below its all-time high of Rs 194, presenting a compelling case for potential investors.
Motilal Oswal’s analysis indicates that Groww is maintaining a robust competitive position in the broking space. Its cash average daily turnover (ADTO) market share remains steady at 23-24%, while its market share in the derivatives segment has climbed to 14.4%, up from 9.7%. This growth comes despite a challenging regulatory environment, showcasing the platform’s resilience. Even after increasing the minimum brokerage fee to Rs 5 from Rs 2, Groww has seen a rise in active users, indicating a price inelasticity that provides a buffer against future challenges.
Moreover, the company is actively rolling out new trading tools aimed at engaging “power traders.” These innovations are expected to deepen user engagement and enhance monetization opportunities. As Groww continues to innovate, its higher-value customer base is expanding, leading to larger order sizes and improved revenue yield. Analysts project that while brokerage revenue may moderate to 67% by FY28 from 85% in FY25, absolute brokerage revenues are still expected to grow at a 16% compound annual growth rate (CAGR) from FY25 to FY28.
Why Analysts Are Bullish on Groww
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Read More →One of the key reasons for the positive outlook on Groww is its affluent user base, which has been growing at nearly double the pace of the overall platform. Approximately 0.3 million affluent customers now account for about 33% of total assets on the platform. This demographic shift is creating significant opportunities for multi-product engagement and deeper wallet share. The recent acquisition of Fisdom further strengthens Groww’s ambitions in wealth management, allowing it to create a technology-driven platform that integrates offerings such as mutual fund advisory, portfolio management services (PMS), alternative investment funds (AIFs), and private equity.
Analysts project that while brokerage revenue may moderate to 67% by FY28 from 85% in FY25, absolute brokerage revenues are still expected to grow at a 16% compound annual growth rate (CAGR) from FY25 to FY28.
Financially, Groww is in a strong position. A large portion of its costs is fixed, resulting in an impressive operating margin of 59% for FY25. The company’s customer acquisition costs remain low, at approximately $6-10, with short payback periods. Analysts predict that EBITDA margins will expand significantly to 66.4% by FY28, driven by sustained core broking revenue and efficient cost management. This operational leverage positions Groww favorably in the competitive landscape.
Finally, Groww’s valuation remains attractive. Currently valued at around 22 times FY28 earnings, it trades at a discount compared to global peers like Robinhood, which is valued at roughly 40 times projected earnings. As Groww diversifies its revenue mix beyond broking, which accounted for 85% of revenues in FY25, towards margin trading funding and wealth offerings, the valuation gap is expected to narrow.
Positioning Yourself for Investment Opportunities in Groww
For investors looking to capitalize on the bullish sentiment surrounding Groww, there are several actionable steps to consider:
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Read More →- Research the Market: Stay informed about the latest developments in the stock market, especially concerning Groww and its competitors. Use financial news platforms and market analysis tools to gather insights.
- Diversify Your Portfolio: Consider including a mix of stocks in your investment portfolio. While Groww shows promise, diversification can help mitigate risks associated with market volatility.
- Engage with Financial Advisors: Consult with financial advisors to tailor your investment strategies based on your risk tolerance and financial goals. Professional guidance can provide valuable perspectives on timing and stock selection.
However, some experts caution that while the outlook for Groww is optimistic, the stock market is inherently unpredictable. A recent analysis by the Financial Times highlights that reliance on a single stock can be risky, especially in volatile markets. Investors should be aware of the potential for market corrections and consider broader economic indicators before making significant investments.
Research the Market: Stay informed about the latest developments in the stock market, especially concerning Groww and its competitors.
The Future of Groww and Its Market Position
Looking ahead, Groww’s growth trajectory appears promising, especially as it continues to innovate and expand its service offerings. The integration of new technologies and the focus on affluent customers will likely enhance its competitive edge. As the company aims to diversify its revenue streams, investors should remain vigilant about market trends and regulatory changes that could impact performance.
What strategies will you implement to take advantage of the evolving landscape in the investment sector?
