Groww shares erased early gains and fell as much as 2.8% on Wednesday, despite reporting strong first-quarter earnings and receiving a higher target price from Citi, as investors focused on signs of moderating business momentum.
The stock rose as much as 2.2% to Rs 220.98 in early trade before reversing course to hit an intraday low of Rs 210.40. It was trading 2.33% lower at Rs 211.29 later in the session.
The decline came after Billionbrains Garage Ventures Ltd., which operates the Groww platform, reported a 94.2% year-on-year rise in net profit to Rs 735 crore for the June quarter. Revenue increased 66% to Rs 1,501 crore, while EBITDA rose to Rs 971 crore from Rs 483 crore a year earlier. Ebitda margin expanded to 64.6% from 53.4%.
The market reaction followed Citi's latest review, in which the brokerage maintained its Buy rating and raised its target price to Rs 255 from Rs 230. However, the brokerage said business momentum had softened, active user additions in the broking business had moderated and the pace of market share gains had slowed. Citi added that new products could provide upside.
Management Flags Moderation In Trading Activity
During the earnings call, management said activity in the derivatives segment had stabilised after an unusually strong previous quarter. It also pointed to softer trading activity toward the end of June and in early July, while attributing much of the weakness to geopolitical events rather than regulatory changes.
Responding to a question on derivatives activity, Chief Financial Officer Ishan Bansal said, "As a trend, what we are seeing is it is relatively stabilising." He added that recent fluctuations were influenced by the war-related volatility and that the company was seeing a stronger correlation with market volatility than with regulatory changes.
The company also said growth in its margin trading facility business continued to be supported by higher ticket sizes, while management expects further adoption of the product as it improves its technology infrastructure.
Focus Shifts To New Businesses
Management said Groww's next phase of growth would centre on wealth management and expanding its product portfolio beyond its core broking business.
Chief Executive Officer Lalit Keshre said the company aims to evolve from an execution platform into a wealth management business and continues to develop products including Groww Prime, W, bonds and U.S. stocks. "We believe we are still early in the journey," Keshre said.
However, management declined to provide customer or financial metrics for several of the newer businesses, saying it was too early to comment on their progress.
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