What is the story about?
Shares of Billionbrains Garage Ventures, the parent of Groww, slipped as much as 4% from the day's high in Tuesday's session, December 23. The stock is trading lower today after rising for three consecutive sessions.
The decline comes after brokerage firm JM Financial initiated coverage on the company with a 'Sell' rating and a target price of ₹144 per share, arguing that the stock is too expensive for a pure-play broking business.
The brokerage said it expects over 80% of Groww's FY28 revenue estimates to be driven by broking, making the business highly sensitive to any slowdown in trading activity.
While margin trading facility or MTF is seen as a low-hanging fruit, JM Financial cautioned that scaling wealth management and consumer credit businesses will require focused execution. It also said that ancillary products are unlikely to meaningfully offset a sharp downturn in core broking revenues.
JM Financial flagged regulatory risks as a key concern, saying that broking orders fell 29% over two quarters following regulatory action beginning October 2024. The brokerage described the decline in orders as a major tail risk to Groww's business model.
Despite these concerns, JM Financial expects revenue and profit after tax to grow at a CAGR of 34% and 45%, respectively, over FY26 to FY28e. The brokerage firm values the company at 21x FY28e earnings, based on an estimated EPS of ₹7.
Earlier on December 19, Jefferies had initiated coverage on Groww with a 'Buy' recommendation and a target price of ₹180. The brokerage said that despite starting operations only in FY21, Groww has emerged as the largest broker in India in terms of active clients.
Jefferies expects the company's EPS to grow at a CAGR of 35% between FY26 and FY28, driven by a 19% expansion in the broking business through client and market share gains, a five-fold growth in new initiatives such as MTF and wealth management, and a 700 basis points improvement in margins.
This marks the second brokerage initiation on Billionbrains Garage Ventures since its listing.
Shares of Groww were last trading 2.54% lower at ₹161.91. The stock has corrected about 16% from its post-listing high of ₹193.8.
The decline comes after brokerage firm JM Financial initiated coverage on the company with a 'Sell' rating and a target price of ₹144 per share, arguing that the stock is too expensive for a pure-play broking business.
The brokerage said it expects over 80% of Groww's FY28 revenue estimates to be driven by broking, making the business highly sensitive to any slowdown in trading activity.
While margin trading facility or MTF is seen as a low-hanging fruit, JM Financial cautioned that scaling wealth management and consumer credit businesses will require focused execution. It also said that ancillary products are unlikely to meaningfully offset a sharp downturn in core broking revenues.
JM Financial flagged regulatory risks as a key concern, saying that broking orders fell 29% over two quarters following regulatory action beginning October 2024. The brokerage described the decline in orders as a major tail risk to Groww's business model.
Despite these concerns, JM Financial expects revenue and profit after tax to grow at a CAGR of 34% and 45%, respectively, over FY26 to FY28e. The brokerage firm values the company at 21x FY28e earnings, based on an estimated EPS of ₹7.
Earlier on December 19, Jefferies had initiated coverage on Groww with a 'Buy' recommendation and a target price of ₹180. The brokerage said that despite starting operations only in FY21, Groww has emerged as the largest broker in India in terms of active clients.
Jefferies expects the company's EPS to grow at a CAGR of 35% between FY26 and FY28, driven by a 19% expansion in the broking business through client and market share gains, a five-fold growth in new initiatives such as MTF and wealth management, and a 700 basis points improvement in margins.
This marks the second brokerage initiation on Billionbrains Garage Ventures since its listing.
Shares of Groww were last trading 2.54% lower at ₹161.91. The stock has corrected about 16% from its post-listing high of ₹193.8.
