Groww IPO: The initial public offering (IPO) by Groww’s parent, Billionbrains Garage Ventures, comes at a time when the market regulator is looking to tighten the futures and options (F&O) market. This, experts feel, could cast a pall of gloom over Groww’s IPO, which is set to hit the Indian primary market on Tuesday, November 4.
Significant regulatory uncertainty is creating ripples in the Indian broking industry, especially around potential curbs on the weekly expiry. Market speculation was rife that the Securities and Exchange Board of India (Sebi) is looking to put an end to weekly expiries amid concerns that these instruments are being used for speculative purposes, causing losses for retail investors.
This remains a cause of concern for discount broking firms like Groww, Zerodha, Angel Broking and others, who derive a major chunk of their revenue from the F&O segment.
Weekly F&O ban could pose risks to business
Nithin Kamath, Zerodha’s CEO, recently highlighted that the company has seen a 40% hit to brokerage revenues in the June quarter with the increase in STT on options and the reduction of expiries to two weekly contracts on options, along with other changes.
He cautioned that the options business might be at further risk, with the regulators evaluating whether to stop weekly options completely.
Groww, while commanding the largest share of retail active clients and continuing to gain market share, is not immune to SEBI’s tightening.
“Notably, about 62% of Groww’s broking revenue in FY25 came from the F&O segment — though this dependence is declining as the business matures and as multi-product initiatives ramp up, the risk remains very live,” opined Nitin Jain, Sr. Research Analyst at Bonanza.
Peer sensitivity analysis suggests that a 5% drop in FO orders can drag Groww’s revenue and profit by roughly 2.5-4.8%, Jain added.
Like its peers, Groww is aggressively pivoting into a margin trading facility (MTF) and unsecured lending, both of which are growing quickly but are small relative to the core broking business. It is also making efforts to diversify into mutual funds, wealth management, and insurance broking, among others. These segments, Jain believes, are either in the nascent stage or loss-making and cannot quickly backfill a broking shortfall.
Harshal Dasni, Business Head, INVAsset PMS, believes that these reforms, while healthy for long-term stability, could temporarily cool investor sentiment toward broking platforms whose near-term growth was powered by record F&O volumes and retail trading activity.
An immediate action in the form of an F&O ban might not materialise immediately, given Sebi chief Tuhin Kanta Pandey’s comment: “How can we shut down the weekly options market just like that? SEBI will do further data crunching on the weekly options issue.” However, he added that Sebi would need to see that irrational exuberance is in control for smaller or less savvy market participants.
Groww’s valuation game
Yet Groww’s scale story remains formidable. As India’s largest retail broker by active clients, it has built a vast user base through low-friction onboarding, trust in simplicity, and rapid mutual-fund adoption.
At an implied valuation near $7 billion, investors are being asked to price in not just today’s profits but the durability of its business model under a stricter regulatory regime.
Given Groww’s IPO price band of ₹95-100, it is being valued at 34-44x FY25 earnings, compared to Angel One (~20x) and Anand Rathi (~25x).
“The premium is justified on strong tech, user growth, and a dominant retail franchise. However, cautious sentiment at IPO and post-listing will likely continue unless there’s clarity or a softening in SEBI’s stance—or Groww demonstrates rapid non-broking income ramp-up,” noted Jain.
Dasani also believes that regulation may cap short-term exuberance, but if Groww sustains steady earnings through diversification and trust, it could still justify its premium.
Brokerage Swastika Investmart added that, considering its latest financial metrics and valuations, the issue seems fairly valued, with limited near-term upside. It finds Groww IPO worth investing in with a medium- to long-term perspective.
While analysts might sound caution on Groww IPO, a Reuters report suggests that over 40 anchor investors, including sovereign funds of Norway, Abu Dhabi and Singapore.
Groww IPO details
Groww looks to raise ₹6630 crore via its IPO, which will open tomorrow and remain open till Friday, November 7.
Groww’s IPO is a mix of fresh share sale worth ₹1060 crore and an offer for sale by existing shareholders who are selling a total of 55.72 crore shares in the IPO, as per the red herring prospectus.
Ahead of the IPO launch, Groww is commanding a grey market premium of ₹14. This means Groww shares are trading ₹14 higher than the upper end of the price band. At the prevailing GMP and issue price, Groww shares could offer investors a 14% listing gain.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
