Short squeezes amid tight share supply have catapulted the market value of fintech platform and broking firm Groww close to that of BSE Ltd that runs the 150-years-old Bombay Stock Exchange. Shares of Groww’s parent listed on BSE last week.
A short squeeze involves bears being forced to close out their sell positions by buying the shares back at higher levels, resulting in price surges as seen on Monday.
Shares of the listed parent of Groww, Billionbrains Garage Ventures Ltd, surged 17.45% on Monday to ₹174.45, taking its market value to ₹1.07 trillion, up from ₹916 billion on Friday — only ₹70 billion shy of BSE’s ₹1.14 trillion.
Since debut last week the shares have soared 56%. Billionbrains listed at ₹112, a 12% premium to its offer price, last Wednesday. Since then, rising trader frenzy has kept the counter active.
Brokers tracking the counter said short squeezes caused by a limited supply of freely available shares have pushed Groww’s market capitalization sharply up.
Tight float problem
The frenzy stems from the lack of freely available shares despite a high public shareholding of 72.19%. Foreign strategic and portfolio investors hold 57.15% and mutual funds 4.06% taking institutional ownership to 61.21%. These investors tend to hold on to shares for longer than non-institutional investors.
With promoters holding 27.81%, the tradeable float available to retail and high net-worth investors (HNIs) is only about 11%.
“In such a situation, traders selling the shares can get trapped by bidders fully aware of the prevailing tight supply, forcing the former to square off at higher prices,” said a broker on condition of anonymity.
High-risk trades
For instance, if a trader sells a stock intraday at ₹100 and a buyer picks it up at that price, the trader must deliver the shares by the end of the session. If the trader cannot source the stock at ₹100, he may be forced to buy it at, say, ₹110 and still deliver it at the agreed price of ₹100 — effectively taking a ₹10 loss per share. In practice, the trader simply pays the ₹10-per-share difference to the buyer, who also squares off by day-end.
The intense trading activity on the counter is evident from the low delivery-to-volume ratio on the NSE. On Monday, 62 million shares were delivered against a traded volume of 466 million, translating into just 13% delivery. Except for listing day, when the delivery ratio was 44%, delivery percentages on Thursday and Friday remained below 18%.
“Post listing, trading interest in the stock has gripped the counter,” said Narinder Wadhwa, managing director of SKI Capital, a Mumbai brokerage.
Groww is the country’s largest brokerage by clients. As of October-end, its user base stood at 12 million, ahead of rivals Zerodha (7 million) and listed peer Angel One (6.85 million).
However, profitability remains far lower than that of unlisted peer Zerodha, which posted a net profit of ₹4,200 crore, compared with Groww’s ₹1,824 crore in FY25.
Optimistic outlook
Still, several analysts remain optimistic and attribute the stock’s surge to strong fundamentals.
“Markets are now viewing Groww not just as a broking firm, but as a consumer tech company with exponential growth potential,” said Shripal Shah, MD & CEO of stock broking firm Kotak Securities. “This shift is resulting in strong demand at the counter.”
Another brokerage recently noted that despite strong growth, Groww’s journey still relies on continued market expansion and client acquisition. “Its innovative approach – including the launch of ‘W by Groww’ for affluent users and a widening product suite – positions it to retain leadership in India’s investment ecosystem, though it remains vulnerable to market volatility and shifts in investor sentiment,” Ventura Securities noted in a report. “Groww’s entry into asset management with its 2023 acquisition of Indiabulls AMC further underscores its push into diversified financial products.”
