Groww’s Operator Grows FY23 PAT 11X YoY As New Users Boost Revenue Growth

Nextbillion Technology, which operates fintech unicorn Groww, reported a 10.73X year-on-year (YoY) rise in profit after tax (PAT) to INR 73 Cr in the financial year 2022-23 (FY23). In contrast, the company logged a PAT of INR 6.8 Cr in FY22, as per information shared with credit rating agency ICRA.

However, Groww’s parent company Billionbrains Garage Ventures recorded losses to the tune of INR 239 Cr in FY22. Billionbrains Garage Ventures runs Nextbillion Technology, Neobillion Fintech, Billionblock Finserv, and Groww Services as its subsidiaries in India. 

“… it is noted that the profitability at NBT’s standalone level remains constrained by an elevated cost-to-income ratio. A sizeable portion of the operating expenses is on account of software, server and technology services provided by the parent (BGV),” the credit rating agency said. 

On the other hand, Nextbillion Technology saw a 3.5X YoY rise in net operating income to INR 1,294 Cr in the year ended March 2023. The Bengaluru-based firm reported a revenue of INR 367 Cr in the year-ago period, as per ICRA.

What stood out like a sore thumb was Groww’s total operating expenditure, which soared 239% YoY to INR 1,197 Cr in FY23 versus INR 357.3 Cr in the previous fiscal year. 

Groww’s immediate parent NBT’s net worth stood at INR 590 Cr at the end of FY23. 

ICRA also added that Groww continues to be the leading player in the equity broking segment, accounting for the second biggest chunk (16% of total) of NSE clients at the end of March 2023. It also said that the platform made substantial client additions between FY22 and FY23 on the back of industry tailwinds and record retail investor participation.

As per the report, the platform improved its active client base from around 40 Lakh early last year to 60 Lakh this year, which helped shore up its financial metrics.

If the numbers are to be believed, Groww could very well be tipped to surpass competitor Zerodha (64 Lakh active users) in terms of user count in the near future. However, the Nithin Kamath-led company continues to be far ahead of its peers in terms of volumes, as it reported revenue to the tune of INR 6,875 Cr against a profit of nearly INR 3,000 Cr in FY23. 

As per ICRA, Groww continues to face headwinds such as concentrated dependence on inherently volatile capital markets and a smaller footprint in other diversified capital market segments.

“As the company’s revenues are linked to the inherently volatile capital markets, its profitability remains vulnerable to market performance. NBT’s primary source of revenue remains retail broking, which accounted for over 90% of its NOI in FY23. Interest income on fixed deposits largely made up the balance NOI… Thus, any downturn in the capital markets may impact NBT’s financial performance,” ICRA added. 

The credit rating agency also flagged susceptibility to regulatory issues as a major risk to the company’s operations, which may lead to increased working capital requirements and compliance burden for all players operating in the space. 

Groww competes directly with the likes of Zerodha and Upstox and the three players together account for the biggest chunk of active clients.

Founded in 2017 by former Flipkart employees Harsh Jain, Lalit Keshre, Neeraj Singh, and Ishan Bansal, Groww is a discount broking platform that allows users to invest in stock markets.