Groww net income doubles, PAT quadruples to Rs 297.8 Cr in FY24

Groww Invest Tech Private Limited (GIT), which operates the brokerage app Groww saw its net operating income more than double to Rs 2,900 crore in FY24, while PAT grew 4X to Rs 297.8 crore.

In FY23, the company's net operating revenue—the amount of cash flow a business generates after all expenses have been deducted—was at Rs 1294.6 while PAT was at Rs 73.1 crore.

Billionbrains Garage Ventures Private Limited (BGV) which houses GIT, has a net worth of Rs 2,224 crore with minimal debt as of March 31, 2024, according to a research note by credit agency ICRA.

"ICRA notes that the Group has initiated diversification into other lines of business, which would require capital outlay in the near-to-medium term. Nonetheless, the capital position is expected to remain comfortable and ICRA expects management and financial support from the Group to be forthcoming to GIT, as and when required," the note said.

GIT has been growing its customer base, which has helped boost its trading volumes and earnings. In FY2024, the company achieved a high return on net worth (RoNW) of 40.3%, even though it had to pay significant fees for software, servers, and technology services from its parent company, the rating report said.

Return on Net Worth (RoNW) is a financial metric that measures how effectively a company uses its equity (the net worth) to generate profits. A high RoNW indicates that the company is generating a substantial profit relative to the amount of equity invested by its shareholders.

As of March 31, 2024, GIT's financial health was strong, with a net worth of Rs 887.4 crore and no debt, the report showed. It has enough resources to meet its financial needs and the company mainly needs funds to maintain margin deposits at the exchanges to support its trading operations. It also had around Rs 85 crore in liquid investments and had access to Rs 158.7 crore in unused bank credit lines (loans it can draw on if required) and Rs 100 crore in intraday lines (short-term funds available for same-day use) that can be used in emergencies or unexpected situations.

"The net worth is primarily deployed in margins placed at the exchanges, followed by certain amounts

in the form of cash/bank balance and liquid investments. While the company has sanctioned overdraft facilities, these are backed by fixed deposits that are used for intermittent, short-term funding requirements," The note said.

Exchanges require brokers to maintain margin deposits to ensure they can cover potential losses from trades, especially in high-risk segments like derivatives (F&O). These margins help reduce systemic risk by ensuring brokers can meet their obligations.

However, GIT has recently entered the margin trading business, which means it will start borrowing money to offer this service. Even with this, the company’s borrowing levels are expected to stay within manageable limits, the report said.

Goww is the top discount broker in the country based on the number of active clients on the NSE (National Stock Exchange) as of August 2024, holding a 25% market share. The company has rapidly grown its client base since FY2022, driven by favorable market conditions and a surge in retail investors.

At TechSparks 2024, Co-founder Lalit Keshre attributed the company's success in the Indian market to its customer-centric approach and focus on simplifying finance, despite not being the first to enter the space.

Retail investments in India have experienced substantial growth in recent years. A significant indicator of this trend is the surge in DEMAT accounts, which reached a record 154 million by April 2024.

Recently Zerodha posted a revenue of Rs 8,320 crore and a profit of Rs 4,700 crore, excluding an unrealised gain of Rs 1,000 crore.

"We continued our tremendous financial track record, and FY23/24 was a fabulous year in terms of both revenues (Rs 8320 crore) and profitability (Rs 4,700 crore). The profits don’t consider the ~Rs 1000 crore of unrealised gain, which will show in our financials," said Nithin Kamath, Co-founder and CEO of the company, in a blog on September 24.

However, Kamath said he expects to see a 30-40% drop in revenue next year due to "all the regulations", including a SEBI circular issued in July this year that mandates market infrastructure institutions to charge uniform fees to all members starting October 1, as well as regulation around index derivatives.