Groww is one business that has been at the forefront of this progress in the tremendous shift of the Indian financial technology (fintech) scene. Unexpectedly, the stock brokerage platform with its headquarters in Bengaluru has not only turned a profit but also posted stellar financial results for the fiscal year that ends on March 31, 2023. This article explores Groww’s competitive landscape, financial performance, and the possible ramifications of this development for India’s fintech industry.
Credits: The Economic Times
A Quick Look at Groww and Its Competitor: Zerodha
Groww is a wealthtech firm that was established in 2017 and has established a name for itself in the fintech market in India. Harsh Jain, Lalit Keshre, Neeraj Singh, and Ishan Bansal—members of the ‘Flipkart Mafia’—founded the business, which offers a platform for consumers to invest in equities, exchange-traded funds (ETFs), and initial public offerings (IPOs). Groww joined the exclusive unicorn club in 2021 after obtaining $83 million in Series D funding, which was spearheaded by Tiger Global. With investors like Tiger Global, Peak XV Partners, and Ribbit Capital among its supporters, it has raised a total of $393 million in fundraising.
Groww’s primary competitor in this space is Zerodha, a well-established player in the Indian stock broking industry. Zerodha has a reputation for offering low-cost brokerage services and is known for its technology-driven approach to stock trading. While Groww is making waves with its impressive growth, Zerodha is a heavyweight with substantial revenue and profit figures.
A Profitable Year for Groww: FY23 Highlights
In a stunning turnaround, Groww reported a net profit of INR 448.7 Crores in the fiscal year ending March 31, 2023. This comes as a welcome change from the previous fiscal year when the company recorded a substantial net loss of INR 239 Crores. Groww’s financial performance in FY23 reflects not only its ability to attract and retain users but also its effective revenue generation strategies.
Revenue Sources: Subscriptions and Commissions Take the Lead
Groww’s operating revenue more than tripled in FY23, soaring to INR 1,277.8 Crores from INR 351 Crores in the previous fiscal year. A significant chunk of this revenue, approximately 95.9%, came from subscriptions and commissions fees, contributing INR 1,226.1 Crores to the company’s coffers.
The substantial increase in operating revenue has played a pivotal role in pushing Groww into profitability. This achievement not only underlines the company’s financial stability but also highlights the growing interest in stock market investments among Indian users.
Expenses and Employee Costs
Groww’s expenses rose by 41% to INR 932.9 Crores in FY23, despite a sharp growth in revenue. Significantly, from INR 109.5 Crores in the previous fiscal year to INR 287 Crores in FY23—a 25% increase—a large amount of employee benefit expenses was allocated to salaries and wages.
Based on data from LinkedIn, Groww employed 1,467 people, a 15% annual growth. The company’s dedication to growing its offerings and enhancing customer experiences is demonstrated by the expansion of its staff.
Advertisement Costs and Strategy
Groww’s ability to reduce advertising costs is noteworthy. In FY23, the company managed to cut down its advertising expenditure to INR 243.8 Crores from INR 254.5 Crores in the previous fiscal year. Historically, Groww has invested in sports sponsorships, particularly cricket teams and tournaments, as part of its marketing strategy.
Reducing advertising costs while maintaining or increasing market presence reflects a mature and efficient approach to marketing and user acquisition. This could serve as an example for other companies looking to optimize their advertising budgets.
Transaction and Other Related Charges Surge
One of the standout features of Groww’s FY23 financial report is the massive surge in transaction and other related charges. These charges ballooned by a staggering 187%, reaching INR 219 Crores in FY23 from INR 76 Crores in the previous financial year. This indicates a significant uptick in user engagement and transaction volumes on the platform.
EBITDA Margin Improvement
The improvement in Groww’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin further highlights the company’s path to profitability. The company’s EBITDA margin increased to a robust 35.6% in FY23, a considerable improvement above the -54.6% margin seen in FY22. This represents a significant change in the company’s financial situation.
