Press Releases     24-Jan-25
Groww Invest Tech Private Limited: [ICRA]AA- (Stable) assigned to NCD programme; ratings reaffirmed

Rationale

 

 The ratings continue to factor in Groww Invest Tech Private Limited’s (GIT) strong market position in the equity broking segment1 , its comfortable capitalisation, strong liquidity, and the expectation of healthy profitability despite the likely moderation on account of near-term headwinds. These positives are, however, partially offset by the company’s high dependence on capital markets, which are inherently volatile and cyclical in nature. Moreover, a sizeable share of the revenues is from the futures and options (F&O) segment (~73% of the net operating income; NOI in FY2024), which is facing industrywide erosion of trading volumes following the measures implemented to curb hyperactive trading in short-tenor index derivatives and to protect the interests of retail investors. GIT has emerged as one of the leading discount brokers in India as it had made substantial client additions since FY2022 amid industry tailwinds and record retail investor participation in capital markets. The continued growth in its client base has been supporting the increase in its broking volumes and earnings, as witnessed till FY2024. The company reported strong profitability with a return on net worth (RoNW) of 40.3% in FY2024. The healthy profitability trajectory continued in H1 FY2025 as well, though ICRA notes that the revenues and profitability would moderate in H2 FY2025 due to the erosion in derivatives volume due to the measures implemented by the regulator. Trading volumes in the cash segment (at industry level) have also moderated2 in recent weeks as investor sentiment is not as bullish as in the preceding period. GIT’s capitalisation profile remains comfortable with a net worth of Rs. 887.4 crore and nil borrowings as on March 31, 2024. ICRA notes that the company has forayed into the margin trading facility (MTF) business in FY2024, which will lead to higher dependence on borrowings, although the financial leverage is expected to remain comfortable. GIT is the flagship operating entity of the Groww Group3 and a wholly-owned subsidiary of BGV, which houses the Group’s tech platform. It remains strategically important for BGV and is a key contributor to its income stream for technology and other services availed. BGV’s consolidated net worth stood at Rs. 2,224.0 crore4 as on March 31, 2024 with negligible borrowings. 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.

 

ICRA notes that GIT remains susceptible to regulatory changes as well as technological risks, given its predominantly online presence and the evolving fintech landscape. Going forward, its ability to sustain the momentum of client additions while improving its revenues and profitability and maintaining comfortable capitalisation would remain important from a credit perspective. The Stable outlook on the long-term rating reflects ICRA’s expectation that GIT will continue to maintain a strong market position in the equity broking business, which will support its healthy profitability trajectory and comfortable capitalisation.

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