Motilal Oswal Initiates 'Buy' Rating for Groww (Billionbrains Garage Ventures), Sees 19% Upside to ₹185 Target

Motilal Oswal Initiates 'Buy' Rating for Groww (Billionbrains Garage Ventures), Sees 19% Upside to ₹185 Target

Motilal Oswal has started coverage on Billionbrains Garage Ventures (Groww) with a Buy rating, a 12‑month target price of ₹185, and an implied upside potential of about 19% from current levels. The call is built around Groww’s leadership in digital broking, rapid financial scale‑up, and a multi‑product roadmap that should lift margins and reduce dependence on pure broking revenues over the next three years.​

Motilal Oswal’s Investment Thesis

• Motilal Oswal sets a base‑case target of ₹185 per share, about 19% above the recent price near ₹155–156, and initiates with a “Buy” rating on Billionbrains Garage Ventures, the listed parent of Groww.​

• The brokerage highlights Groww as a prime beneficiary of India’s under‑penetrated equity and mutual fund markets, leveraging a simple app interface, low pricing and strong brand recall among first‑time investors.​

• In its bull case, Motilal Oswal believes the stock could reach around ₹260 by FY28, implying roughly 67% upside if execution on growth and diversification beats current base‑case assumptions.​

Why Groww Looks Attractive Now

• Groww has rapidly scaled to become India’s largest retail broker by NSE active clients, with an estimated 26.8% market share in active demat customers.​

• The platform serves customers across about 98% of Indian pin codes, manages around 37 million demat accounts and roughly ₹2.6 lakh crore of customer assets, underlining its reach and franchise strength.​

• Motilal Oswal argues that strong operating leverage and digital‑first economics make Groww well‑placed to compound earnings as ticket sizes rise and more products per customer are monetised.​

Financial Performance and Growth Outlook

• Between FY23 and FY25, Groww’s consolidated revenue from operations surged from much lower levels to about ₹3,902 crore, implying an ~85% CAGR, while net profit jumped to roughly ₹1,824 crore, a ~100% CAGR over two years.​

• For the six months ended March 31, 2025, Groww reported operating income of ₹904.4 crore and net profit of about ₹379 crore, demonstrating continued profitability even as regulatory changes temporarily hit topline growth.​

• Motilal Oswal projects that revenue will roughly double between FY25 and FY28, supported by scaling of margin funding, commodities trading, lending/credit products and wealth/ advisory services.​

Margin Profile and Operating Leverage

• Groww already operates with industry‑leading profitability: FY25 profit after tax margin is cited at around 42–45%, higher than many traditional and bank‑backed brokers.​

• Motilal Oswal expects EBITDA margin to improve from about 59% in FY25 to nearly 66% by FY28, driven by operating leverage, higher non‑broking revenue mix, and better monetisation of its existing user base.​

• The brokerage notes that cloud, marketing, and tech spend will remain elevated, but should grow slower than revenue, allowing incremental margins to expand over time.​

Shifting Revenue Mix Beyond Broking

• Today, broking contributes roughly 85% of Groww’s revenue, but Motilal Oswal expects this to fall to around 67% by FY28 as non‑broking segments scale.​

• Non‑broking businesses—margin trading facility (MTF), commodities, loans against securities (LAS), credit services via Groww Creditserv, and wealth management—are projected to rise from about 15% to roughly 33% of revenues by FY28.​

• This diversification is seen as crucial for smoothing earnings across market cycles since transaction‑driven broking income is highly sensitive to volumes and volatility.​

IPO, Valuation and Market Position

• Billionbrains Garage Ventures’ IPO (late 2025) raised about ₹6,632 crore, including ₹2,984 crore from anchor investors at ₹100 per share, and was subscribed roughly 17.6 times overall, signalling strong institutional and retail demand.​

• IPO proceeds are earmarked for cloud infrastructure (≈₹152.5 crore), brand‑building and performance marketing (≈₹225 crore), capital infusion into the NBFC Groww Creditserv (≈₹205 crore), and funding MTF capital via Groww Invest Tech (≈₹167.5 crore), plus general corporate purposes and inorganic growth.​

• While valuations appear richer than many listed brokers, Motilal Oswal argues the premium is justified by Groww’s growth visibility, profitability profile and digital franchise quality.​

Key Risks Highlighted

• A sharp downturn in equity market activity or prolonged periods of low retail participation could hit trading volumes and broking income, pressuring earnings despite diversification.​

• Regulatory tightening around discount broking, leverage (MTF), options trading, or fintech‑NBFC models could affect revenue growth and capital requirements.​

• Rising competition from other digital-first brokers and full‑service players improving their apps could slow market‑share gains or force higher promotional spending, affecting margins.​

What the 19% Upside Call Means for Investors

• With a base‑case target of ₹185 and about 19% implied upside over 12 months, Motilal Oswal is effectively positioning Groww as a high‑quality, high‑growth fintech broker where earnings compounding, not deep value, is the core attraction.​

• The bull‑case scenario of ₹260 by FY28 assumes sustained 20%+ revenue growth, successful scaling of non‑broking verticals, and EBITDA margin expansion to mid‑60s, offering meaningful upside but with commensurate execution and regulatory risk.​

• For investors, the call suggests viewing Groww as a long‑term digital financial services platform play, where position sizing and time horizon should reflect both the strong fundamentals and the volatility that typically accompanies richly valued, high‑growth fintech names.