Groww’s market debut turned out to be one of the most spectacular post-IPO rallies in recent memory. During the IPO around Rs. 61,000 crore valuation, the stock is now trading at Rs. 1 lakh crore has been crossed. That means Groww has jumped more than 70% from its IPO price and more than 50% from its listing level, all within a week.

Now the question is simple and mathematical. Is the stock price overvalued today beyond what the company’s financials can justify, or is the market correctly pricing in a long runway? The answer, like most things in markets, sits in the middle.

Appropriate financial support stock boom

On the one hand, Grove’s financials are healthy for a tech-first brokerage. It is more profitable and more capital-efficient than its listed peers. As of FY25, the company’s net profit margin is around 47%, much higher than Angel One’s 22.4%, Motilal Oswal’s 30.1% and Nuwama’s 23.6%.

Its ROE at 37.6% is also comfortably above all three, indicating exceptional operational efficiency and a highly scalable business model. Angel One’s Rs. 5,238 crore and Motilal Oswal’s Rs. 8,339 crore compared to – despite lower revenues – Rs. 3,902 crore – Grove surpasses them in profitability ratio, which very few digital platforms achieve this early.

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This is one of the reasons why the market has rewarded the company despite its rich valuation. Analysts said investors prefer platforms that scale cheaply, expand quickly and retain users. Grove fits all three.

The company has over 10 crore registered users, a sticky retention rate between 84% and 93% and an app interface that has become synonymous with initial investment.

Between FY23 and FY25, Groww’s revenue was Rs. 1,141 crore to Rs. 3,902 crore, a CAGR of about 85%, while PAT stood at Rs. 458 crore to Rs. 1,824 crores. EBITDA Rs. 399 crores to Rs. 2,371 crore, a sharp display of operating leverage.

Prashant Tapase of Mehta Equities says Grove represents a strong long-term structural story and can act as a proxy for India’s expanding capital market participation. In an economy where only 16-18% of Indians have demat accounts and barely 5% actively trade, the runway is wide.

But where does the other side of the argument begin? with evaluation

Groww’s IPO is valued at around 34-44x FY25 earnings, a higher premium to peers like Angel One (20x) and Anand Rathi (25x). Now when the stock is Rs. 1 lakh crore, the valuation gap has only widened.

Ishan Tanna of Ashika Institutional Equity Research says Groww looks like it’s getting ahead of itself. While peers like Angel One charge Rs. 25,000 crore at a market cap and Motilal Oswal at Rs. 59,000 crore in trading at very low multiples, it is clear that the market has been overvalued in the hyper-growth years,” he said.

Another key question is whether that growth continues unabated and there are some risks for the company on the regulatory front. In Q1 of FY26, Groww’s brokerage revenue fell by around 18% year-on-year, mainly due to SEBI’s restrictions around F&O and high-risk derivatives.

This makes sense because Grove still derives 62% of its broking revenue from F&O trading — a segment regulators continue to tighten. Any further clampdown could directly compress revenues and profits.

Bonanza Research’s Nitin Jain had earlier said that a 5% decline in F&O orders could drag Grove’s revenue and profit by around 2.5-4.8%.

“For a highly-valued stock, even a small hit can unnerve investors,” Tanna said. There is also the broader question of sustainability. While Groww’s FY25 performance was decent, it remains to be seen whether such high margins will continue, especially as the company expands into lower margin businesses like lending, margin trading, wealth management and advisory.

So where does that leave investors?

On balance, Grove today is a collision between mathematics and potential. The math says the valuation is a bit high and the odds say the company could still be at the beginning of a long India-scale story. “Valuations leave very little margin for error. Any slowdown in customer additions or monetization could unnerve investors,” Tanna said. Still, he adds, “Grove is a watchable stock at the low end.”

Right now, whether Groww is gone too soon depends on what investors believe — FY25 figures or FY30 promises.

(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)