JM Financial has initiated coverage on Groww with a sell rating and a target price of ₹144 per share, citing concerns over valuation sustainability given the company’s heavy dependence on its broking business. The brokerage values Groww at 21x FY28E earnings of ₹7, but believes the stock is currently priced at levels that do not adequately reflect regulatory risks and earnings concentration.
JM Financial highlighted that around 88% of Groww’s Q2FY26 revenue was derived from broking activities, underscoring its limited diversification at this stage. The brokerage noted that broking orders declined 29% over two quarters in FY25 following regulatory action from October 2024, which it described as a material tail risk for earnings visibility. According to JM Financial, this regulatory sensitivity makes Groww’s revenue profile more volatile than what is typically warranted by its current valuation multiple.
The brokerage acknowledged that margin trading facility (MTF) represents a relatively low-hanging growth opportunity for the platform. However, it cautioned that scaling wealth management and consumer credit businesses will require focused execution and time before they can meaningfully reduce dependence on broking revenues. JM Financial expects over 80% of Groww’s FY28E revenue to continue coming from broking, limiting diversification benefits in the medium term.
While the brokerage forecasts strong revenue and PAT growth of 34% and 45% CAGR, respectively, over FY26–FY28E, it believes these growth rates are already priced in. JM Financial concluded that Groww’s current valuation is demanding for a predominantly broking-led business operating in an increasingly regulated environment.
Disclaimer: The views and recommendations above are those of JM Financial. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
