Why Has JM Financial Turned Cautious on Groww Despite Strong Growth Projections?
About Groww and Its Rapid Rise in Indian Broking
Groww has emerged as one of India’s most recognisable digital-first investment platforms, riding the surge in retail participation across equities, mutual funds, and derivatives. Its clean interface, zero-commission equity delivery model, and aggressive acquisition strategy helped it scale rapidly during the post-pandemic market expansion. However, as the business matures, questions around sustainability, valuation, and revenue concentration are coming into sharper focus.
JM Financial’s initiation of coverage with a Sell rating and a target price of ₹144 signals a meaningful shift in how institutional analysts are beginning to view platform-based broking models. The note does not dispute Groww’s growth story; instead, it challenges whether the current valuation adequately compensates investors for rising regulatory risks, revenue cyclicality, and execution complexity beyond core broking.
Key Concerns Highlighted by JM Financial
🔹 Valuation appears stretched for a broking-led business model.
🔹 Overdependence on broking revenues remains structurally high.
🔹 Regulatory action has already impacted order volumes.
🔹 Ancillary products lack scale to offset downturns.
🔹 Execution risk in wealth and consumer credit is underappreciated.
At the heart of JM Financial’s thesis is the belief that Groww is being valued as a diversified fintech platform, while its earnings profile still resembles that of a traditional broking business. According to the brokerage, more than 80 percent of Groww’s FY28 estimated revenue is expected to come from broking activities. This concentration exposes the company disproportionately to market cycles, regulatory interventions, and shifts in retail trading behaviour.
One of the most striking data points cited is the 29 percent sequential decline in broking orders over two quarters following regulatory actions starting October 2024. This decline is not viewed as a temporary blip, but as evidence of how sensitive the business model is to external rule changes. In a high-valuation environment, such sensitivity becomes a material tail risk rather than a manageable operational issue.
Groww Revenue Mix: What the Numbers Suggest
| Segment | FY28E Share | JM Financial View |
| Broking | 80%+ | High risk, cyclical |
| MTF | Low base | Low-hanging fruit |
| Wealth & Credit | Nascent | Execution-heavy |
Margin Trading Facility is identified as a relatively easy monetisation lever, given Groww’s existing user base and trading intensity. However, JM Financial categorises this as incremental upside rather than transformational. MTF revenues, while attractive in bull markets, remain tied to trading sentiment and leverage appetite, both of which can reverse quickly in volatile conditions.
The wealth management and consumer credit segments are acknowledged as long-term opportunities, but the note stresses that success here is far from guaranteed. These verticals demand deeper advisory capability, risk management infrastructure, regulatory compliance, and sustained trust-building. Scaling them profitably is not a function of app downloads alone, but of execution discipline over multiple market cycles.
Strengths in Groww’s Model🔹 Large and engaged retail user base. 🔹 Strong brand recall among young investors. 🔹 Scalable digital infrastructure. |
Weaknesses Highlighted🔹 Revenue concentration in broking. 🔹 High sensitivity to regulation. 🔹 Limited diversification cushion. |
Interestingly, despite the Sell rating, JM Financial still projects robust financial growth, with revenue and PAT expected to grow at a CAGR of 34 percent and 45 percent respectively over FY26 to FY28. This apparent contradiction underscores the core issue: growth alone does not justify valuation if risk-adjusted sustainability is questionable.
In other words, the debate is not about whether Groww can grow, but about how fragile that growth may be during regulatory tightening or market downturns. For long-term investors, this distinction is critical. High-growth platforms can underperform if expectations are set too aggressively relative to structural risks.
Opportunities Ahead🔹 Cross-sell to existing users. 🔹 Expansion into advisory-led products. 🔹 Monetisation via MTF. |
Key Threats Identified🔹 Regulatory tightening. 🔹 Prolonged market slowdown. 🔹 Compression in broking yields. |
The broader implication of JM Financial’s view extends beyond Groww. It reflects a maturing phase for India’s discount broking and fintech ecosystem, where scale is no longer enough. Investors are beginning to differentiate between platforms with diversified, annuity-style revenues and those still heavily tied to transaction intensity.
For market participants, this serves as a reminder that valuation discipline matters even in high-growth stories. Just as traders rely on structured frameworks like Nifty Tip to navigate volatility, equity investors must assess not only growth rates but also durability and downside protection.
Valuation Versus Visibility: The Central Question
Groww’s future will be defined by its ability to reduce dependence on pure broking and build resilient revenue streams. Until that transition becomes visible and material, valuation risk is likely to dominate investor perception.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP® believes that in high-growth fintech stories, risk often hides behind impressive numbers. Sustainable wealth creation requires evaluating concentration risk, regulatory exposure, and execution depth alongside growth. Investors should stay selective and disciplined. Read more structured market insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
