Billionbrains Garage Ventures, the parent company of Groww , rallied 2% to reach its day's high of ₹166.00 on Tuesday, extending gains for a second consecutive session. The stock has gained 4.5% over this two-day period, driven by positive analyst coverage from a leading domestic brokerage.

Kotak Initiates Coverage with Buy Rating

The recent surge follows Kotak Institutional Equities initiating coverage on the stock with a Buy recommendation and a target price of ₹190.00 per share. This target represents an upside potential of 16.5% from current market levels, reflecting the brokerage's confidence in the company's growth trajectory.

Strong Growth Projections

Kotak expects the company to deliver robust financial performance over the coming years. The brokerage projects largely flat earnings for FY26E, followed by strong growth of approximately 35% in FY27E and about 25% in FY28E. This growth trajectory is expected to be driven by several key factors including sharp ramp-up in underpenetrated segments such as marginal trading facility (MTF) and commodities.

Business Model Strengths

The investment platform is expected to deliver a 20% revenue CAGR over FY2026–28E, supported by a business model designed for high profitability. EBITDA margins are projected to expand to around 65% by FY2028E from about 60% in FY2025, driven by scale benefits and declining cost intensity. Margin expansion will be further supported by new, higher-margin revenue streams such as MTF and commodities.

Marketing efficiency has shown significant improvement, with costs as a percentage of revenue falling sharply to 12% in FY2025 from 21% in FY2023. These costs are projected to ease further to around 10% by FY2028E. Strong internal cash generation is expected to comfortably fund growth in MTF and on-balance sheet lending, supporting capital efficiency.

Platform Leadership and User Metrics

Groww maintains its position as India's largest retail investment platform by NSE active users, having scaled largely through organic referrals and low customer acquisition costs. Since FY2022, the addition of new transacting users has accelerated, with active users reaching approximately 14 million. Nearly 45% of these users are under 30 years of age, indicating a substantial long-term growth runway.

Key platform metrics demonstrate strong user engagement:

• Three-year retention rate: approximately 78%
• Retail cash market share: roughly 25%
• Derivatives market share: expanded to about 15%
• Return on equity: around 25%

Risk Factors

Kotak highlighted several risk factors that could impact future performance, including sensitivity to market cycles and shifts in retail investor behavior, prolonged regulatory processes extending into other broking areas, execution challenges in scaling the wealth management business, intensifying competition within the broking space, and the risk of mature users migrating to platforms offering more advanced tools.

Kotak Institutional Equities has initiated coverage on Billionbrains Garage Ventures Ltd., the parent company of discount broking platform Groww , with optimistic projections for the stock's future performance. The brokerage issued a 'Buy' recommendation on Monday, January 12, setting a price target that suggests significant upside potential for investors.

Analyst Recommendations and Price Targets

Kotak's coverage initiation comes with a price target of ₹190.00 per share, representing a potential upside of 20% from Friday's closing levels. This positive outlook is built on the brokerage's constructive medium-term view anchored in several key factors including a durable, product-led growth flywheel, expanding monetisation opportunities, and robust technological infrastructure.

Market Position and Growth Prospects

Groww has achieved a remarkable market position, becoming India's largest broker in terms of active clients despite commencing operations only in FY21. This rapid growth trajectory has caught the attention of multiple research houses, with Jefferies valuing the company at a premium to peer Angel One. The premium valuation is justified by faster growth rates, superior margins, and lower exposure to the volatile futures and options segment.

Financial Projections and Business Expansion

The earnings outlook for Groww appears robust, with projections indicating a 35% EPS CAGR over FY26-28. This growth is expected to be driven by multiple factors:

• Core broking business growth of approximately 19%, supported by client vintage and market share gains
• Five-fold expansion in newer initiatives including margin trading facilities and wealth management services
• Significant margin expansion of nearly 700 basis points
• Diversified monetisation across broking, margin lending, wealth management, and consumer credit segments

Stock Performance and Market Reception

Shares of Groww closed nearly 1% lower at ₹158.90 on Friday, reflecting some near-term volatility. However, the stock maintains substantial gains of about 59% from its issue price of ₹100.00, though it has retreated approximately 18% from its post-listing high of ₹193.00. The mixed analyst sentiment, with three 'Buy' ratings against one 'Sell' recommendation, reflects differing views on valuation metrics for the broking business model.

Investment Considerations

While the majority of analyst coverage remains positive, JM Financial's contrarian 'Sell' rating highlights concerns about stretched valuations in the broking sector. The firm's ₹144.00 price target suggests potential downside risk, arguing that current market pricing may not adequately reflect the cyclical nature of broking businesses. Investors are advised to consider these varying perspectives and conduct thorough due diligence before making investment decisions.