Billionbrains Garage Ventures Limited

Billionbrains Garage Ventures Limited (Groww) reported a strong Q4 FY26. The company's AUM grew 2.5x in one year, demonstrating robust asset accumulation. Equity options market share increased from 9.1% to 10.6%, driven by new customer acquisition and increased activity from existing users. Quarterly transacting customers saw a significant rise, growing from 1.4 million to 1.7 million. The company also expanded its product portfolio, now offering 12 products compared to 3-4 products four years ago.

Groww has strategically forayed into wealth management through its acquisition of Fisdom, which enabled the launch of three new products: Fisdom (bank partnership), W (for affluent/HNI customers), and Prime (for mass affluent customers). Fisdom is targeted to achieve profitability by FY28. While the Prime product is currently available to some customers, management expressed optimism about its future rollout to existing customers, though a specific timeline was not provided.

The increase in equity options market share was attributed to new customers entering the derivatives market, supported by new initiatives like 915, and increased trading activity from existing customers due to market volatility^🌐. Management noted a shift in the acquisition funnel towards mutual funds and ETFs since September '24, influenced by prevailing market conditions. Despite a dip in AUM due to mark-to-market adjustments at the March 31st cutoff, inflows have remained strong.

Employee costs increased during the quarter due to strategic investments in asset management, wealth, and AI initiatives, bringing the total headcount to 1800. Depreciation also rose, primarily as a result of the Fisdom acquisition. Management indicated that the cost to serve, largely tech-related, is expected to decrease as a percentage of revenue. The cost to grow (acquisition spend) for the current year is projected to be similar to the INR 450-500 crores spent in the previous year.

Groww is actively integrating AI across its operations, including the software development lifecycle, company-wide processes, and customer experience, such as customer support and the GR1 co-pilot for customer research. The company aims to leverage AI to enhance productivity, enabling faster and higher-quality product development. This focus has allowed Groww to expand its product offerings to 12 products with a relatively similar team strength compared to four years ago.

Management actively engages with regulators on industry concerns, including efforts to curb speculation in F&O. The company is awaiting further regulatory clarity before developing a strong strategy for algo trading. While acknowledging macroeconomic headwinds^🌐 and negative FII flows, which have kept the market 'away from the bottom yet,' management remains optimistic about the long-term potential, projecting the industry to grow at a 10-15% CAGR over a longer frame, driven by future bull runs.

The company's Average Revenue Per User (ARPU) was influenced by a decline in F&O penetration, which dropped from 18% before November to approximately 10%. However, the introduction of new products like MTF and commodities helped to offset this impact, bringing ARPU back to pre-November levels. Management clarified that MTF is primarily utilized by existing customers for longer position holding, rather than serving as a new customer acquisition tool.