Groww Explained: From valuations to projections, here's what numbers tell us

About this update from Billionbrains Garage Ventures Limited

The listing of Billionbrains Garage Ventures Ltd., parent company of the trading platform Groww, its subsequent rally and the fall on Wednesday has been much talked about on Dalal Street. At the intraday high of ₹193 on Tuesday, the trading platform was valued at over ₹1.15 lakh crore, higher than all of its peer companies, and even the Bombay Stock Exchange (BSE). But how do Groww's valuations stack up for investors to analyse? Lets help you answer this question using two scenarios:Understanding PEG: A Tool to Value Growth Companies When evaluating high-growth companies like Groww, the traditional P/E ratio doesn't tell the full story. This is where the PEG ratio, or Price-to-Earnings-to-Growth, becomes useful. PEG divides a company's P/E ratio by its expected earnings growth rate. The benchmark is straightforward: a PEG of 1.0 is considered fair value. A PEG above 1.0 suggests the stock may be overvalued relative to its growth prospects, while below 1.0 indicates potential undervaluation.Scenario 1: The Management Base Case In interactions with CNBC-TV18, the management of Groww has guided for the company's revenue to grow between 25% to 30% and costs to rise between 15% to 20% over the next few years. In financial year 2025, Groww had reported a revenue of ₹3,902 crore and a net profit of ₹1,824 crore. Assuming the higher end of the revenue guidance and the lower end of the cost guidance, here's how the numbers work out:MetricFY25FY30 Est.CAGR (%)Revenue (₹ Crore)3,90214,48730Net Profit (₹ Crore)1,8248,58636 In case this scenario plays out as projected, Groww's price-to-earnings-growth-ratio works out to be 1.64. This indicates that even at the higher end of the management guidance, the current valuation would mean that investors are paying a premium to the relative growth being delivered.Scenario 2: The Opportunity In ARPU Expansion There's a second narrative that offers more upside potential. Currently, Groww generates ₹3,025 in revenue per NSE active client. Compare this to Angel One, which earns an implied ₹6,893 per client, more than double. This gap exists because Angel One has successfully built out wealth management and advisory services for high-net-worth clients. They've also expanded into commodities trading and bonds, creating multiple revenue streams. Groww is pursuing a similar strategy through its MTF book, Fisdom, Platform 915, commodit...

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