Groww: Making Investment Simple

Introduction Groww, founded by Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal in 2017, is an investment platform that simplifies the process of investing in stocks, mutual funds, and other financial products.

Growth and Success Groww’s user-friendly app and educational resources have made investing accessible to millions of Indians. The company reached unicorn status in 2021, highlighting its impact on the fintech industry.

Future Prospects Groww plans to expand its product range and continue educating investors, helping more people achieve their financial goals.

Founding Story

Groww was founded in 2016 by four co-workers from Flipkart: Lalit Keshre (CEO), Harsh Jain (COO), Neeraj Singh (CTO), and Ishan Bansal. Motivated by the focus on democratizing investing and making it accessible to the Indian population, the four co-founders left their jobs to build a product, beginning as a mutual fund platform.

Keshre, an Indian Institute of Technology Bombay alumnus, first learned about stocks from one of his friends in college, eventually reading books to learn about investing. He launched his first start-up Eduflix, an ed-tech company in 2011, but this eventually shut down when it wasn’t able to scale fast enough.

While working at Flipkart, Keshre and his other co-founders witnessed how technology and customer-centricity disrupted the ecommerce industry, and realized that a similar user experience was missing from the financial services industry. Only ~20 million Indians held a share in mutual funds from 2016 to 2018, despite 60% of household savings in India being held in financial assets (including mutual funds, insurance, cash, direct equity, etc.). As a result, the founders believed there was an opportunity to make the process of purchasing financial products easier and more transparent.

The founders initially launched an app focused on robo-advising in 2016, which struggled to find product-market fit. Six months later, in May 2017, the company launched Groww as a direct mutual fund distribution platform, offered as a web platform. While initially targeting 100 customers in the product’s first month, the team managed to attract 600 customers. The Groww app was subsequently launched in December 2017 and continued to add other capital market offerings such as stocks, futures & options (F&O), and initial public offerings (IPOs).

Even before the product was officially launched, the founders started creating courses and videos to educate potential users about personal finance and trading. Keshre has said a key defining characteristic of the company has been “customer obsession”. Between 2016 when the company was launched and 2023, Groww grew to over 1K employees.

Product

Groww is a web and app-based investment platform, that allows users to invest in a number of investment products including stocks, mutual funds, futures, options, and intraday trading. As of November 2023, Groww also offers instant loans to eligible customers. In addition to investment and credit services, the company also offers financial education programs in the form of blogs, articles, and videos.

Investment Products

A user can access Groww through the official website or by downloading the app. To start investing, the customer needs to create an account on Groww and verify their Permanent Account Number (PAN), which is issued by the Income Tax Department to Indian taxpayers.

Before creating a dematerialized (demat) account on Groww, customers are asked to select and verify details of their existing bank. Demat accounts are used to track ownership of tradable assets, such as securities transactions in India. Demat accounts with different banks can have different account opening and maintenance charges, but there are no minimum balances or trading requirements once the account is open.

Groww offers demat account opening free of charge, thereby creating an edge over demat accounts offered by traditional brick-and-mortar banks. Customers can then start investing in different investment products through their Groww demat account. Both the website and app provide market updates and technical charts to help make investment decisions.

Stocks: This includes securities listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) including Futures and Options (F&O), Exchange Traded Funds (ETFs), Initial Payment Offerings (IPO), and Sovereign Gold Bonds (SGBs). Groww’s offering also includes stocks available on US markets and in US ETFs.

Business Model

As a zero-commission platform, Groww does not charge a demat account opening fee, maintenance fee, or mutual fund brokerage fee. It does charge flat-fee brokerage on equity and F&O, goods and services tax (GST), etc., and regulatory and statutory charges.

Regulatory and statutory charges include:

1. Securities Transaction Tax (STT): Direct tax levied on the sale and purchase of securities listed on stock exchanges
2. Stamp Duty: Charge levied on the contract note, applicable only on buy orders
3. Exchange Transaction charge: Transaction charges levied by NSE or BSE on both buy and sell orders
4. Depository Participant (DP) charge: Charges levied on sell orders, not applicable to intraday trading and F&O

Valuation

In October 2021, Groww announced a $251 million Series E round at a $3 billion valuation, and it has raised a total of $393.3 million in funding as of December 2023. The company’s Series E round was led by ICONIQ and included other investors like Alkeon, Lone Pine Capital, and Steadfast. It also included participation from existing investors Propel Venture Partners, Ribbit Capital, Sequoia Capital India, Tiger Global, and YC Continuity.

Groww’s $3 billion valuation represented a 3x markup since it was last valued at $1 billion in April 2021. The company shared plans at the time to invest new capital in expanding reach to under-penetrated geographies and adding more products and services to the platform. In June 2023, Groww also raised an additional $25 million Series E from Foxhog Ventures at an undisclosed valuation.

Comparable companies, like Paytm, have seen significant fluctuations in the public markets. After an IPO in November 2021, the company saw an all-time-high valuation of ~$14 billion before dropping to ~$7 billion as of December 2023. That valuation represented a drop from a 31.7x revenue multiple to a 5.6x revenue multiple.

Summary

In a short span of time, Groww has managed to occupy a significant market share of millennials who prefer digital investing and has achieved a substantial valuation in the process. It is difficult to differentiate from existing competitors in the space, and a challenge is to become profitable while also reducing CAC. Groww’s strategy to expand into credit lending is one way to offer a larger suite of products to investors, creating a purchase funnel. Groww benefits from having a loyal customer base and significant funding, but it needs to continue to improve unit economics as it pursues becoming well-integrated within the larger fintech space.