Digital Wealth And Lending Expansion Will Drive Long Term Earnings Power

Catalysts

About Billionbrains Garage Ventures

Billionbrains Garage Ventures operates GROWW, a digital investing and lending platform focused on making wealth creation simple and accessible for Indian customers.

What are the underlying business or industry changes driving this perspective?

• Rising financialization of savings in India, combined with GROWW's strong brand and predominantly organic customer acquisition, positions the platform to capture a larger share of new investors, supporting sustained growth in active users and brokerage revenue.
• Expansion of higher yielding products such as MTF, LAS and commodities, on top of an already engaged equity customer base, can drive up average revenue per order and improve overall net margins as these scaled products leverage existing technology and fixed cost infrastructure.
• Increasing affluence of the customer base and the integration of the Fisdom wealth platform create room to cross sell advisory, PMS, AIF and insurance solutions, which should diversify income streams and lift fee based earnings over time.
• Shift toward tech led, asset light credit models, with a growing mix of secured products alongside stabilized unsecured books, can lower credit costs as a percentage of AUM and improve risk adjusted earnings from the lending franchise.
• Industry wide move toward better quality, more compliant F and O and credit users following regulatory changes reduces low quality churn and supports higher average ticket sizes and stable CAC, enhancing long term profitability and earnings visibility.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Billionbrains Garage Ventures's revenue will grow by 22.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 45.4% today to 52.3% in 3 years time.
• Analysts expect earnings to reach ₹51.9 billion (and earnings per share of ₹8.29) by about August 2029, up from ₹24.4 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as ₹60.4 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 45.7x on those 2029 earnings, down from 51.6x today. This future PE is greater than the current PE for the IN Capital Markets industry at 22.9x.
• Analysts expect the number of shares outstanding to grow by 3.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.37%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Rising customer acquisition costs in a maturing broking market, combined with management comments that overall marketing spends will not be very different from previous times, could compress unit economics if competitive intensity forces higher promotional activity. This could put pressure on net margins and earnings growth.
• The lending franchise remains young at roughly three years old, with recent unsecured credit costs mentioned in tens of crores and a still stabilizing book. Any macro slowdown or asset quality shock in unsecured digital loans could increase provisioning needs and stall growth in the credit AUM, weighing on both revenue and net margins.
• Management is targeting a significantly higher, double digit market share in margin trading funding and is dismissive of price led competition, yet peers are already offering materially lower rates. If customers prove more price sensitive than expected, GROWW may have to cut yields or sacrifice growth, which could hurt lending revenue and overall earnings.
• Fisdom and broader wealth management are still early, with only about 3 percent of revenue contribution and near breakeven or negative profitability. Delays in integration or slower than expected adoption of advisory, PMS and AIF products could limit diversification benefits and keep fee based income and consolidated earnings below expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of ₹237.5 for Billionbrains Garage Ventures based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹255.0, and the most bearish reporting a price target of just ₹190.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be ₹99.2 billion, earnings will come to ₹51.9 billion, and it would be trading on a PE ratio of 45.7x, assuming you use a discount rate of 13.4%.
• Given the current share price of ₹200.72, the analyst price target of ₹237.5 is 15.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.