Buy Billionbrains Garage Ventures Ltd for the Target Rs.240 by Motilal Oswal Financial Services Ltd
Strong operating performance drives 11% PAT beat
* Billionbrains Garage Ventures’ (GROWW) operating revenue of INR15b in 2QFY27 grew 47% YoY (5% beat). For 1HFY27, revenue grew 56% YoY.
* Operating expenses rose 29% YoY in 2QFY27 to INR5.3b (6% below est.), with employee expenses rising 36% YoY (11% below est.) and other expenses rising 25% YoY (in line). EBITDA grew 60% YoY to INR9.7b, reflecting EBITDA margin of 64.5% (59.2% in 2QFY26 and MOFSLe of 60.4%).
* PAT for the quarter came in at INR7.2b, growing 54% YoY (reflecting an 11% beat on our estimates). For 1HFY27, PAT grew 72% YoY.
* The impact of SEBI’s proposed optionality measures on CAS is expected to be limited, with derivatives activity likely to normalize relatively quickly following implementation, according to management.
* We have increased our earnings estimates by 4%/1% for FY27/28, considering strong 2QFY27 performance driven by improved operational efficiency. We reiterate our BUY rating with a TP of INR240 (premised on 38x FY28E EPS).
MTF surge supporting broking revenue/order improvement
* Broking revenue rose 29% YoY to INR10.5b, driven by 24% YoY growth in orders to 517.3m as well as an increase in revenue per order to INR20.4 (INR19.7 in 2QFY26).
* Derivatives revenue grew 13% YoY but declined 14% QoQ to ~INR6.9b, owing to market adjustments to CAS. GROWW’s retail options premium ADTO market share was 11.0%, up from 8.7% in 2QFY26.
* Cash revenue grew 29% YoY/8% QoQ to ~INR2.7b, with ADTO market share at 15.4% (12.9% in 2QFY26). Cash orders witnessed ~3% sequential growth, while revenue/order continues to benefit from rising MTF adoption.
* Commodity derivatives benefited from growth in user adoption and industry momentum, with revenue growing 26% QoQ and contributing 6% to GROWW’s total operating revenue. Launched in 3QFY26, commodity derivatives currently have 505,000 active users.
* MTF revenue grew 26% QoQ to INR1.6b (INR503m in 2QFY26), with the MTF book scaling to INR43.5b by the end of 2QFY27 (INR37.7b in 1QFY27), reflecting a stable market share of 2.7%. Management expects quarterly book additions of INR6-7b to continue, supported by ongoing improvements in risk control.
* The credit segment’s revenue rose 37% YoY/7% QoQ to INR909m. Disbursement by partners declined sequentially to INR3.5b, with ~96% being unsecured in nature. Groww Creditserv’s unsecured loan book increased sequentially to INR13.8b (INR13b in 1QFY27), while the secured loan book continues to scale significantly at INR4.1b (INR3.1b in 1QFY27).
* The AMC’s AUM reached INR72b, with revenue of INR41.3m and an operating loss of INR83m during the quarter
* Wealth management AUM crossed INR100b to INR108b in 2QFY27 (INR98b in 1QFY27), with active users increasing meaningfully from 421,000+ to 607,000+, driven by rising adoption of MF Prime.
* Cost-to-grow declined sequentially to ~INR1.1b (INR1.5b in 1QFY27), primarily due to the impact of IPL-related spending in the last quarter. The transacting user base reached 24.1m by the end of 2QFY27. With a recovery in market, the quarterly run rate is expected to normalize at INR1.2-1.3b.
* Cost-to-serve grew 25% YoY to INR2.1b, largely driven by: 1) a higher number of trading days, 2) a rise in AI costs, and 3) a one-time impact of INR100-130m from delayed expiry-day files.
Valuation and view
* GROWW continues to report strong revenue growth YoY, driven by rising product adoption by users. Its brokerage business is gaining market share across segments, with its newer products, MTF and commodities, aggressively fueling further growth. The scale, coupled with strong operational efficiency, has also driven robust profitability growth during the quarter.
* We expect overall order volumes in the broking segment to report ~20% growth over FY27-28, backed by market share gains, with revenue growth further supported by improving revenue per order. Continued expansion in the MTF segment, along with gradual growth in LAS and wealth management, is expected to provide an additional boost to top-line growth.
* We have increased our earnings estimates by 4%/1% for FY27/28, considering strong 2QFY27 performance driven by improved operational efficiency. We reiterate our BUY rating with a TP of INR240 (premised on 38x FY28E EPS).
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