Stock: Billionbrains Garage Ventures (Groww)

Brokerage Action: Initiated Coverage with SELL Target Price: ₹144

Current Price: ~₹163

While the market has been buzzing about the “Indian Robinhood” narrative, a sharp reality check has just arrived. Domestic brokerage firm JM Financial has initiated coverage on Groww (Billionbrains Garage Ventures) with a ‘Sell’ rating, labeling the stock “Too Expensive.”

This stands in stark contrast to the bullish view from global giant Jefferies. While Jefferies sees a path to ₹180, JM Financial has set a conservative target price of ₹144, implying a potential downside from current trading levels.

Here is why JM Financial believes investors are overpaying for Groww.

1. The Core Argument: “It’s a Broker, Not a Tech SaaS”

The primary disagreement lies in how to value the company. Bulls argue Groww is a technology platform that deserves a premium multiple (like a software company).

JM Financial counters this by stating that at its core, Groww is still a broking business.

• The Reality: Broking is a cyclical industry highly dependent on market moods.
• The Valuation: Paying a massive premium (over 50x P/E) for a cyclical business is risky. JM Financial argues that the current valuation prices in “perfection” and ignores the cyclical risks inherent to the stock market.

2. The Alarm Bell: A 29% Drop in Orders

While the user base is growing, JM Financial flagged a concerning data point regarding activity levels.

According to their report, Groww’s broking orders declined by ~29% over two quarters in FY25.

• The Cause: This drop correlates with recent regulatory curbs on Futures & Options (F&O) trading.
• The Risk: Since F&O volumes are a major revenue driver for all brokers, a structural decline here directly impacts the bottom line. If the regulatory tightening continues, Groww’s “hyper-growth” narrative could hit a wall.

3. The “Crowded Market” Problem

JM Financial highlights that the “Zero-Revenue” customer base (users who only hold direct mutual funds) might be harder to monetize than expected.

• Competition: Every major player—from Angel One to the new entrant Jio BlackRock—is fighting for the same wallet share.
• Pricing Pressure: To convert free users into paying users (for loans or MTF), Groww may have to offer competitive rates, which could limit margin expansion.

4. Jefferies vs. JM Financial: The Tale of Two Targets

Feature	Jefferies (Bull Case)	JM Financial (Bear Case)
Rating	BUY	SELL
Target Price	₹180	₹144
Core Thesis	“Indian Robinhood” with massive cross-sell potential.	“Too Expensive” for a cyclical broking model.
Key Focus	Tech Platform & Future Growth	Regulatory Risks & Current Decline in Orders

The Verdict

JM Financial’s report serves as a sobering counter-weight to the recent rally. Their analysis suggests that the stock has run up too fast, driven by hype rather than fundamentals.

For investors, the message is clear: Caution is advised. While the long-term “financial supermarket” story is attractive, the short-term reality involves declining volumes and regulatory headwinds that simply do not justify the current premium price tag.

Are you watching the technical levels? If JM Financial is right, the stock might face resistance near ₹170 and could retrace toward the ₹144 support zone. Keep an eye on the F&O volume data in the next quarterly result to see which brokerage is closer to the truth.