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groww: Groww raises fresh funds as valuation triples in six months to $3 billion


Online investment platform Groww has raised $251 million in a new round of funding, tripling its valuation in barely six months to $3 billion, or about Rs 22,500 crore. The Bengaluru-based company had
joined the unicorn club of privately held companies valued at $1 billion or more in April this year.

Groww is part of a group of high-growth startups that have raised back-to-back financing at steep valuations this year, cornering a large chunk of the capital as ET reported last week.

Iconiq Growth, which has previously backed tech giants like Airbnb, Alibaba, and Zoom, led the round, a senior company official told ET. Existing investors Sequoia Capital, Ribbit Capital, YC Continuity Fund, Tiger Global, and Propel Venture Partners also participated in the round.

Lalit Keshre, cofounder and chief executive officer of Groww, said the company still has the money it had previously raised. “Our burn rate is very low, but you can think of capital like an asset or future investment,” he told ET. “Being a financial services company, capital is also a good leverage for the long term.”

Founded in 2016 by former Flipkart executives Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal, Groww enables retail investors to access financial products and services through the web and mobile. Users can invest in direct mutual funds, stocks, ETFs ( exchange traded funds), and IPOs. It will utilise the new capital to deepen its reach in existing geographies, strengthen the team and scale tech infrastructure. The startup also plans to continue making significant investments in its financial education initiatives. Its YouTube channel has over one million subscribers. It often collaborates with social media influencers to acquire younger audiences.

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Groww competes with the likes of Zerodha, Upstox and Paytm Money as a stockbroking platform for retail traders, and with Tiger Global-backed IndWealth, Accel’s portfolio company Scripbox, and Time Internet-owned ET Money in maintaining investment portfolios and mutual fund accounts.

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Times Internet is part of the Times of India Group which also publishes this paper.

ET had last week reported that the top two-three startups across fast growing sectors had cornered as much as 50% of the total funds raised as of September 30 this year. And the trend continues unabated.

Investing boom among millennials

ET had reported in May how online brokerages flush with funds were tapping into financial services influencers and content creators to aggressively target young investors warming up to financial markets, amid a global stock market boom.

Groww’s platform boasts of over two million active investors in stocks which it claims to have acquired in the last 12-15 months. Its total user base is over 20 million and monthly active users hover between 8-9 million, the company said.

Keshre said exchange-traded funds were among the more popular products on the platform. “The financial services market in India is already large, growing rapidly, and ripe for disruption,” said Yoonkee Sull, partner at Iconiq Growth. “During the last couple of years, Groww has demonstrated that they are ready to seize that opportunity through strong accelerating momentum predicated on the strength of technology.”

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The company recently received a nod from the Competition Commission of India (CCI) to acquire Indiabulls’ Asset Management Company (AMC) business. This will allow the four-year old startup to soon create and sell its own mutual funds.

Rivals Zerodha and Flipkart founder Sachin Bansal’s Navi Technologies also recently received Sebi approval to launch their own AMCs.

The heightened interest among VCs to back “discount broking” startups in India comes as the country’s stock market has seen an unprecedented interest emerging from retail participants. Millions of new traders – mostly millennials from urban and semi-urban centres – took to stock trading during the pandemic even as most indices rallied on favourable market dynamics such as low bank deposit rates and a flurry of IPOs.

This has lent weight to startups facilitating such retail investments as cost of consumer acquisition has dropped significantly.

Data from market regulator Securities and Exchange Board of India (Sebi) shows that in FY21 a record 14.2 million Indians opened new demat accounts, which is nearly three times the figure in the preceding fiscal.

A discount broker refers to a model where platforms offer stockbroking services at a reduced commission without providing advisory or portfolio management services, which is a departure from the business model provided by traditional brokerages such as ICICI Securities and Motilal Oswal.

Zerodha, India’s largest retail broker, is credited for implementing the discount broking model at scale, drawing comparisons to US-based Robinhood that got listed on Nasdaq earlier this year at a valuation of nearly $32 billion.

Fintech majors also getting aggressive

Over the last 18 months, some of the largest fintech companies in the country including Paytm and PhonePe have ramped up their forays into this segment. Paytm Money has launched several new investment avenues such as derivatives and ETF trading while PhonePe has applied for brokerage license with Sebi as reported by ET first. Last month, Amazon also entered this market, acquiring a minority share in Smallcase, a wealth tech startup based out of Bengaluru.

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Meanwhile, Mumbai-based Upstox, another popular investment platform, is reportedly considering a Nasdaq listing.

Factors that have contributed to the growth of this segment in India include high smartphone penetration, ease of digital payments, online Know Your Customer (KYC) authentications through Aadhaar as well as a general increase in awareness for investments in the society.

Groww, flush with fresh funds, is also said to be planning a renewed push to garner millennial customers with a slew of financial education initiatives, as it said earlier this year.

In September 2020, the company had raised $30 million led by Y Combinator. It was part of Y Combinator’s winter 2018 cohort.

Groww clocked an operational revenue of Rs 52.05 lakh in FY20 registering an over 300% growth against the preceding fiscal, as per latest available financials, news portal Entrackr had reported. In this period, the firm’s losses ballooned to Rs 7.92 crore against Rs 23 lakh in FY19.



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