Groww’s scale goes past Rs 350 Cr in FY22, losses spike 3X

Fullstack financial services platform Groww was in the market to raise money at a valuation of $5 billion. While the firm didn’t pull off a new round as the funding environment turned tepid, it has managed to grow its business well in the fiscal year ending March 2022 by crossing Rs 350 crore in revenue.

Groww’s scale soared 11.7X to Rs 351 crore in FY22 from Rs 30 crore in FY21, as per the annual financial statements filed by its main entity Billionbarins Garage Ventures Private Limited. Billionbrains Garage Ventures runs three subsidiaries in India: Next Billion Technology, Neobillion Fintech, Billionblock Finserv, and Groww Serve.

The Bengaluru-based company registered Rs 52.68 crore in revenue in FY21 but these figures got revised to Rs 30 crore due to the adoption of a new accounting standard (Ind AS 101).

Subscription fees and commissions formed 93% of its operating revenue which shot up around 25X to Rs 326 crore in FY22. Income from tech platforms and supports charges shrank 86.7% to Rs 2 crore in FY22. The company also has other operating revenue of Rs 23 crore in FY22.

On the expenditure front, advertising and promotion were the largest cost center for Groww accounting for 38.2% of the overall expenses. This cost surged over 5X to Rs 254 crore in FY22 from Rs 50 crore in FY21.

Employee benefit expenses was the second largest expenditure followed by the cost of advertising which formed 35% of the total spending. This cost blew 5.6X to Rs 230 crore in FY22. It also included Rs 112.5 crore as ESOP expenses which was a non-cash expenditure.

Information technology costs surged around 5X to Rs 84 crore while transaction charges ballooned 19X to Rs 76 crore in FY22. The company spent Rs 9 crore on legal and professional fees which pushed the total expenditure by 5.7X and stood at Rs 664 crore in the last fiscal year.

Due to a sharp spike in expenditure, Groww’s losses grew 3X to Rs 239 crore in FY22 from Rs 78 crore in the previous fiscal year (FY21). On a unit level, Groww spent Rs 1.89 to earn a single unit of operating income in FY22 which is a significant improvement from the Rs 3.90 it spent in the previous fiscal year (FY21).

Groww’s numbers still reflect its early growth stage, and to that extent, the share of various heads in expenses is bound to change with time. The firm’s valuation is a clear punt on a massive opportunity in the financial services space in India that many, including its investors, obviously believe is still unfolding.  However, it is an expectation that has repeatedly been belied, in key segments within finance, be it credit cards, forex services, or the like. 

But with multiple fintech pivoting to the same model of offering services and products with large addressable markets like broking, mutual funds, insurance and more, competition will not flag off anytime soon, with the risk of further disruptions always on the horizon. FY23, in many ways the first truly ‘normal’ year since FY19, should be a very good indicator of where the industry, and Groww’s fortunes, are heading.