Alright, let's dissect Groww's latest Q2 results. A 12.2% year-over-year jump in net profit to ₹471.3 crore – sounds impressive, right? The headline screams "success," but I've learned to treat these announcements like corporate cat videos: entertaining, but rarely the full story.
Groww's Profit Puzzle: Revenue Down, Profits Up?
Drilling Down: Revenue vs. Expenses The first thing that jumps out is the revenue discrepancy. Consolidated revenue from operations *decreased* by 9.5% year-over-year, landing at ₹1,018.7 crore. How does a company increase profit while revenue dips? Simple: cut costs. Total consolidated expenses plummeted by roughly 27%, from ₹589.79 crore to ₹432.59 crore. So, is Groww more profitable because it's making more money, or because it's spending less? The data suggests the latter. A 27% cut in expenses is a *massive* shift. What exactly did they cut? Marketing? Personnel? The report doesn't specify, which, frankly, is annoying. (I always distrust companies that bury key details.) It *does* say that "other income" increased to ₹52 crore from ₹34.6 crore. But that’s still a relatively small number compared to the overall revenue decline. EBITDA did increase by 9.7% year-over-year, reaching ₹603.3 crore. Margins widened to 59.3% from 48.9%. Again, this paints a rosy picture, but it's crucial to remember that these metrics are heavily influenced by those drastic cost reductions.User Acquisition: A Shift Towards "Safe" Bets?
The User Acquisition Game The report highlights a 3.2% increase in active users. Not bad, but hardly explosive growth. New users accounted for 4.5% of the 13% revenue growth (sequentially), with the rest coming from existing users. This suggests Groww is getting better at monetizing its existing user base. But what’s driving that? Are users trading more frequently, taking on more risk, or simply paying more fees? Here's where things get interesting: the mix of new users is shifting. Mutual fund SIPs now account for 36% of new users, up 7 percentage points year-over-year. Stocks-first users, on the other hand, declined by 15 percentage points. ETF-first users are up significantly, and IPO-first users have doubled. What does this tell us? Perhaps investors are becoming more cautious, favoring diversified, professionally managed products over individual stocks. Or maybe Groww is actively pushing users towards products with higher fee potential. (Full disclosure: I've looked at hundreds of these filings, and this particular product mix shift is not unusual in a maturing market.) The business claims that penetration in derivatives has decreased, while more clients are using mutual funds, stocks, PL+LAS (Product Linked Assurance Scheme), and margin trading facilities. This feels like a carefully worded statement. Are fewer people trading derivatives because they're losing money? Are they moving to other platforms? The data is vague, but the implication is clear: Groww is trying to diversify its revenue streams beyond high-risk, high-churn products.Groww's Numbers: What Are They *Really* Telling Us?
Methodological Critique: What's Missing? Here’s my problem with these kinds of reports: they never tell you *how* they arrived at these numbers. What constitutes an "active user"? How is "revenue" defined? Are these numbers audited? What are the specific criteria for segmenting users into "mutual fund-first" vs. "stocks-first"? Without this level of transparency, it's difficult to assess the true health of the business. (And this is the part of the report that I find genuinely puzzling.) I'd also love to see data on customer acquisition cost (CAC). How much is Groww spending to acquire each new user? Is CAC increasing or decreasing? A rising CAC, combined with slowing user growth, would be a major red flag. The Real Story Here Groww's Q2 results are a mixed bag. Profit is up, but revenue is down. User growth is slowing, but monetization is improving. The company is cutting costs aggressively, but the long-term sustainability of this strategy is questionable. The shift in user mix – towards mutual funds and ETFs – suggests a maturing market and a more risk-averse investor base. Groww is adapting, but it needs to find new ways to drive revenue growth beyond cost-cutting and squeezing more fees out of existing users. A Veneer of Success?