Loss-making Groww is now the most-valued investment platform even though some of its peers make profits

• It plans to use the latest funding to expand its technology infrastructure and widen its reach to under-penetrated regions.
• Groww had reported a revenue of ₹1 crore in the financial year 2020.
• It competes with profit-making Zerodha and AngelOne in this domain.

Wealth management and investment platform Groww has tripled its valuation to $3 billion, after its $251 million funding round announced on Monday.

The Series E funding round was led by Iconiq Growth, with participation from new investors Alkeon, Lone Pine Capital and Steadfast. Sequoia Capital, Ribbit Capital, YC Continuity, Tiger Global and Propel Venture Partners also participated in the round. The development was first reported by Mint.

Groww is the highest valued venture capital (VC)-funded investments platforms in India after this fundraise.

However, what are these valuations based on?

Zerodha — which has the most number of users and offerings — is not even in the race as it is a bootstrapped company. In the last two years, Zerodha accorded itself a $1 billion valuation in 2020 and $2 billion valuation in 2021 in order to buy back employee stocks and give them returns.

Nitin Kamath, the co-founder and chief executive officer (CEO) of Zerodha, believes that the valuations it has accorded to itself could be conservative.

While there is nothing wrong with chasing valuations, but without being profitable, it’s tough to ride out the downturns in the economy. So this tax arbitrage potentially could be potentially creating not so resilient businesses which isn't good for our economy in long run 5/11

— Nithin Kamath (@Nithin0dha) May 28, 2021

Groww’s valuation is also double that of publicly-listed companies such as AngelOne (formerly Angel Broking), which has a market cap of ₹10,700 crore ($1.4 billion). AngelOne has 5 million registered clients, as per its website.

Groww is also the only startup among the three companies valued over a billion dollars. It is also the one with the least amount of revenue in the financial year 2020.

The financial statement for FY2021 is not yet publicly available.

Business Insider reached out to Groww seeking details about its financial performance in FY21. However the company declined to comment.

Upstox’s RKSV Securities subsidiary is also a player in the domain, although valued below $1 billion. The company had hit profitability in the financial year 2019, but reported a loss of ₹37.99 crore in FY20 after a profitable run of two years.

Rata Tata-backed Upstox has two subsidiaries RKSV Securities and RKSV Commodities, with RKSV Securities being the bigger one.

Groww is looking to expand its reach

“Groww is already among the leading investment platforms in India, showcasing strong unit economics and customer cohorts. We are excited to participate in its vision to be the primary financial platform for Indian consumers," said Yoonkee Sull, partner at Iconiq Growth.

Groww plans to use this funding to expand its technology infrastructure and widen its reach to under-penetrated regions. It will also use the capital to create financial education and awareness about investment products.

The company — founded by four former Flipkart employees Lalit Keshre, Harsh Jain, Ishan Bansal and Neeraj Singh in 2016 — has already enabled its customers to invest in US-based stocks through its web platform.

The company claims to have more than 2 million users on its platform, with nearly 70% of its users coming from Tier II and III geographies.

Source: Media reports

Groww has raised nearly $393 million to date from marquee investors like Tiger Global, Y Combinator, Sequoia Capital India, Ribbit Capital and others. It was valued at $1 billion in April 2021.

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