The listing of Billionbrains Garage Ventures Ltd., the operator of India’s largest online brokerage Groww, has turned out to be a lesson in market euphoria and swift correction.
After a spectacular post-listing rally that saw Groww’s share price surge over 90% from its IPO price, the high-flying stock hit a decisive 10% lower circuit today, signaling the first major wave of profit booking and revaluation of its aggressive valuation.
The initial days of trading were defined by relentless buying. Groww’s shares, which had listed at a premium, sprinted past major valuation milestones, riding on its strong brand recall among India’s growing cohort of retail investors and its demonstrated profitability.
The Short Squeeze
The phenomenal rally, however, was not purely driven by fundamentals. According to reports in The Economic Times, a critical factor was the stock’s low free float—the small number of shares available for regular public trading. This tight supply, combined with massive demand, created a technical trap for short-sellers.
“Groww has only about 7% free float, which makes it extremely volatile,” Ishan Tanna, research analyst at Ashika Institutional Equity Research, told ET. “Many traders who tried to short-sell or engage in Buy Today, Sell Tomorrow (BTST) trades got caught out.”
This resulted in a massive volume of over 30 lakh shares entering the auction market to cover failed deliveries, according to NSE data. This forced buying by the exchange, at often premium prices, acted like a short-squeeze, further pushing the stock higher and adding fuel to the initial parabolic ascent.
The company even crossed the ₹1 lakh crore market capitalisation mark in record time, an achievement that made headlines.
The Inevitable Valuation Correction
As the stock continued its upward trajectory, the whispers of overstretched valuations grew into a chorus among market veterans. Analysts quickly pointed out that the price run had significantly outpaced that of its listed peers in the broking sector, such as Angel One and Motilal Oswal.
“The current valuations seem to fully capture the short-term growth prospects. Investors should watch out for a couple of quarterly earnings before making further investment decisions,” Kranthi Bathini, director of equity strategy at WealthMills Securities, told Reuters on the day of Groww’s listing.
But while Groww’s implied price-to-earnings multiple—which indicates how much investors are willing to pay for every rupee earned—was estimated to be elevated even before the IPO, the post-listing surge pushed its effective valuation multiples far higher.
Groww’s valuation has “certainly run well ahead of most listed capital market players on valuation, justified mainly on the promise of digital scale and future product expansion,” Nitin Jain, senior research analyst at Bonanza, told Moneycontrol.
Profit Booking = Circuit Breaker
The market’s caution translated into a decisive shift today as a major wave of profit-booking began. Investors who had secured phenomenal gains—some over 90% in just a few sessions—began liquidating their positions.
The selling pressure overwhelmed the buying demand, forcing a circuit breaker at 10%. Groww’s share price is now locked at ₹169.94 for the rest of the day.
This price correction signifies that, while the long-term growth story of Groww remains attractive due to strong user acquisition and a dominant position in India’s financialisation trend, the market is no longer willing to sustain the short-term valuation premium.
“For value-oriented investors, current levels might demand caution,” Jain said, echoing the consensus among market watchers that a healthy correction was overdue.