Billionbrains Garage Ventures Limited (GROWW.BO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Billionbrains Garage Ventures Limited, popularly known as GROWW Q2 and H1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. Additionally, please note that this earnings call is scheduled for a duration of 45 minutes, and we will be starting directly with the Q&A session right after few words by Lalit. [Operator Instructions] Ladies and gentlemen, I now hand the call over to Himanshu from Bank of America. Thank you, and over to you, Himanshu.

Thank you, Michelle, and thank you, everyone, for joining the call today. It's a great pleasure to host the management of GROWW for their first post-IPO results call. Before I begin, I would like to read out the standard disclaimer from Bank of America. The opinions, statements and other information provided today by GROWW management are not the opinions, statements or information of BofA Securities. Such opinions, statements or information will be based solely on publicly available information and not in breach of any confidentiality obligations owed to the third parties. Please note that BofA Securities are not providing any financial, investment, legal, tax, medical or other professional advice and in particular, are not providing any advice or view with respect to any securities or financial instruments or the advisability of investing in, purchasing or selling any securities or financial instruments. With that, let me hand over the conference to Kunalraj Singh, Head of Investor Relations. Thank you, and over to you, Kunal.

Thank you, Michelle. Thank you, Himanshu. Good evening, everyone, and welcome to the Second Quarter FY '26 Earnings Call of Billionbrains Garage Ventures Limited. Our financial results and shareholders' letter have been published on the exchanges, and the information pack has also been uploaded on the company's IR website. Before we begin, I would like to remind all the attendees that certain statements or comments made on this call by the management, which reflects the outlook for the future or which could be deemed as forward-looking may involve risks and uncertainties and are not subject to any review or procedures. Such statements or comments are not guarantees of future performance, and actual results may differ. Joining me on the call today are Lalit Keshre, Co-Founder and CEO; Harsh Jain, Co-Founder and COO; Neeraj Singh, Co-Founder and CTO; Visant Bansal, Co-Founder and CFO; and Lalit Bimani, Group Head, Finance. With that, I now hand over the call to Lalit to share his opening remarks.

Hello, everyone. First of all, thank you so much for your belief in us. We started GROWW more than 9 years back to make investing simple, transparent and delightful. Our philosophy has been to always build -- always do right for the -- right by the customer, keep building for them, create the best product experience. And then with that philosophy, we have got immense love from our customers, and we are super grateful to them. Although it has been more than 9 years, but we still feel that we are just starting in our journey. And because this is our first quarterly call, I want to kind of touch very briefly on our product road map for the future. And over the next few -- many quarters, you will keep seeing us -- I mean, you'll keep listening the same thing -- same kind of things. The first thing is like as we see India, like how we grow and how financial markets grow? GROWW -- your company will kind of continue spearheading this democratization of financial services in the country. And our obsession to build the best customer experience kind of will continue kind of help us getting a lot more customers, and that would be like our highest priority going forward. And then as customers join us, they build their wealth, they continue buying more and more products. So far, we have built 10-plus products on the platform. But good thing is that there is like a long road map in front of us, and we will continue building multiple products. And with multiple products, customer engagement continues increasing, retention goes up. And then when customers love your product, monetization also follows. From the -- we build the platform from the customer perspective, and that's what kind of also creates like a pull for us. Lastly, like with the brand that we have created and the deep investment in technology that we are doing also create an enduring competitive advantage for your company. That's all I wanted to say today, but we'll happy to kind of -- we'll be very happy to answer your questions in this first, quarterly call. Once again, thank you for joining us in this journey in building India's largest investing and wealth platform. Thank you.

Thank you very much, sir. [Operator Instructions] The first question is Prayesh Jain, [Operator Instructions].

This is Prayesh Jain from Motilal Oswal. Congrats on a great set of numbers. Just firstly, a bookkeeping question on the orders that you've given. Can you split that up for us in terms of cash and derivatives? Second question is on the CAC, right? We've seen a significant increase in CAC. And how do you see this kind of progressing going ahead? I'm restricting to those two because we have the limit, right?

Thanks, Prayesh. Let me take this question. And I think we've already shown our revenue split across derivatives and cash. And if you look at the pricing is very simple, we charge INR 20 on the derivative side. The rest is on the cash. So the split is actually very similar. So roughly, you can say 70-odd percent will be on the derivative side and INR 30-odd will be on the cash side. And on the question on the tax side, I think, Harsh, you can answer.

Yes. See, part of our growth -- the cost to GROWW that we report is part of it is the branding, which is a fixed cost and some part of it is in the variable cost. So if you see different quarters, it's different. The CAC will also be a result of how many new acquisitions happen in that particular time frame. And going forward, like across the year, it then normalizes. So this variation quarter-to-quarter, you can see depending on the time and the situation in the market.

But on an annual basis, do you think that we can -- what level we were in, say, FY '25, right? Now that's completely gone away, and we will possibly be at a more higher number on an annual basis? And what should be the annual number that we should think about from a CAC perspective. And that I think what you mentioned also that CAC should be look from a full year basis rather than just on a quarterly basis. So from a full year perspective, what should be the kind of CAC that we should think about from a -- I understand that additions would come as they are, but from an absolute spend perspective is what I'm looking for.

So Prayesh, it's difficult to predict for the future, but I would say that it's not going to be very different from the overall spends are not going to be very different from the previous times. And acquisition overall numbers also depends on how the market conditions are.

We'll take the next question from Jayant Kharote.

I am Jayant Kharote from Axis Capital. Lalit, just two questions, both regarding lending. First one is on MTF. We have seen strong growth over here. I think given the number, the yield number is looking slightly higher than 15%. Is it an end-of-period issue? One is that? And broader question on MTF is the aggression by the competition, right? Over the last 3 months, it seems everybody has now jumped into this product. We have players offering it at 7.99% very aggressively. So both from a yield as well as a growth perspective, how should we think of competitive landscape for MTF, not just for the quarter, but given our aspirations over the next 2, 3 years, how should this -- what is the strategy that you would use? That is the first question. I'll follow up with the second one.

Yes. So let me take this one. I think MTF for us, the yield part that you talked about, I think, will be again end of the quarter kind of a difference. Our pricing is simple. It is 14.95%. Other than that, the growth rate, I think it's not very -- we don't see competition from an MTF perspective, specifically because it is a second product typically that customer is using before that customer is already there on stocks and some of those customers actually start doing MTF as well. What we have seen in other products as well the pricing is not the reason why customer chooses a platform A versus platform B. The experience is what matters to them. And over a period of time, typically, customers end up doing more and more products with the same platform. The reason to selection can be different for different customers. But in the end of the day, pricing is least of the concern when looking at the selection of the platform.

Okay. And the second one is around LAS. You have started this product now. What is the experience? How is the run rate? And how long do you want to wait before you test down the accelerator on this one? Or it will be a calibrated run rate from -- of the kind that we are seeing for the past 1 month?

So it is very -- LAS is very early stage today. So if you look at LAS is actually not even fully LAS, it is just loan against mutual funds as of now. Loan against securities is yet to be launched. So what we have seen is there is like a lot of features and kind of different, you can say, optimization on the product side yet to be done. I think as we keep on doing some of these features, the growth will keep on scaling up. We generally don't look at like accelerating or something. Some of this is like adoption from the customer perspective. As the customers' need on the LAS side keeps on increasing, this will kind of keep on going up. What is happening is this is an AUM product, very similar to MTF. When we started MTF was also started like almost more than a year back. And that time, MTF also was going up slowly. But over a period of time, it has become larger. So we think LAS also will take some time for us to kind of come to a product where the scale is larger and hence, the growth rate of the disbursement will keep on happening.

Sorry, if I could just squeeze one supplementary sort of encapsulating these two points only. If you can give me a broader 3-year outlook, where does your lending book look like?

So difficult to project again from a forward-looking perspective. But what we have seen is, especially on the MTF side, our growth rate has been really good in the past. And what we are expecting in the future is that we have a fair share that we want to kind of reach, and it will take at least 3 years to probably reach there. And the fair share is significantly higher than where we are today, probably like a double-digit number on the market side. There it's not going to be like we are taking share from the market, but we think we will end up expanding the market by that amount itself.

You mean double digit in terms of market share of MTF...

We'll take the next question from Nidhesh Jain.

My name is Nidhesh. I'm from Investec. I have two questions. Firstly, on the customer sourcing, can you share some breakup in terms of sourcing channel, whether it is organic referrals or performance marketing? And second question is on the revenue model in the wealth management, the acquisition that we have done and the plan that we have for the W app, what is the revenue model that we are thinking on the wealth management business?

Yes, sure. So I'll take the first one, and I'll answer that, Nidhesh. So for us, the organic is the biggest channel and almost -- I think we reported also almost 80% people come organically. The other channel is primarily the performance marketing, which is digital marketing that happens. And a very small part of it is referral, but we are not running a commercial referral. So it's more of a word of more through the app also. So these are the three channels how we get the acquisition.

And just to confirm, 80% is still organic?

Yes. And the second question, I think, Ishan?

Yes. So on the wealth side, I think we are very early today. We did the acquisition on the Fisdom side, which got -- the balance sheet got consolidated as of 30th of September, but the P&L will start getting consolidated soon. And roughly 3% revenue is coming from that business. And obviously, that business is growing well. And over a period of time, the contribution will keep on increasing. There's a lot of integration yet to be done for us to kind of look at how actually it will perform in the future, and we'll come back to you in future quarters on the wealth side.

If you can explain the revenue model, it is distribution income or it is the...

On the Fisdom side, it is largely distribution income coming across different four products primarily. One is mutual fund -- regular mutual funds. Second is the PMS distribution -- PMS and AIF distribution. Third is insurance distribution and fourth is on the unlisted securities side.

So you plan to carry on with a similar revenue model? Or do you think...

So there are future products, some of them are already launched. So for example, we have launched a PMS of mutual funds recently. And I think that part will obviously grow faster and will start contributing where effectively we are charging the customer for the advisory under the PMS route.

The next question is from Deepanjan Ghosh.

So just a few questions from my side. First, in terms of the employee base and with the acquisition of System and probably your own ramp-up expectations on the wealth side of the journey, what sort of manpower and maybe the quality of personnel that we'll be requiring to deploy on that side of the business? And in terms of that, how can the employee expenses really behave over, let's say, the next 2 to 3 years? That was the first question. The second question is, if I look at your active F&O customers, and that has remained around 1.4 million for at least the last 2 or 3 quarters despite the fact that obviously, new customer acquisition run rate is very strong. So in terms of when you do some analysis on your underlying customer segment and the new users who are coming on to the platform, in terms of the behavior of those customers or in terms of potential new customers who can be coming in on the F&O side, what sort of outlook do you really have out there?

Lalit, do you want to take the wealth piece?

Yes. Yes. So Deepanjan, I think wealth, as Ishan said, like we'll be talking a lot more about in coming quarters. It's just like we are just getting started. So all these kind of questions will become clearer. But how we look at it is like it will be more our -- based on our DNA, it will be more like tech-led and so on. But again, like as I said, like we are still kind of -- the integration is happening, and it would be an interesting kind of product to build. And your second question was on the F&O. Ishan, you want to answer this?

So on F&O side, what is happening for us, especially after the last year's regulation is there is a churn in the users, which we saw specifically till Q3 -- Q4 last year. After that, there is a small growth rate. It is not showing up in millions, I think, but there is still a growth rate in users. But the quality of the user is like doing really well. So if you look at the average order per user has significantly grown. Some of those numbers, you can look at it, will be kind of in the range of like 10% to 20% growth on average order per user, which is primarily getting contributed because the high-quality users are still there on the platform, not only still there, but are actually growing. But the low-quality customers who were earlier placing significantly lesser number of orders and the turnover was also significantly lower, is actually moving away from the platform, which we think is a good thing both for us as well as industry as it becomes more niche and we'll be only serving the high-quality customers who understand F&O as a product better.

Got it. Ishan, just one small follow-up on the first question. If you can just quantify your employee count for 2Q of this year and last year? That's all.

Lalit, you have that number? Bimani?

So we have 832 core employees who are involved in product business building and about 300-odd employees who are doing our customer services. And on the system side, we have acquired about 500-odd employees, which have come as part of the acquisition. And out of this 500, about approximately 180 are doing sales for system.

[Operator Instructions] We'll take the next question from the line of Abhijit Sakhare.

My first question was that when I -- based on the commentary, when I do some rough math, it looks like the annualized ARPU of the customers that we've acquired in the last quarter is probably close to the past vintages. I just wanted to double check if that observation is right. And secondly, the second question was that there was a number mentioned in the press release on the disbursements in the credit business, slightly different from what you've disclosed in the data book. So I just want to double check in the data book, the disbursement number on the -- for credit-- GROWW credit was about INR 3,932 million. And in the press release, it was somewhere close to about INR 1,500-odd million. So I just want to clarify that as well.

Yes. On the first question, I think -- sorry, on the second question, I think we'll check the data and come back to you. My guess is the difference is between one is a PL number and another is an overall GCS number. So that might be the difference. And the other one will be like a LAS-related number. On the ARPU side, actually, it's very difficult to look at ARPU on a quarterly basis. We've seen that over a period of time, things change. And hence, we look at ARPU on an annualized basis. But you are right, the quality of the user that we are getting today looks similar to what we were getting earlier as well. It's not like significantly different from in the past as well.

The next question is from Saket Karan.

And first -- and I'm an individual investor. And my first question is, what is the expected contribution of the Finwizard Technology acquisition to GROWW consolidated financials and operational road map.

So currently, like I said, roughly their run rate from a revenue perspective is around 3%. And on the contribution side, I think they are still negative, more like breakeven -- closer to breakeven, but still negative. Hence, on the bottom line side, I don't think they will add anything to GROWW as an overall platform. On the road map side, I think Lalit already talked about that there are still an integration that is happening between Fisdom and GROWW, but there are four products that Fisdom has. One is on the regular mutual fund advisory side. Second is on the distribution of AIF and PMS, insurance and then unlisted securities. And recently, they have launched PMS of mutual funds, which is also growing very fast. So some of these products over time will start coming to GROWW customers as well.

One more question I have. So what are the major operational or regulatory risk management for like over the next 2 quarters? And what is the steps are we taking to mitigate them?

Lalit Bimani, you want to take it?

Sorry, I just lost the Internet in between. Can you repeat the question?

Yes, sure, sure. So what are the major operational or maybe a regulatory risk management for SIPs like over the next 2 quarters? And what steps are being taken to mitigate them?

From a regulatory standpoint, I think it is BAU for us. There is no specific risk which we are foreseeing, Saket.

The next question is from Ansuman Deb.

This is Ansuman from ICICI Securities. My question is regarding your new users who are coming on to the platform. I see an increasing trend of new users using what we call SIP and MF portfolio, which is a successful diversification of your product, but they lack that kind of monetization, right? So can it be -- how are we mitigating this, what you call, diversification of customers who may not be as monetizable at the start versus what was our core offering where it is monetizable in terms of broking. So if you can just give a strategic road map of this new user, new product worth with less monetizable compared to the old users or the old product and the classical broking business. If you can just give your strategic road map of that.

Ansuman, I'll take this. So I think we'll think a bit differently here, right? So as I said, like the way we look at it is that we are building India's largest investing and wealth platform, and there are multiple products. Some products will have -- and different products have different monetization kind of methods, transaction based and also some amount of TM based and so on, right? And that is how we look at it, like we don't kind of design this way, okay, this is less monetized product, let's monetize and more and so on. We look more from the value proposition for the customer and also building the entire basket for the customer. And we have to accept the fact that there will be some products that will be kind of -- there will be some products which either will be -- have lower monetization or will be monetized in future and so on. But I think the fundamental kind of way we think about it is building a very, very kind of customer-focused platform, building entire kind of wealth of the customer there, keep building multiple products there and keep building better and better experience for the customer. And then monetization follows.

Yes, absolutely. No, I got a sense. But I was just saying that you also mentioned the high quality of investors. I think we have seen in the system also that number of average size of trades have increased in the exchanges also, which is kind of reflective of your thing also. But any chance or any view on possible monetization of this mutual fund distribution because we seem to be one of the major movers and shakers when it comes to SIP, right? But anything on the horizon on that front?

Yes. We'll share with you when we kind of come up with something, yes. But primarily we -- yes, yes, we'll share with you if something happens.

The next question is from Nidhesh Jain.

I have a question on the lending business where the disbursements on a Y-o-Y basis has moderated. And if I look at FY '25 financials, in the expense line item, there is, I think, credit loss of almost INR 70 crores. If I allocate to the unsecured book on your own balance sheet, that translates into 7% credit cost. So is this reading right that on your book that you have originated on your own balance sheet, the credit loss was around INR 70 crores on a book of INR 1,000 crores?

I think from a book perspective, I think we are more closer to INR 1,250-odd and hence, this number is slightly lower in percentages. And some of these are like variable in nature. We are still in a phase where we are stabilizing our book from a vintage perspective. So this business is just 3 years old, and we are closer to where I think it will get stabilized. We have seen, I think, from a cost of provisioning perspective, it has come off compared to the last quarter. And that's how we think it looks more stabilized now compared to earlier.

So what will be the strategy on using your own balance sheet for loans? Will you be focusing on unsecured loans going forward or...

So idea is to actually create a healthy mix between secured and unsecured. And you can see in the last quarter itself, the secured business has grown much faster, both in disbursement as well as on the book side. And I think that will keep on continue in the coming quarters as well. And we want to, in longer term, have a healthy mix of both of them.

And for unsecured, it's a completely digital process. There is no physical process in terms of collections or underwriting?

So collection obviously is a mix of digital and physical. But on disbursement side, it is 100% digital. And that's how we operate both on book as well as on the distribution side.