Startups in stock brokerage Groww and Upstox are looking into lending and payments to broaden their revenue stream

Growing their credit operations are Groww and Upstox, two significant challenger brands in the broking industry, according to sources. The ultimate goal is to keep clients who come to the platform to invest.

Brokerage companies looking to expand their business base after disrupting the traditional world of stock trading and investments. Brokers, like other fintech, are growing beyond their primary business into complementary areas such as lending and payments.

Groww and Upstox, two big challenger brands in the broking ecosystem, are doubling down on their credit operations, according to sources. The ultimate goal is to keep clients who come to the platform to invest.

Upstox, based in Mumbai, hopes to enter the credit market fast by working with banks and NBFCs, and eventually will obtain a non-banking finance company (NBFC) licence and may apply to the Reserve Bank of India.

“As we expand our product suite, we will also focus on collaborating with banks and NBFCs to provide lending products, ensuring strict adherence to regulatory standards, and eventually applying for an NBFC licence,” said Ravi Kumar, cofounder of Upstox.

Groww, another competitor, has identified credit as a significant possibility. Groww is developing a full-fledged financial services application, according to two sources. It will branch out into financing for small-ticket items including home loans as well as personal, consumer, and two-wheeler loans.

“They have abandoned their neo-banking dreams, but they eventually want to become a full-service financial player with lending as a critical part of the business,” one of the people ET spoke with explained.

This business is led by Nilufer Mullanfiroze, who joined Groww from Federal Bank in 2021.

Until press time, Groww’s emails went unanswered.

Maintaining the flock’s unity

The obstacles for Groww and Upstox are distinct, but the goal is to diversify the product base to boost consumer stickiness.

Groww now has over 5 million active traders and about 10-15 million investors. If this base is to be expanded further, Groww requires more mass-market solutions such as payments and credit.

Groww is a third-party payment app that works with the Unified Payments Interface. In addition to an in-house NBFC licence, it has acquired in-principle clearance from the Reserve Bank of India for a payment aggregator licence.

“With lending, Groww wants to cover a large part of the spectrum of financial services,” said the above-mentioned person.

The difficulty for Upstox is to keep its flock united. The Tiger Global-backed business has lost almost 2.6 million traders in the last year. Kumar wishes to broaden his product offering in order to retain customers. However, he is not optimistic about other financial services. He prefers to focus on core investments.

Upstox successfully onboarded a large number of consumers during IPL ads. Kumar told ET that the majority of his customers were searching for simple investment choices, which were not available on the app at the time.

Today, Upstox added an ‘Invest’ option to the app, which has been set as the default setting. Customers can choose from mutual funds, sector-specific baskets of funds, content based on stock movements, and curated top-rated funds for long-term investing.

“Only customers who want to do F&O trades or are into professional trading can use the app’s Pro mode,” Kumar explained.

Kumar hopes to return to the top of the brokerage platform leaderboard with ‘Invest’ and credit.

corresponding to value

Broking is a significant revenue generator, yet it is a relatively specialised industry. Only a small percentage of Indians trade actively. However, these apps, which have a valuation of more than $3 billion (about Rs 24,000 crore), require more revenue-generating avenues to justify the valuation.

Groww is technically trading at a 12 times revenue multiple even with an annual sales run rate of $250 million or Rs 2000 crore. In comparison, Angel One, a publicly traded tech broker, is trading at four times its revenue. It has a market value of Rs 11,000 crore and an ARR of roughly Rs 2500 crore.

And F&O traders account for roughly 80-90% of brokers’ revenue. And just a small portion of their customer base normally engages in high-frequency trading.

“These venture-backed players need to expand their revenue-generating user base, and thus their product offerings,” stated the founder of a wealth tech business. “The big bet on lending and long-term investing can keep customers loyal and sticky.”