July 13, 2023

Nextbillion Technology Private Limited: [ICRA]A1+ assigned

Summary of rating action

Current Rated Amount
Instrument* Rating Action
(Rs. crore)
Short-term fund-based/non-fund based bank facilities 108 [ICRA]A1+; assigned
Total 108
*Instrument details are provided in Annexure I

Rationale
The assigned rating factors in Nextbillion Technology Private Limited’s (NBT) leading market position in the equity broking
segment (2nd in terms of National Stock Exchange (NSE) active clients as on March 31, 2023), its comfortable capitalisation with
nil gearing, improving profitability trajectory and strong liquidity position. NBT has, under the brand ‘Groww’, emerged as one
of the leading discount brokers in India as it made substantial client additions during FY2022-FY2023 amid industry tailwinds
and record retail investor participation, especially in FY2022.

NBT is a subsidiary of Billionbrains Garage Ventures Private Limited (BGV) 1, which in turn is wholly owned by the ultimate
parent, i.e. Groww Inc. NBT is the Group’s flagship operating entity2 and a key contributor to the income stream of the parent
(BGV) for the services offered. The growth in NBT’s client base led to improved broking volumes and earnings in FY2023 with
the company reporting a return on net worth (RoNW) of 13.2%3 and a profit after tax (PAT) of Rs. 73.0 crore on net operating
income (NOI) of Rs. 1,294.0 crore compared to a PAT of Rs. 6.8 crore and NOI of Rs. 367.4 crore in FY2022.

NBT’s net worth stood at Rs. 590 crore as on March 31, 2023 and remains comfortable for the current scale of operations and
the near-term growth plans. There were no borrowings outstanding as of March 2023, although the company has availed
overdraft facilities which are utilised for intermittent, short-term funding requirements. ICRA notes that NBT is preparing to
foray into the margin trading facility (MTF) business, which will lead to higher borrowings, although ICRA expects the financial
leverage to remain comfortable. BGV’s net worth and liquidity reserves are meaningfully more than that of NBT, supported by
equity capital infusions by the ultimate parent. While the Group has initiated diversification into other lines of business, ICRA
expects management and financial support from the Group to be forthcoming to NBT, as and when required.

The above positives are, however, offset by NBT’s high dependence on capital markets, which are inherently volatile and
cyclical in nature. Moreover, the Group is yet to diversify the income stream as a sizeable share of the broking revenues is
from futures and options (F&O) broking (over 80% of broking income in FY2023). Further, the rating remains susceptible to
regulatory changes as well as technological risks, given its predominantly online presence. Going forward, NBT’s ability to
maintain the momentum of client additions while improving its revenues and profitability and maintaining comfortable
capitalisation would remain critical from a credit perspective.

1 BGV holds 99.99% of the shares

2 BGV and its subsidiaries collectively
3 While the RoNW of NBT on a standalone basis stood at 13.2% for FY2023, the RoNW of BGV (on a consolidated basis) was meaningfully

higher compared to NBT’s standalone RoNW in FY2023

www.icra .in
Page | 1
 Key rating drivers and their description

Credit strengths

Leading position in equity broking segment – NBT is one of the leading discount brokers in the country. It is ranked 2 nd, in
terms of NSE active clients as on March 31, 2023, with a market share of 16%. The company made significant client additions
during FY2022-FY2023, supported by industry tailwinds and record retail participation in domestic capital markets in the
country, especially in FY2022. Supported by the expanding client base, NBT reported a sizeable improvement in broking
volumes and income in FY2023. Its cash market share4 (excluding proprietary turnover) is estimated to have improved to ~6%
in FY2023 from 3.8% in FY2022 and 0.8% in FY2021. The healthy improvement in derivatives volume in FY2023 further
supported the broking revenues. As NBT’s leading market position has been achieved in a relatively short time span, its
sustainability will be a monitorable in the evolving industry landscape.

Comfortable capitalisation – NBT’s capitalisation remains comfortable with a net worth of Rs. 590.0 crore and nil borrowings
as on March 31, 2023. The net worth is primarily deployed in margins placed at the exchange, followed by certain amounts
parked in the form of cash/bank balances and liquid investments. While the company has sanctioned overdraft facilities, these
are backed by fixed deposits which are utilised for intermittent, short-term funding requirements. ICRA notes that NBT is
preparing to foray into the MTF business that will lead to higher borrowings, though the financial leverage is expected to
remain comfortable. Further, ICRA expects financial support from the parent to be forthcoming if required, given NBT’s
strategic importance to the Group. In this regard, it is noted that BGV’s net worth and liquidity reserves are meaningfully more
than that of NBT, supported by equity capital infusions by the ultimate parent. The Group has raised over Rs. 2,800-crore
equity capital till date and there are no accumulated losses. Of this, the capital infusion in NBT by BGV amounts to ~Rs. 500
crore till date.

Improving earnings profile – NBT’s earnings profile remained constrained till FY2022, given its limited vintage in the equity
broking space. The earnings profile improved thereafter as the company made significant client additions during FY2022-
FY2023. It reported an RoNW of 13.2% with a PAT of Rs. 73.0 crore on NOI of Rs. 1,294.0 crore (PAT/NOI – 3.7%) compared to
a PAT of Rs. 6.8 crore and NOI of Rs. 367.4 crore in FY2022 (PAT/NOI – 0.6%). Nonetheless, it is noted that the profitability at
NBT’s standalone level remains constrained by an elevated cost-to-income ratio. A sizeable portion of the operating expenses
is on account of software, server and technology services provided by the parent (BGV). Going forward, a sustained
improvement in NBT’s revenues and profitability will remain imperative from a credit perspective.

Credit challenges

Concentrated dependence on capital markets, which are inherently volatile and cyclical in nature; presence in other capital
market segments yet to be established – As the company’s revenues are linked to the inherently volatile capital markets, its
profitability remains vulnerable to market performance. NBT’s primary source of revenue remains retail broking which
accounted for over 90% of its NOI in FY2023. Interest income on fixed deposits largely made up the balance NOI. Moreover,
the Group has initiated diversification in to other lines of business and the share of broking revenues remain sizeable, especially
from the F&O segment ( over 80% of broking income in FY2023). Thus, any downturn in the capital markets may impact NBT’s
financial performance.

Susceptibility to risk of regulatory changes and/or technological risks – The broking industry has witnessed multiple
regulatory changes in the last couple of years aimed at enhancing investor confidence and ensuring the protection of investor
interest. These changes have increased the working capital requirements and compliance burden across players. However,

4 Market share as per ICRA calculations

www.icra .in
Page | 2
 NBT takes an upfront margin from its clients, which limits its own funding requirement. While the growth of discount brokers
has been phenomenal during the last few years with their market share increasing to 58% of NSE active clients in FY20235 (less
than 10% till FY2017), they would be at a comparatively greater risk of facing technology-related issues owing to their end-to-
end digital presence.

Liquidity position: Strong

NBT’s funding requirement is primarily for placing margin buffers at the exchanges as it has nil debt outstanding as on March
31, 2023. Its margin utilisation ranged between 12% and 15% (basis month-end data) during April 2022 to March 2023. As on
March 31, 2023, the margin placed at the exchanges aggregated ~Rs. 1,664 crore, of which ~Rs. 575 crore was from the
company’s own fund. The overall margin utilisation, as on March 31, 2023, was ~6% of the margin placed. As on March 31,
2023, the company had liquid investments of Rs. 93 crore. Further, it had unutilised, fund-based bank lines of Rs. 157.5 crore,
which can be utilised in case of exigencies.

Rating sensitivities
Positive factors – Not applicable

Negative factors – The rating could be downgraded if there is a significant decline in NBT's revenue, leading to a weakening of
the financial performance. The rating would also come under pressure in case of a deterioration in the credit profile of the
parent (BGV) or any weakening in the strategic importance to the parent. Any adverse change(s) in the regulatory environment,
affecting NBT’s business operations and financial performance, would also be a credit negative.

Analytical approach
Analytical Approach Comments
Rating Methodology for Entities in the Brokerage Industry
Applicable rating methodologies
Rating Approach – Implicit Support from Parent or Group
Billionbrains Garage Ventures Private Limited (BGV)
Parent/Group support
NBT is a wholly-owned subsidiary of BGV and ICRA expects that the company will receive
adequate and timely support from the parent, if required.
Consolidation/Standalone For arriving at the rating, ICRA has considered the standalone financials of NBT.

About the company

Nextbillion Technology Private Limited (NBT) was incorporated in May 2016. It is a subsidiary of Billionbrains Garage Ventures
Private Limited (BGV) and its ultimate parent company is Groww Inc., which is based out of Delaware, USA. The company
started its business as a mutual fund investment platform, under the brand name ‘Groww’. Subsequently, it obtained
registration from the Securities and Exchange Board of India (SEBI) as a stockbroker. NBT is registered with the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE). Its registered office is in Bengaluru. It had 53.7-lakh active NSE
customers as on March 31, 2023 and stood 2nd in terms of active NSE clients as on that date. NBT offers equity broking services
in the cash as well as derivatives segment, besides mutual fund distribution.

5 Source: NSE website

www.icra .in
Page | 3
 Key financial indicators
Nextbillion Technology Private Limited – Standalone FY2022/Mar-22 FY2023/Mar-23*
Fee income (including broking) 324.1 1,204.0
Net interest income 43.3 89.5
Net operating income (NOI) 367.4 1,294.0
Total operating expenses 357.3 1,197.2
Non-operating income 1.4 2.9
Profit before tax 9.3 97.7
Profit after tax (PAT) 6.8 73.0
Net worth 516.6 590.0
Borrowings 0.0 0.0
Gearing (times) 0.0 0.0
Cost-to-income ratio 97.3% 92.5%
Return on net worth 1.8% 13.2%
PAT/NOI 1.9% 5.6%
Source: Company, ICRA Research; *Provisional numbers; All ratios as per ICRA’s calculations; Amount in Rs. crore

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Chronology of Rating History for the Past 3
Current Rating (FY2024)
Years
Amount Date & Rating Date & Rating Date & Rating Date & Rating
Instrument Amount
Outstanding as in FY2024 in FY2023 in FY2022 in FY2021
Type Rated
on June 30, 2023
(Rs. crore)
(Rs. crore) Jul 13, 2023 - - -
Short-term fund-
1 based/non-fund based Short term 108 - [ICRA]A1+ - - -
bank facilities

Complexity level of the rated instruments

Instrument Complexity Indicator
Short-term fund-based/non-fund based bank facilities Very Simple

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

www.icra .in
Page | 4
 Annexure I: Instrument details
Amount
Date of Issuance Coupon Maturity Current Rating and
ISIN Instrument Name Rated
/ Sanction Rate Date Outlook
(Rs. crore)
Short-term fund-based/non-
NA NA NA NA 108 [ICRA]A1+
fund based bank facilities
Source: Company

Please click here to view details of lender-wise facilities rated by ICRA

Annexure II: List of entities considered for consolidated analysis

Not Applicable

www.icra .in
Page | 5
 ANALYST CONTACTS
Karthik Srinivasan Anil Gupta
+91 22 6114 3444 +91 124 4545 314
karthiks@icraindia.com anilg@icraindia.com

Deep Inder Singh Komal M Mody

+91 124 4545 830 +91 22 6114 3424
deep.singh@icraindia.com komal.mody@icraindia.com

Subhrajyoti Mohapatra
+91 80 4332 6406
subhrajyoti.mohapatra@icraindia.com

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
shivakumar@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

www.icra .in
Page | 6
ICRA Limited

Registered Office
B-710, Statesman House, 148, Barakhamba Road, New Delhi-110001
Tel: +91 11 23357940-45

Branches

© Copyright, 2023 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance,
which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to
timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable,
including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been
taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no
representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group
companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of
opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.