New Delhi – The unlisted market, often a bellwether for India’s most promising startups, is flashing a major warning signal for fintech giant Groww. Shares of its parent company, Billionbrains Garage Ventures Pvt Ltd, have plummeted a staggering 18% in just two trading sessions, sending ripples of concern through the investor community. The stock, which was trading robustly around ₹270-₹280, nosedived to the ₹220-₹230 range, wiping out significant notional value for its pre-IPO backers.
For a celebrated unicorn that has redefined retail investing for millions of Indians, such a sharp fall begs the question: What’s spooking the market?
The RBI Trigger: A Clampdown on Unsecured Loans
The primary trigger for the fall in Groww‘s shares isn’t a flaw in its core brokerage model or a dip in its massive user base. Instead, the tremors originate from the Reserve Bank of India (RBI). Last week, the central bank announced a significant tightening of norms for consumer credit, a move aimed at curbing the rapid rise in unsecured loans and tempering potential systemic risks.
At the heart of this regulatory clampdown is an increase in risk weights for consumer loans extended by banks and NBFCs. This makes it more expensive for them to lend without security.
How Do the New RBI Norms Impact Groww?
Crucially for Groww, the RBI‘s new rules include a higher risk weighting for Loans Against Securities (LAS) and financing for Initial Public Offerings (IPOs).
In simple terms, the RBI is telling financial institutions that these types of loans are riskier than previously thought. As a result, lenders must set aside more capital for every loan they issue in this category. This makes the entire business of lending against shares less profitable and more capital-intensive, effectively putting a brake on the aggressive growth many fintechs had planned in this vertical.
This directly hits one of Groww‘s emerging revenue streams. The company has been actively building its credit business by offering LAS to its vast user base. This was seen as a logical and lucrative extension of its platform, allowing users to leverage their stock portfolios for liquidity. The new RBI directive throws a spanner in the works, potentially slowing down the growth and profitability of this segment significantly.
Investor Reaction: Pricing in Regulatory Risk
Investors in the unlisted market are quick to react to such regulatory headwinds. Their valuation models for a company like Groww are not just based on its current performance but heavily on its future growth potential. The perceived throttling of a promising credit business has led to an immediate re-evaluation of Billionbrains‘ future earnings and, consequently, its present valuation.
The fall is also symptomatic of the broader sentiment in the startup ecosystem. The era of “growth at all costs” is over. Today, the market is laser-focused on profitability and sustainable business models. Any event that casts a shadow on these aspects can trigger a sharp correction, especially in the less liquid unlisted market. It is also a classic case of profit booking, with early investors likely seeing the RBI circular as a cue to cash in some gains.
A Reality Check for Fintech Giants
For Groww, this isn’t a crisis for its core business. Its dominance in stockbroking and mutual fund distribution remains formidable. However, this episode is a stark reminder of the regulatory risks inherent in the fintech space. As these companies expand from being distributors to full-stack financial service providers, they come under the direct and stringent purview of regulators like the RBI and SEBI.
The 18% slide in Billionbrains‘ shares is more than just a market correction; it’s a recalibration of expectations. The road to becoming a diversified financial behemoth is paved with regulatory hurdles, and investors are now pricing in that new reality.
