India's online brokerage Groww posted a rise in quarterly profit and revenue, but a regulatory change to how the country's stock markets set daily closing prices took a bite out of its derivatives business.
For the quarter ended September 30, Groww's profit climbed to 7.26 billion rupees ($76.38 million), while revenue from operations jumped 47% year-on-year to 15.02 billion rupees. The number of transacting users also grew 27%, signaling continued retail investor engagement.
However, compared with the previous quarter, revenue was flat and profit dipped 1.3%. The company attributed the slowdown to a new "closing auction session" introduced by Indian exchanges, which has made end-of-day pricing more volatile. As a result, equity derivatives revenue fell 14.3% quarter-on-quarter.
What is the closing auction session?
A closing auction is a mechanism used by stock exchanges to determine the official closing price of a security. Instead of relying solely on the last trade of the day, exchanges collect buy and sell orders over a short period and match them at a single price that balances supply and demand. This price then becomes the day's closing price.
India's markets introduced this system to make closing prices more reflective of actual trading interest and harder to manipulate. But the change has also introduced more unpredictability at the end of the trading day. For derivatives traders—who often use closing prices to settle contracts or manage risk—this added volatility can reduce the appeal of trading, especially for strategies that depend on stable end-of-day prices.
Groww's experience reflects a broader trend: when market infrastructure changes, trading behavior often shifts. In this case, the new auction appears to have dampened activity in equity derivatives, a key revenue stream for many brokers.
What this means for investors
For everyday investors, the news is a reminder that regulatory tweaks can have real financial consequences for the companies they own. Groww's core business—retail stock trading and investing—remains healthy, as evidenced by the growth in users and revenue. But the derivatives slowdown shows that even a popular platform can be sensitive to changes in market mechanics.
Investors holding Groww's parent, Billionbrains Garage Ventures, or considering an investment should watch how the company adapts. If the closing auction continues to suppress derivatives volumes, Groww may need to find other ways to grow revenue, such as expanding its mutual fund or lending products.
It's also worth noting that the broader Indian market has seen strong retail participation, with local investors often offsetting foreign selling. That trend has supported brokerages like Groww, but it also means competition is intense.
Looking ahead
Groww's results come at a time when Indian equities have been attracting attention globally. The company's ability to grow users and revenue despite the derivatives headwind suggests resilience, but the flat quarter-on-quarter revenue is a caution flag.
Investors will likely focus on whether the derivatives revenue decline stabilizes in the coming quarters, and whether the company can maintain its growth trajectory. For now, the story is one of mixed signals: strong year-on-year growth, but a clear impact from a market rule change.
As always, it's important to consider how such developments fit into your own investment strategy. A single quarter's dip in one segment doesn't necessarily change the long-term picture, but it's worth understanding the risks.
