Angel One vs Groww: Which is a better buy according to Citi?

Synopsis: Citi initiated covering Angel One and Groww, assigning both a “Buy” rating. However, it sees more upside for Angel One. It’s not about greater diversification; it thinks the key is Angel One’s re-rating potential, which the market appears to be missing.

India’s retail investing landscape has changed. Broker apps aren’t just for stock trading anymore; they’ve become financial supermarkets. Citi, the global brokerage giant, recently began covering Angel One and Groww, and they’re optimistic about both. 

However, Citi sees a bigger upside in Angel One, even though Groww appears more diversified on the surface. So what’s the story? Why does Citi have greater confidence in Angel One? In this article, we will try to understand the answers to these questions.

Analyst Take

Leading global brokerage house, CITI, has assigned a “Buy” call on Angel One and has fixed a target price of Rs 3,215 per share, signalling an upside of 28 percent from its current market price of Rs 2,519 per share.

On the other hand, CITI has assigned a “Buy” call on Billionbrains Garage Ventures (Groww parent) and has fixed a target price of Rs 195 per share, signalling an upside of 19 percent from its current market price of Rs 163.70 per share.

So what was the reason behind giving Angel One a more upside potential than Groww, which is more diversified in comparison with Angel One? Citi’s rationale for both Angel One and Groww is that large retail broking platforms are transitioning beyond pure brokerage and evolving into one-stop financial platforms offering multiple products like mutual funds, loans and other financial services. 

The brokerage also added that there is a huge cross-selling potential since both players have been continuously growing their product offerings and have a large and fast-growing captive customer base. Besides that, the Indian capital markets story is still in a very nascent stage, which makes the long-term growth potential attractive, even though there’s the risk of near-term volatility and regulatory challenges.

Nevertheless, the reason for Angel One getting a higher upside than Groww by Citi mainly has to do with the fact that Citi sees greater stock re-rating potential. Angel One’s share price is still mostly based on the traditional brokerage-led platform concept, so if the company manages to diversify its business successfully and the market starts valuing it as a broader financial platform, the stock could get that higher valuation.

For Groww, Citi still has a positive view and points out its niche market leadership, customer-first approach, strong brand recall, and a lean model that results in better operating efficiency.

However, as Groww is already seen as a contemporary platform and more diversified, some of its “platform premium” might already be factored into the valuations, which is why the upside is relatively lower compared to Angel One, even though Groww may seem structurally more diversified.

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