• Groww is buying Fisdom for $140-160 million in an all-cash deal to strengthen its wealth management offerings ahead of a planned $700 million IPO.
• Fisdom’s 15 bank tie-ups give Groww deep market access, especially in tier 2 and 3 cities an asset that’s hard to build organically.
• The acquisition signals Groww’s shift to a full-service financial platform, mirroring global fintech trends and boosting its IPO valuation narrative.

Groww has agreed to buy wealthtech firm Fisdom in an all-cash deal worth between US$140 million and US$160 million.

The deal awaits approval from Securities and Exchange Board of India (SEBI) and is for broadening Groww's foothold in the wealth management business.

The acquisition is part of Groww's expansion drive and its planned US$700 million public listing soon.

Established in 2015, Fisdom provides mutual funds, stocks, bonds, portfolio management, and tax return filing services. It achieved EBITDA profitability in Q4 FY24 and recorded 84 crore rupee (US$9.82 million) in revenue for the fiscal year.

The firm has onboarded more than one million customers and has raised US$48 million of investors such as PayU, Saama Capital, and Quona Capital.

Indian wealthtech consolidation strengthens in the backdrop of market maturity
Groww's purchase of Fisdom for $150 million indicates a speeding-up trend of consolidation in India's wealthtech space, where size is increasingly necessary for survival.

Fisdom had raised around $48 million and valued itself at $103 million in 2023 prior to being taken over, indicating a decent exit multiple even though it was taken over short of unicorn status.

The deal is Groww's second major buy after it had acquired Indiabulls Asset Management Company earlier, reflecting a strategic trend of growth through acquisitions as opposed to organic expansion.

The trend reflects global wealthtech consolidation where platforms providing end-to-end services are gaining a competitive edge over best-of-breed products by building integrated financial ecosystems catering to multiple needs of customers.

Industry trends indicate smaller wealthtech players facing rising customer acquisition costs in competition with established players, leading to consolidation as the inevitable solution in the competitive Indian market.

Fisom's 15 bank alliances, such as those with Punjab National Bank and Indian Bank, are a strategic distribution benefit that would be challenging and time-consuming for Groww to create organically1.

These banking ties are especially coveted because they translate into access to a wider base of customers beyond digitally literate city investors, which could enable Groww to reach deeper into India's expanding tier 2 and tier 3 marketplaces.

The deal emphasizes the extent to which bank collaborations have emerged as highly prized fintech assets, with firms buying these relationships instead of trying to establish them in-house.

By retaining Fisdom's original team after the acquisition, Groww provides continuity in such banking relationships and maintains the trust and operating structures that have made these alliances a success1.

This B2B2C approach enables wealth management platforms to tap into the existing trust and distribution network of conventional banks while offering cutting-edge digital investment products, a resilient combination in India's new-age financial environment.

Pre-IPO strategic positioning unveils changing fintech business models
Groww's takeover is as it gets ready to submit its IPO documents to SEBI as a full-service financial services platform and not merely a broking firm.

The timing appears to be a calculated move to bolster Groww's pre-IPO market positioning, perhaps helping to back its reported $7-8 billion valuation goal.

Even with reporting robust top-line growth to ₹3,145 crore in FY24, Groww's net loss of ₹805 crore (due to a one-time tax outflow) reflects the tough economics of pure broking ventures, justifying its foray into wealth management.

The deal shows Indian fintech unicorns are moving from single-product to comprehensive financial services platforms, mirroring the growth path of global fintech behemoths.

This diversification strategy by acquisition instead of development in-house is an indication of the time constraint under which Groww is operating as it hurries towards its IPO, illustrating how considerations of market timing influence business development strategies in high-growth fintech spaces.