In H1 FY26, Groww’s average cost to acquire each new customer jumped to ₹1,374, up from ₹796 a year earlier — representing a roughly 73% increase
This sharp cost rise coincides with several headwinds — slower user growth in certain segments, revenue pressure, and intensifying marketing spends. In this article we’ll unpack what’s driving the cost spiral, what the implications are for Groww and its investors, and how the fintech might respond.
What exactly happened?
- In its Q2 FY26 disclosures, Groww revealed that its average customer acquisition cost (CAC) for H1 FY26 rose to ₹1,374.
- That compares with ₹796 in H1 FY25 — hence the ~73% year-on-year increase.
- The rise is driven by increased “cost to grow” expenditures: marketing and performance-marketing expenses rose significantly.
- At the same time, some key segments of revenue (like derivatives trading) saw decline, which may put pressure on profitability even as user-acquisition costs rise.
Why is Groww’s CAC rising so much?
1. Increased spend on performance marketing
Groww noted that performance-marketing spend jumped ~48% quarter-on-quarter (Q1 to Q2 FY26) and branding expenses also saw shifts.
When you spend more per user, your CAC naturally rises.
2. Slowing growth in high-value segments
Although total transacting users rose (for instance to 19 million) the active user base and certain higher-margin segments (like derivatives) are under pressure.
If higher-value users are harder to acquire (or slower to join), cost per new user may go up as you chase growth.
3. Competitive landscape & maturity of market
Fintech platforms are fighting harder for quality customers (not just any user). As the low-hanging fruit reduces, platforms may need to spend more per user to maintain growth.
4. Regulatory or market headwinds
Groww said its operating revenue slipped ~9 % YoY in Q2 FY26, largely due to reduced derivatives activity following regulatory “true-to-label” circular from SEBI.
When growth in core business falters, the cost to acquire new customers becomes more sensitive.
Implications for Groww & stakeholders
For Groww
- Rising CAC means margin pressure: Even with the company reporting a profit (₹471 crore profit in Q2 FY26) the cost base is threatening to squeeze future profitability.
- It signals that growth may get more expensive: If the company cannot lower CAC or raise revenue per user, unit economics may deteriorate.
- The firm may need to shift focus from purely acquiring users to retaining and monetising them more aggressively (i.e., increase revenue per user, cross-sell, increase wallet share).
For investors
- A sharp cost increase raises questions about sustainability of scale at current cost base.
- Investors may look more closely at metrics like CAC, lifetime value (LTV), user-asset growth, and profitability per user.
- Could affect valuation: High CAC without proportionate revenue growth may reduce growth premium.
For the fintech/online broking industry
- Groww’s spike may reflect a broader trend: as user acquisition gets tougher, platforms will need to differentiate, optimise marketing, and improve monetisation.
- Competition may intensify for high-quality customers (those with large assets, frequent trading).
What can Groww do (and likely will) to manage the cost rise?
- Refine targeting & optimise marketing spend: Focus more on channels and segments with better conversion and higher asset value.
- Improve retention and upsell: Increasing revenue per user (e.g., via margin trading facility, mutual funds, wealth management services) can spread cost over more revenue.
Groww noted its MTF (margin trading facility) book grew sharply. INDmoney - Cost discipline & operational efficiency: Reducing non-efficiency marketing, improving onboarding conversion rates, reducing user churn.
- Leverage existing user base for referrals: Lower-cost acquisition via existing users can reduce CAC.
- Explore product diversification: Moving beyond trading/derivatives into wealth, fixed income, bonds, commodities (Groww launched commodity derivatives in September) to deepen customer wallet
Key numbers recap
- CAC H1 FY26: ~₹1,374 per new user.
- CAC H1 FY25: ~₹796 per new user.
- Approx. 73% increase in CAC year-on-year.
- Total income for Q2 FY26: ~₹1,070 crore. Profit after tax: ~₹471 crore.
- Operating revenue decline: ~9% YoY in Q2 FY26.
Outlook & what to watch
- Will Groww manage to bring CAC down in H2 FY26 and beyond? Tracking Q3/Q4 metrics will show trend.
- Will revenue per user increase (via upsell, cross-sell) to offset higher acquisition cost?
- How will user base growth fare (both number of users and quality of users)? If user growth stagnates, higher CAC becomes more problematic.
- What impact will regulatory changes have on key segments (trading, derivatives) and how will it affect metrics like user activity and average revenue per user?
- Given the high CAC, how will Groww prioritise marketing vs profitability — will it continue to invest aggressively for growth, or shift to cost/margin discipline?
Conclusion
In summary, the fact that Groww user acquisition cost up 73% in H1 FY26 is a major signal for the fintech ecosystem. While Groww has reported solid profit and growth in some metrics, the rising cost to bring new users aboard puts pressure on its future growth and unit economics. The next few quarters will be critical: if Groww can stabilise or reduce its CAC, improve monetisation per user, and capture higher-value customers, it may weather the cost headwinds. If not, the rising cost may constrict growth or profitability.
