[Update] Groww Founders Relinquish Differential Voting Rights Ahead Of IPO

Update | April 2  3:55 PM

About a month after investment tech major Groww initiated its stakeholder rejig bid, the Competition Commission of India (CCI) has approved the proposed transactions. 

On April 1, the competition watchdog passed an order approving the following transactions: 

• Issuance of compulsorily convertible preference shares (Bonus CCPS) to investors Peak XV Partners, Ribbit and Y-Combinator.
• Collapse of the differential voting rights (DVRs) held by the startup’s cofounders – Lalit Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal.

“The Proposed Transaction is being notified to the Hon’ble Commission as an acquisition under Section 5(a)(i)(A) of the Competition Act, 2002.The notification is a technical filing for regulatory compliance,” the CCI order read. 

In the case of Groww, the filing with the CCI was a technical one, as the investors and the startup founders already exercise “joint control” over the startup’s operations. 

Original | March 5, 9:37 AM

For context, DVRs give their grant holders either more or fewer voting rights compared to ordinary shareholders, typically granting shareholders more votes per share than ordinary shares, enhancing their control over company decisions

 

About a month after investment tech major Groww initiated its stakeholder rejig bid, the Competition Commission of India (CCI) has approved the proposed transactions. 

On April 1, the competition watchdog passed an order approving the following transactions: 

• Issuance of compulsorily convertible preference shares (Bonus CCPS) to investors Peak XV Partners, Ribbit and Y-Combinator.
• Collapse of the differential voting rights (DVRs) held by the startup’s cofounders – Lalit Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal.

“The Proposed Transaction is being notified to the Hon’ble Commission as an acquisition under Section 5(a)(i)(A) of the Competition Act, 2002.The notification is a technical filing for regulatory compliance,” the CCI order read. 

In the case of Groww, the filing with the CCI was a technical one, as the investors and the startup founders already exercise “joint control” over the startup’s operations. 

Original

IPO-bound fintech platform Groww’s parent Billionbrains Garage Ventures Private Ltd has issued bonus compulsorily convertible preference shares (CCPS) to existing investors Peak XV Partners, Ribbit Capital and Y Combinator. 

The development came to fore in a notice issued by the Competition Commission of India (CCI) on March 3. As per CCI’s notice, the transaction will also result in collapse of the differential voting rights (DVR) held by Groww cofounders Harsh Jain, Lalit Keshre, Neeraj Singh and Ishan Bansal.

There was no clarity on the quantum of bonus CCPs allotted to the Groww’s investors, which were issued to existing backers at no extra cost. 

“The proposed transaction comprises of: (i) the proposed collapse of the differential voting rights (“DVRs”) held by the founders of Groww (proposed DVR collapse”); and (ii) the bonus compulsorily convertible preference shares (bonus CCPS) proposed to be issued to all existing equity shareholders of Groww (proposed bonus CCPS issuance”),” read the CCI notice.

For context, DVRs give shareholders lower or higher voting rights compared to ordinary shares. With this, the cofounders will now have the same voting rights as other shareholders. 

It is pertinent to note that companies may issue bonus shares before going for an IPO to increase the number of shares available in the market, with an eye on attracting greater participation in the public listing by lowering the entry barrier with a lower share price. 

Explaining this, founding partner at 3one4 Capital, Siddarth Pai, told Livemint, “By capitalising reserves, particularly the securities premium, the company can reduce the final IPO issue price. This is a standard bonus issue that almost every startup does before they IPO. Most recently-listed companies followed the same approach”.

Pai also reportedly said that issuing bonus shares as CCPS, instead of equity shares, also acts as a safeguard, helping ensure that the company can reinstate all investor rights if the IPO does not go through for any reason.

Meanwhile, a source close to the company told the publication that the bonus issue of shares does not include a new investment in the company and will not have “major implications” on the shareholding structure.

The CCI notice added, “The competitive dynamics remain unchanged prior to and post the proposed transaction as the major investors and founders already exercise joint control in Groww which remains unchanged prior to and post the proposed transaction”.

This comes at a time when the invest tech platform is pulling all stops to list on the Indian bourses. Just last month, reports surfaced that the company was looking to file its draft red herring prospectus (DRHP) with market regulator SEBI by April-May for a $1 Bn IPO. Groww is said to be eyeing a listing by the end of the fiscal year 2025-26 (FY26).

Previous reports claimed that the fintech unicorn was targeting a valuation of $7 Bn to $8 Bn for its upcoming markets debut. In preparation for this, the company also recently reportedly finalised four bankers, namely Kotak Mahindra Capital, JP Morgan, Axis Capital, Citi and Motilal Oswal, to helm the public issue. 

Groww also shifted its domicile back to India in March last year as part of its plans to list on domestic exchanges. 

Founded in 2017 by Keshre, Jain, Singh, and Bansal, Groww is an online discount broking platform that allows users to invest in stocks, exchange-traded funds (ETFs) and IPOs.

On the financial front, Groww Invest Tech, which operates online stock broking giant Groww, saw its revenue surge 119% to INR 3,145 Cr in FY24, up from 1,435 Cr in FY23. Meanwhile, profits jumped to INR 535 Cr during the fiscal under review from INR 458 Cr in FY23.