<TelerikComboBox Data="@Data"
                 @bind-Value="@SelectedValue"
                 GroupField="Category.CategoryName"
                 TextField="ProductName"
                 ValueField="ProductId"
                 Placeholder="Select a product">
</TelerikComboBox>

@code {
    public IEnumerable<Product> Data { get; set; }
    public int SelectedValue { get; set; }

    protected override void OnInitialized()
    {
        List<Product> products = new List<Product>();
        
        products.Add(new Product() // I expect FIRST group will "Category 5"
        {
            ProductId = 2,
            ProductName = $"Product {2}",
            Category = new Category() { CategoryId = 5, CategoryName = $"Category 5" }
        });

        products.Add(new Product() // I expect SECOND group will "Category 3"
        {
            ProductId = 1,
            ProductName = $"Product {1}",
            Category = new Category() { CategoryId = 3, CategoryName = $"Category 3" }
        });

        Data = products;
        base.OnInitialized();
    }

    public class Product
    {
        public int ProductId { get; set; }
        public string ProductName { get; set; }
        public Category Category { get; set; }
    }

    public class Category
    {
        public int CategoryId { get; set; }
        public string CategoryName { get; set; }
    }
}

And result of code: