Zerodha Success Story - The Largest Stock Broker in India (2024)

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The boom of the stock market has been skyrocketing since the 2000s. Imagine a player coming in and letting the traders trade barrier-free. Yes! That has been a reality with Zerodha since 2010 when it was founded by brothers Nithin and Nikhil Kamath.

Headquartered in Bengaluru, Zerodha is a financial service company that is registered with the Securities & Exchange Board of India (SEBI) and a member of NSE, BSE, and MCX-SX, built to provide brokerage facilities to the stock market traders. All in all, Zerodha is an online discount broking company that aims to lower the costs for their clients, something that is crucial in deciding the long-term profitability of the trader trading in the stock markets of the country.

Read about Zerodha's Business Model, Revenue, Profit, Competitors, Founders, Growth, and more, in the article ahead.

Zerodha - Company Highlights

Zerodha - About and How Does It Work?
Zerodha - Founders and Team
Zerodha - Startup Story
Zerodha - Startup Launch
Zerodha - Mission and Vision
Zerodha - Name, Logo and Tagline
Zerodha - Business Model and Revenue Model
Zerodha - Revenue and Profit
Zerodha - Investments
Zerodha - ESOPs
Zerodha - Growth
Zerodha - Products
Zerodha - Partnerships
Zerodha - Startup Challenges
Zerodha - Award
Zerodha - Competitors
Zerodha - Future Plans

Zerodha - About and How Does It Work?

A Bangalore-based fintech/financial services company, Zerodha offers retail stock brokerage facilities at discounted rates along with other opportunities for currencies and commodities trading, mutual funds, and bonds.

The company works on the idea of discount broking, which means that it charges a reduced commission or low brokerage on the transactions to ideally attract investors to use this platform. This makes Zerodha famous amongst the traders and is the main reason behind Zerodha having a active client of 6.3 million.

Zerodha has the first-mover advantage as it was the first discount broker in the country. “Zerodha was incorporated to make trading, barrier-free, so is its name Zerodha i.e., No Obstructions,” says Nithin Kamath. One another important reason for the highly surging growth of Zerodha is that it puts in constant efforts and keeps coming up with innovative ideas and unique strategies, all of which have helped Zerodha get an edge over its rivals.

Zerodha - Founders and Team

The founders of Zerodha are two brothers namely Nithin Kamath and Nikhil Kamath.

Nithin Kamath

Nithin Kamath, Founder and CEO of Zerodha and Rainmatter Foundation, a non-profit initiative by Zerodha with an aim to improve environmental sustainability, is the older of the two founder brothers of Zerodha. Nithin is an alumnus of the Bangalore Institute of Technology. After completing his studies, he was initially self-employed as a Proprietary Trader and later served as a Senior Telesales Executive at Manipal Infocom and as a Partner at Kamath Associates. Nithin eventually collaborated with his younger brother, Nikhil Kamath, to find Zerodha.

Nikhil Kamath

Nikhil is the younger Kamath brother, who is the co-founder of Zerodha along with being the co-founder of True Beacon, an asset management firm dedicated to the service of the ultra-rich. Nikhil dropped out of his school when he was only 16, after Class 10. Always keen on trading, Nikhil started with the used cellphone business first, when he started selling old cell phones while in the 10th grade. He soon joined a call centre after dropping out of school at 17 and started equity trading at the same time in his leisure. Nikhil eventually started managing some money from his friends and colleagues as well, which helped him gain his initial experience in asset management. He then quit his call centre job and started auto trading with his brother, and eventually founded Zerodha together. Nikhil is known as a brilliant trader. At Zerodha, he manages the prop trading desk, risk management, and everything related to trading.

As of today, Zerodha has a team of over 2100 employees. Nithin Kamath, the Co-founder, and CEO of Zerodha mentioned that around 90% of the company's total workforce, will be working from home regularly. The company has also set up an office in Belagavi city of Karnataka.

While talking on the same, Kamath said, “we have taken a call that we would do permanent work from home and people are enjoying living in their small towns. Belagavi has amazing talent and we have a large team working there. Folks are enjoying Belagavi as a city, are having maids and independent houses which they could never think of affording in Bengaluru”.

Zerodha - Startup Story

The founder and CEO of Zerodha, Nithin has been trading in the Indian stock market since the age of 17. Nithin attended an engineering college and then went on to become an entrepreneur. During his college years, he spent considerable time trading in the stock market and that forced him to take up a job at the call centre. Hence he worked at the call centre during the night and saved the daytime for trading.

“I did this, working-trading, for almost 3 years during 2004-5, post which, I quit my job when I got my first client who asked me to manage money for him after looking at the positive returns on my trading account,” says Nithin Kamath.

Though Nithin managed to make quite a fortune by trading in stocks, he lost a significant amount of money in the stock market crash of 2001-02. However, he eventually landed a cheque from a foreign HNI to manage his money, which he did along with landing a job at Reliance Money, where he served as a sub-broker.

Within a very short span, Nitin managed to get many big clients for Reliance Money. At Reliance Money, Nitin was one of the most successful sub-brokers, breaking volumes of more than 1000 sub-brokers at once.

“But as a trader, I was still finding something missing with the way RMoney was working, not really what a trader requires. That is when we decided to start Zerodha,” added Nithin.

Nithin again lost a considerable amount of money in the market crash during the global financial crisis of 2008-09. After this, he decided to change ways and started to develop an idea of building a company that will provide online stockbroking services for all the traders of the country, which will be simple to use and affordable.

Zerodha - Startup Launch

After the founders, Nikhil and Nitin founded Zerodha, it took a long time for them to establish a market standing. It was a slow transition that happened over the last decade. Zerodha, in its first year, opened 3,000 accounts. In India, when the cost of any product or service is less, people generically start questioning the quality. And that was the biggest milestone for Zerodha founders to conquer. As a result of which, they built a community that also helped them in the long run. Even today Zerodha doesn’t spend any money on advertising.

The focus on building a community for the traders helped Zerodha. This was because the initial doubts of the traders towards Zerodha’s discount broking model was stemming from the fact that retail investors were often clueless about what stocks should be bought or sold, and did not ideally offer any research services. To counter this challenge, Zerodha launched Varsity. Varsity is a learning module that became immensely popular. It ran Trading Q&A, an active forum where traders and investors were able to discuss stock ideas.

Over time, Zerodha used technology heavily to differentiate itself from the rest in the market. Zerodha also went on to launch Coin, which is an online platform to buy mutual funds directly.

Zerodha - Mission and Vision

Zerodha is firmly committed to working towards the vision of creating a world without any brokers, which will hugely benefit the stakeholders when it comes to the financial markets. Furthermore, the company is equally committed to providing the best possible customer experience with the help of a support and service that can be highly personalized.

Zerodha envisions creating a brokerage-free world.

Zerodha - Name, Logo and Tagline

"What's in a name?" said William Shakespeare once, and this is what Zerodha is likely proving with its wide success. Zerodha founder, Nithin Kamath indicated the same in a recent post when a Linkedin user was confused with the naming of the company. Check out the LinkedIn post below to have a quick glimpse into the same.

The name "Zerodha" is an English-Sanskrit portmanteau word consisting of "Zero" in English and "Rodha" (Barriers or Obstructions) in Sanskrit, to sum up as "No Obstructions". This name of the company directly signifies the birth of a challenge-free online stock-broking platform that Zerodha is!

The tagline of Zerodha is 'The Free Trade Zone'. It conveys the brand's primary differentiator of brokerage-free trading in a clever fashion.

Zerodha - Business Model and Revenue Model

The business model of Zerodha works on a 'Low margin and high-volume model.' Zerodha charges a very minimal amount to the traders for transactions because of which the trading volume is generally high. This fee collection of smaller amounts from a larger number of clients leads to good revenue generation for Zerodha. Also, one more factor aiding high-profit margins for the company is the operational costs. They are quite low for Zerodha as compared to some of the top brokers because of its online structure, which allows it to maintain low operational costs.

Zerodha has finally got approval from the SEBI (Securities and Exchange Board of India) to offer mutual fund services, said Zerodha co-founder Nithin Kamath via his Twitter handle. The company had applied for the license of the same in February 2021. This will help Zerodha to launch its asset management company, (AMC) and is surely another feather in its cap.

“Passive, simple, cheap index-traded funds will be on offer. Mutual fund products need to be simplified to attract investments from young investors,” said the co-founder and CEO of the brand, Nithin Kamath.

Zerodha - Revenue and Profit

In terms of revenue and profit, Zerodha seems to have gone from strength to strength.

The Nithin and Nikhil Kamath-led company reported a operating revenue of Rs 2,729 crore in FY21, which almost tripled in FY22 when the company reported a revenue of Rs 4,964 crore. This revenue again witnessed a good expansion during FY23, when Zerodha reported having earned Rs 6,875 crore in revenue.

"There was market volatility, and a lot of initial public offerings (IPOs)... so we were able to clock higher daily average users", added Nithin Kamath.

The company's profits have also increased over the last three fiscal years. In FY21, Zerodha witnessed a profit of Rs 1,122 crore, which more than doubled, becoming Rs 2,094 crore in FY22. In FY23, Zerodha recorded a profit of INR 2,907 crore, which is an 39% increase from the previous year.

Revenue Breakdown

Zerodha gained a big part of its operating revenue from the "sale of service," which came from its brokerage fees, the premium tech products that it sells like Kite Connect API, the collections that it manages by onboarding the users, and by exchanging the transaction charges that they collect from the clients due to different securities exchanges. The revenue collected from these services was recorded at Rs 4,129 crore in FY22, up from Rs 2,252.5 crore in FY21.

The interest income of Zerodha in FY22 stood at Rs 614.5 crore, and the other operating revenue (dividend income and net gain on fair value changes) stood at Rs 220.5 crore in FY22.

Zerodha - Investments

Zerodha has invested in four companies till date. The most recent investment was on August 10, 2023, in the company Rainmatter Capital.

Below are the details of the Zerodha investment:

According to various news reports, Zerodha has exited RBL Bank.

Zerodha - ESOPs

Zerodha created a new ESOP pool for its employees, as of November 1, 2021. Under this ESOP Plan 2021, the company has allocated around 7,00,000 options, as per the regulatory filings of the company with the Registrar of Companies (RoC).

The company then issued another ESOP pool that is estimated to be worth around Rs 100 crore at the beginning of Q3 2022.

Zerodha - Growth

Zerodha has achieved numerous feats since it was founded in 2010. The company boasts of being a unicorn back in June 2020 without even raising funds from any of the investors, thereby purely relying on bootstrapping. Along with this, Zerodha is also credited with buying ESOPs at nearly 4X times their book value, which was almost around the time when the stockbroking startup valued itself as a unicorn.

The company is currently valued at over $2 billion, as of fiscal year 2022. It is a close second after Groww with a 19.4% market share of the entire active NSE clients as per news report on October 12, 2023.

Zerodha - Rainmatter Foundation

In January 2021, Zerodha set up Rainmatter Foundation, a non-profit foundation that aims to support individuals/organizations/companies working towards problems related to climate change. Rainmatter Foundation has committed a $100 million fund towards the above directions.

As the Head of Rainmatter Foundation, Sameer Shisodia (Founder of The Farming Collective and Linger Leisure) is working towards this collective goal. The Foundation has invested in Terra (online climate school training climate entrepreneurs on climate science, policy, business, and social justice), and Blue Sky Analytics (Provides real-time and predictive environmental intelligence).

Some other growth highlights of Zerodha are:

1. Dethroned the market leader- ICICI Securities to become India's largest brokrage firm.
2. Boasts of over 6.3 million active clients.
3. Conducts 2-3 million trades every day.
4. Zerodha is the largest retail brokerage firm in India.
5. Added 11 crore demat accounts in January 2023.
6. Zerodha was having 6.32 million active customers at the end of August, 2023.

Zerodha - Products and Features

Kite

It's a modern browser-based trading tool with a wide range of order types, advanced charting, keyboard shortcuts, and streaming quotations that provides a seamless trading experience. Zerodha Kite web was launched in November 2015 and Kite app was launched in November 2019.

Console

The Zerodha console is a dependable back-office platform created for their esteemed clients. It acts as a vital reporting dashboard, allowing users to easily keep track of and manage all of their investments.

Coin

It's the finest platform for hassle-free and cost-free direct mutual fund investments. Over 40 mutual fund houses' thousands of equity, debt, hybrid, and ELSS tax-saving schemes are available on the platform. Zerodha coin web was launched in April 2017.

Kite Connect API

Zerodha Kite Connect API offers a number of capabilities for developers to create trade applications and interface them with Zerodha's trading platform.

Varsity Mobile

Zerodha Varsity mobile is a free online tool designed to teach people about stock market trading and investments. It is accessible online via a website or a mobile app.

Zerodha - Partnerships

smallcase

Zerodha and smallcase have tied up in April 2023, and with this for India, Zerodha will create straightforward, affordable passive mutual fund solutions.

Zerodha - Startup Challenges

Certain challenges faced by Zerodha are:

• Technical glitches on the platform because of heavy trading lead to decreased customer satisfaction.
• The customer support mechanism of Zerodha is not as efficient as compared to other top brokers in India.
• The important fact materials like daily reports, quarterly result analyses, news alerts, etc., are not provided by this platform unlike some of the other top brokers.

However, the company is striving hard to manage all of these and streamline the operations further for the users.

Zerodha's OMS froze during its trading hours, which had the company face the investors' fury. The company founder, Nithin Kamath mentioned that he doesn't want Zerodha to be mentioned as a company that once saw a glitch, which is why it is working more on its nudge feature that will help the traders make more informed decisions about their investments. Zerodha has previously launched killswitch as a part of this nudge feature, which will instantly disable trading for the investors that are constantly making losses.

Nithin Kamath further mentioned that a market downturn is anticipated soon, with the slowdown in public markets. This might lead to growth slowing down in the next 3-6 months, Kamath mentioned.

Zerodha - Award

• In the second Unicorn Premier League (UPL) tournament, which was played in Bangalore, Zerodha triumphed against Flipkart by a margin of six wickets to win the championship as per news report of February 28, 2024.
• Nikhil Kamath, the founder of Zerodha, received the 2023 CK Prahalad Next Practice Entrepreneur Award and the Kempegowda 2023 Award.
• Nikhil Kamath also won Entrepreneur of the Year Award at the Economic Times Awards in 2023.

Zerodha - Competitors

Zerodha faces some cut-throat competition in the market. It is competing with other discount brokers like Upstox. Simultaneously, Zerodha also faces serious competition from full-service brokers which are huge and popular amongst the traders such as HDFC Securities, Kotak Securities, Motilal Oswal, etc.

Zerodha - Future Plans

Upcoming goals for Zerodha is the aim to add 5-10 million new investors to the Indian stock market with the aid of the platform. "India is very dependent on foreign capital to drive the country. For any country to do well, you need residents to put their money in the market. The money shouldn't just stay in fixed deposits and real estate. I want to encourage people to educate themselves and put the money in the ecosystem in some way or the other to drive growth," Nithin concluded.

According to numerous news sources in September 2023, Zerodha is carefully putting itself in position to join Ather Energy's cap table through a secondary sale. This action demonstrates Zerodha's desire to diversify its investment portfolio and maybe aid Ather Energy, a prominent participant in the electric car business, in expanding and developing.

Zerodha to launch AMC(Asset Management Business) as per various media report of August 2023. This initiative will be carried out in partnership with smallcase, a business that sprang out of Zerodha's internal corporate fund.

Zerodha is planning to invest Rs 100 crore in Nazara Technologies, as per the news update in September 2023.

FAQs

Who are the founders of Zerodha?

The founders of Zerodha are two brothers namely Nithin Kamath and Nikhil Kamath.

What is Zerodha?

Zerodha is a financial service company and a member of NSE, BSE, and MCX providing brokerage facilities to stock market traders. It is an online Discount Broking company.

Who are the Top Competitors of Zerodha?

Zerodha's top competitors are :

• Upstox
• SAS Online
• IIFL
• Finvasia
• Angel Broking
• Beeline Broking
• TradingBells
• Karvy Stock Broking
• Sharekhan
• Motilal Oswal
• HDFC Securities
• ICICIdirect

How does Zerodha make money?

Zerodha charges a very minimal amount to the traders for transactions because of which the trading volume is generally high. This fee collection of smaller amounts from a larger number of clients leads to good revenue generation for Zerodha.

What is Zerodha's Operating Revenue?

In FY23, the company earned Rs. 6,875 crore in operating revenue. Also, Zerodha reported a profit of Rs 2,907 crore after tax in FY23, which is an 39% increase from the previous year.

What is Discount Broking?

Zerodha works on the idea of discount broking, which means that it charges a reduced commission or low brokerage on the transactions to ideally attract investors to use this platform.