Broking biz is similar to insurance biz, you can lose everything in a day, says Zerodha’s Nithin Kamath
Kamath’s comments come a day after Zerodha reported a sharp rise in its net profit as it surged to approximately Rs 4,700 crore, cementing its status as India's most profitable new-age company.
Nithin Kamath, Co-founder and CEO of online brokerage firm , drew a parallel between the risks in the stock broking industry and those in the traditional insurance sector, underscoring the challenges of running a successful stock broking business.
"Broking business is like the insurance business. You can make money for 10 straight years, and then one day you can lose everything,” said Kamath, at TechSparks 2024, YourStory’s flagship startup-tech conference in Bengaluru.
“We are in it as long as it lasts. We are ambitious to build a good product for our investors,” Kamath added.
Kamath’s comments came a day after Zerodha reported a sharp rise in net profit, which surged to about Rs 4,700 crore, cementing its status as India's most profitable new-age company. The company’s operating revenue also grew by over 20%, exceeding Rs 8,320 crore and crossing the $1 billion milestone—making Zerodha one of the few startups to achieve this feat.
However, Zerodha anticipates a significant decline in revenue and profit for the current fiscal year due to new SEBI regulations for discount brokers, set to take effect from October 1.
In July, SEBI issued a circular mandating market infrastructure institutions to charge uniform fees to all members starting October 1.
Kamath, during the session at TechSparks, forecast a 30-40% decline in revenue for the year.
“The next year we are going to see a 30-40% drop in revenue due to all the regulations,” he said. He also said that the company is looking to diversify revenue streams.
“As Zerodha, we are at speed. For the broking industry, in terms of revenue, we are building other adjacent bits to it. We are building Zerodha Capital and insurance business with Ditto, building AMC with Smallcase. We don’t want to be 100% of something, we’re happy being 60% of something,” Kamath added.
Founded over a decade ago, Zerodha has never raised external funding and was the largest stock broker in India by active users until recently. However, rising competition in the stock broking and wealth management sectors has led the company to lose ground to venture capital-backed startups like Groww.
Despite this, Kamath expressed that he feels "lucky" to have reached Zerodha's current position without relying on external funding. He also shared that there are no plans to take the company public, as it would create external pressures to meet financial targets.
“Numbers don't really mean anything. One of the reasons why we are not listing is when you list, it starts meaning something. We are lucky to be where we are without raising capital and we want to continue the same way,” said Kamath.
Edited by Megha Reddy