Many companies claim to be 100% bootstrapped but always manage to get some funding from investors. However, Zerodha is one of the most successful bootstrapped companies that quickly shot to unicorn status in India. Brothers Nithin and Nikhil Kamath managed to change the way the stock market traded around 12 years back, and since then there has been no looking back! Zerodha was the first company to introduce discount brokerage and barrier-free trading in India. Zerodha was mainly built to provide brokerage facilities to stock market traders. Today, it is registered with the Securities and Exchange Board of India (SEBI), BSC, MCX, NSE and more. Here is a bit more in detail about the company and its current revenue and financial status.
What unique services do they provide & how it’s solving real-life issues?
Zerodha is a financial/fintech service provider company located in Bangalore. It mainly deals with providing retail stock brokerage facilities at discounted rates. It also provides traders with other opportunities like trading commodities and currencies, bonds, and mutual funds.
Zerodha charges a reduced commission or a low brokerage rate on the transactions done on its platform, thereby attracting more investors. Today, it has become quite famous amongst traders and enjoys a client base of 1 million and more. It is currently the biggest stockbroker platform in India.
Zerodha banked upon its first-mover advantage as it was the first company to launch a discount broker platform in the country. The name ‘Zerodha’ can be decoded as ‘No Obstructions’, meaning it offers no barriers for the traders. The company keeps upgrading is features and comes up with innovative ideas constantly. These methodologies have helped Zerodha gain an edge over other discount broker sites in India.
How journey started?
The founder and CEO of Zerodha, Nithin Kamath was trading in the stock market since the age of 17. He took up a call center job in the daytime and spent most of his nights trading in the stock market. This pattern continued until 2005 when he got his first client. A man asked Nithin to manage his money when he saw how well Nithin understood the tricks of the trade.
Nithin had made a fortune trading in the stock market but lost a considerable amount during the stock market crash of 2001-2002. But soon, a foreign HNI asked him to manage his money. At the same time, he was also working as a sub-broker at Reliance Money. Soon, he managed to bag a lot of clients for Reliance Money. He was the most successful sub-brokers at Reliance Money at that time.
At that time, he felt that there was something missing in the way RMoney was working. He then decided to launch Zerodha along with his brother Nikhil. He again faced huge losses in the stock market crash of 2008-09, but then decided to mend his ways and launch a company that would offer online stockbroking services to all Indian traders.
Zerodha made a slow start and could only open 3000 accounts in its first year. Zerodha managed to change the mindset of people that a low-priced service or product need not be low in quality. Even today, the company does not spend on advertising.
Zerodha proved very helpful for retail investors who were often clueless about what stocks should be bought or sold. But it did not provide any research services. To provide a learning module for trading, Zerodha launched Varsity, an active forum where traders and investors could discuss stock ideas.
Zerodha rose above the others in the market because it managed to use technology intelligently over the years. Its trading platform Kite, which runs on both mobile and web, accounts for more than 10% of retail trading in India. Zerodha also launched Coin, an online platform that helps users buy mutual funds directly.
Zerodha – Mission and Vision
Zerodha envisions creating a world free of brokerage. A world free of brokers will hugely benefit the stakeholders. It has a mission to provide the best possible customer experience with a personalized service and support system.
Zerodha – Funding and Revenue Model
Zerodha is a bootstrapped company that did not seek funds from any investors. The business model is based on, a ‘Low margin and high-volume model’. It charges a low fee to the traders for any transactions and this is why it benefits from high trading volume. A large number of clients result in good revenue generation for Zerodha. The operational costs of the company are also quite low.
It recently bagged approval from the Securities and Exchange Board of India (SEBI) to provide mutual fund services. Now Zerodha can also launch its asset management company (AMC).
The company’s revenue was reported to be of INR 938.4 crore in FY20. This figure tripled in FY21 with a revenue of INR 2,729 crore. The revenue in FY22 was reported to be INR 4300 crore.
The increase in revenue was due to the huge increment of users who joined the company. The growth of the company is estimated to be around 60% in FY22.
Future Plans
Zerodha aims to add around 10 million new investors to the Indian stock market in the coming future through its 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 Kamath said in an interview.
The company is also trying to reduce transaction costs in its discount brokerage services. As per the latest plans revealed in April 2022, Zerodha plans to remove its dependence on legacy systems. They are currently working on the development of an in-house order management system(OMS) to attain this feat. This OMS should probably roll out in 2023.
Conclusion
Zerodha is one of the strongest companies in India today that built steadily on its belief on ‘Expenditures should not increase your income.’ This belief kept them grounded and encouraged them to be a bootstrapped company that grew slowly but steadily without the burden of operational or advertising costs.
