Zerodha: The Most Successful Bootstrapped Startup in India

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 Bangalore, 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. Zerodha's journey is a story of revolutionizing India's stockbroking industry through innovation and accessibility.

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

Zerodha - Company Highlights

About Zerodha
Zerodha - How it Works?
Zerodha - Founders and Team
Zerodha - Startup Story
Zerodha - Startup Launch
Zerodha - Mission and Vision
Zerodha - Name and Logo
Zerodha - Products and Features
Zerodha - Business Model
Zerodha - Revenue Model
Zerodha - ESOPs
Zerodha - Challenges Faced
Zerodha - Investments
Zerodha - Growth
Zerodha - Awards
Zerodha - Competitors
Zerodha - Future Plans

About Zerodha

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

Zerodha - How it Works?

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 an active client base 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. Another important reason for the highly surging growth of Zerodha is that it puts in constant effort 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 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 center 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 center job and started auto trading with his brother, and they 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.

The company has 501–1,000 employees, as per LinkedIn.

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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 center. Hence, he worked at the call center 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 generally start questioning the quality. And that was the biggest milestone for the Zerodha founders to conquer. As a result of this, 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 stemmed 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 has become 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 of the market. Zerodha also went on to launch Coin, which is an online platform to buy mutual funds directly.

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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 and Logo

"What's in a name?" William Shakespeare once said, 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 the challenge-free online stock-broking platform that Zerodha is!

Zerodha - Products and Features

Zerodha products and features are:

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 has introduced a 'privacy mode' on its Kite trading website, allowing users to hide real-time profit and loss (P&L) changes. This feature was launched on 22 August 2024. The feature aims to reduce distractions and the temptation to overtrade. Currently available only on the Kite website, the feature will soon be added to the Kite app as well.

Zerodha Kite Web was launched in November 2015, and the 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

The 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 - Business 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 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 gotten 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 for the same in February 2021. This will help Zerodha 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.

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Zerodha - Revenue Model

The revenue model of Zerodha can be summed up as follows:

Commission and Fixed Fee Structure: Unlike full-service brokers, who normally charge a percentage of the deal value, Zerodha charges a fixed fee for intraday and futures and options (F&O) trades. Zerodha charges a maximum brokerage of INR 20 for every transaction, regardless of the value of the transaction.

Volume-based Revenue: Drawing a lot of transactions to its platform is Zerodha's main goal. By providing high-quality goods at a competitive price, their goal is to make money from the sheer number of trades. Despite charging a set fee for each transaction, the daily total money generated by millions of transactions can be rather large.

Startup Incubation: Rainmatter, a subsidiary of Zerodha, acts as a startup incubator for companies in the banking sector. Profitable businesses like CRED, LearnApp, Smallcase, Streak, Tradelab, and CRED all provide revenue to Zerodha in different ways, like equity investments, revenue-sharing contracts, or acquisitions.

Mutual funds and True Beacon: To broaden its portfolio of products, Zerodha introduced True Beacon, an alternative investment fund that targets high-net-worth individuals (HNIs) with a $million minimum investment. Zerodha aims to enter the mutual fund industry and has applied for a mutual fund AMC license as a result of True Beacon's success.

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 - Challenges Faced

Zerodha, while a prominent player in India's brokerage landscape, confronts notable challenges, notably technical glitches during periods of heavy trading, and diminishing customer satisfaction. Its customer service system also lags below that of other top brokers.

In contrast to its rivals, Zerodha does not provide important informative resources like news alerts and daily reports, which reduces investor attraction. But Nithin Kamath, the company's founder, is aggressively resolving these problems. The goal of features such as the nudge feature is to provide traders with well-informed tools for making decisions.

One such tool is the killswitch, which is used to stop losses from occurring continuously. Challenges remain despite efforts; Kamath predicts a possible market correction and an ensuing slowdown in growth in the upcoming months. To preserve its reputation in the brokerage sector, Zerodha is still dedicated to improving the customer experience and overcoming these challenges.

Zerodha - Investments

Zerodha has invested in five companies to date.

Below are the details of the Zerodha investment:

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

Zerodha - Growth

Zerodha Growth Highlights are:

• It has 75+ branches and partner offices as of March 2024
• Over 1+ crore clients place millions of orders every day as of March 2024
• It is trusted by over 1.3 crore customers in the Google Play Store as of March 2024
• It has 6.4 million active customers as of October 2023

Zerodha Financials

Zerodha has announced revenues higher than INR 8,370 crore and profits of INR 4,700 crore for FY24, as shared in a blog post by co-founder and CEO, Nithin Kamath. This marks a 22% increase in revenue and a 62% rise in post-tax profit compared to the INR 6,875 crore in operational revenue and INR 2,907 crore in profit reported for FY23. The company has yet to file its audited annual report.

In FY23, Zerodha reported a 38.5% increase in revenue, reaching INR 6,875 crore. Profits also grew by 39%, totaling INR 2,907 crore for the year.

Zerodha - Awards

Zerodha won several awards; some of the prominent ones are:

• 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 the 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 the Entrepreneur of the Year Award at the Economic Times Awards in 2023.

Zerodha - Competitors

Zerodha faces some cutthroat 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 among traders, such as HDFC Securities, Kotak Securities, Motilal Oswal, etc.

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Zerodha - Future Plans

A news report from March 12, 2024, states that Zerodha Fund House, a joint venture between Zerodha and Smallcase that was founded in 2023 with the goal of launching a mutual fund or asset management organization, is aggressively looking for outside funding.

The company is in early talks with several investors to raise up to $100 million for its AMC business. This action reflects the company's goals to become more widely recognized in the asset management industry by utilizing the combined resources of Zerodha and Smallcase.

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.

When was Zerodha founded?

Zerodha was launched in 2010.

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 generates revenue through its commission and fixed fee structure. Its Rainmatter-led business incubation program also generates revenue through revenue-sharing agreements and equity holdings.

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.

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.