Zerodha’s profits more than doubled to Rs 1,000 cr in FY21: Kamath

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India’s largest retail stockbroker Zerodha’s profit has more than doubled to Rs 1,000 crore in FY21 from the year-ago period, chief executive Nithin Kamath tweeted on Sunday. The gains are largely on the back of growing traction around online trading and stock investments among retail investors in India.

In FY20, the fintech stockbroker had reported a profit of Rs 440 crore which was backed by a robust 15% growth in revenue to Rs 1,093 crore during this period. The company had posted profits of Rs 350 crore and Rs 250 crore in FY19 and FY18, respectively.

Kamath, who founded Zerodha with brother Nikhil Kamath in 2010, said that its annual profits of Rs 1,000 crore is now comparable to those of legacy bank brokers such as ICICI Direct and HDFC Securities. Unlike these brokers, Zerodha’s business model involves charging customers a “discount brokerage” or a flat fee of Rs 20, irrespective of the investment size as opposed to a percentage commission.

The company has recently been in the news after its board approved an enabling resolution to allow promoters of the bootstrapped startup – Nithin and Nikhil Kamath, and Seema Patil –
to draw a salary of Rs 100 crore. Nithin Kamath said that the development was “misinterpreted.”

“Firstly, the reported figure isn’t the actual salary being drawn,” Kamath tweeted. “This is an enabling resolution that allows us as working promoters to draw salaries up to the number in case of liquidity requirements. Didn’t anticipate that this would get this much attention.”

“Running a business is like trading, you can be up or down very easily. It is important to take liquidity out when you are “up” to de-risk. We have always done this, ~15% of profits. This also helps us in supporting our personal investments in small businesses & social causes,” he added.

The inherently risky nature of stock trading business and changing regulatory dynamics can always potentially impact profitability, said Kamath, adding that the company is also giving an employee stock buyback option for its employees to de-risk their positions in this context.

As reported by ET, the
size of ESOP scheme will be for around Rs 200 crore, valuing the firm at $2 billion, he tweeted. This is double the valuation at which Zerodha’s ESOP programme of 2020 where it initiated a buyback of Rs 60 crore at around $1 billion.

Kamath also said that taking salaries is a “tax-inefficient” way of remuneration for promoters. However, the company will do so to ensure transparency and be tax compliant.

“Promoters don’t take out profits through salaries as it is tax-inefficient, you end up paying almost 50% in taxes. We believe that building sustainable businesses & paying taxes is a great step in contributing to society and the nation,” he said.

With over 5 million active users, Zerodha is India’s largest retail stockbroking platform, managing around 15% of all trading volume in India. The company has seen massive traction on its platform Kite in 2020, as millions of retail stock traders drawn by a volatile stock market, opened their demat accounts with Zerodha.

“In our business if markets do well, we do well too,”
Kamath had told ET on Friday. “But the market is overvalued, and we have to be prepared for when the bubble bursts. We, therefore, want to keep our business very simple and verticals such as lending does not appeal to us. There is no point overspending and we want to keep our operational cost low,” he had added.

Apart from Zerodha, Kamath brothers also run an investment fund called True Beacon which was founded in 2019. In 2021, Kamath brothers and Patil also
launched Rainmatter Foundation, a non-governmental organisation (NGO) supporting climate change action. It has committed a $100 million fund for grants and projects across India.

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