Zerodha is a company that has made trading barrier-free possible. It is India's first discount brokerage company.
In this digital world, Zerodha has established itself in the stockbroking industry. The company has grown purely on the principle of technology via giving valuable services to its customers.
Zerodha initiated its journey with a team of merely five people and now it employs more than 1,200 people. The unique idea of the Kamath brothers, along with great use of technology has taken this startup to the level we see it today.
It is India’s number 1 stockbroker, it is the most popular and largest online broker that offers services to invest in equity, currency, commodity, IPO and direct mutual funds.
But do we know about its journey throughout? Let’s explore!
Zerodha is a financial service company founded in the year 2010. It is an online discount broking company whose main objective is to give lower costs to the customers.
Also, it is a member of NSE, BSE, MCX, MCX-SX that gives brokerage services to stock market traders.
The name Zerodha comprises two terms, ‘Zero’ and ‘Rodha’. The latter term has been taken from Sanskrit, combining it with zero gives the meaning ‘barrier free’.
The company has its headquarter in Bangalore, and it has earned a great customer base as they were the first discount broker in the country when they started their operation.
There is one more thing that has made things interesting for the business and contributed to its success is that the company always comes up with innovative ideas backed with different strategies and regular efforts.
The tagline of the company is “The Free Trade Zone”.
Additionally, Zerodha runs several famous open online education and community ambitions to authorize retail traders and investors.
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Nithin Kamath and Nikhil Kamath are the two brothers who came up with this innovative startup idea. Nithin is the oldest one who is the founder and CEO of Zerodha whereas Nikhil is a brilliant trader where he manages the prop trading desk, risk management, and every trading-related thing.
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Nithin had a keen interest in trading since the age of 17. During his college days, he spent most of his time trading in the stock market. Even he worked at the call center at night and did trading in the daytime.
Therefore, due to this hard work and interest in trading, Nithin got more clients through referrals in a very short period.
It is a reality that there is no alternate route to success. Though, when Nithin established this discount broking company, chose to give technology-efficient and cost-proficient services to its clients.
He saw that there is an immense slack between the commissions charged by the other brokerage firms and the amount of cash really obtained by the clients.
Likewise, Nithin wanted to introduce a more smart platform that empowers clients to trade online comfortably. He considered offering services at a low cost.
Also, he wished to pull in more youthful clients who frequently don't go into trading because of high commission charges.
Thus, with this point, he began his firm and today it has become the greatest discount broking company.
In recent times, Nithin has words over his journey around de-risking and spoke about a sustainable, bootstrapped business approach focusing on conventional growth metrics.
How does Zerodha make money?
Zerodha does not have a straightforward revenue model. However, the company is arguably one of the most used trading networks in India. Traders across the nation use this platform for investment and trading.
The company charges ₹20 or 0.03%, whichever is lower, for each F&O and intraday equity trade. Since a large volume of transactions takes place on the platform, it generates revenue. Other than this, the company charges ₹300 annually for account maintenance.
The company has seen a rapid increase in its user base in the past few years. Nevertheless, this contributes to more than 2% of investors in the stock exchange from its platform that would eventually increase the revenue of Zerodha.
Zerodha made headlines when it earned itself a $1 billion valuation, without having ever gone out to raise money from investors. And now, the company is valued at a whopping $3 billion in the Hurun Global Unicorn List of 2020.
“I want to tell people that it is possible to be successful at business by questioning the true cost of revenue, valuations, and growth, instead of continuously chasing them,” writes Nithin Kamath
Zerodha doesn’t directly invest but it has initiated funds and incubates innovative Indian fintech startups named as ‘Rainmatter’.
To date, Rainmatter has made 11 investments of which 7 are lead investments and their most recent investment was made on Jan 28, 2021, when GrowFix raised $2M.
On 28 January 2021 Rainmatter invested $2M in GrowFix in a seed round funding.
On 24 November 2020, they invested ₹100M in ERPNext in a venture round.
On 09 September 2020, they invested ₹27M in Walnut Knowledge Solutions in a seed round.
On 18 June 2020, they invested ₹ 3.5M in GoldenPi in a seed round.
On 20 March 2020, they invested $400K in ImStrong Health & Wellness in a pre-seed round.
On 30 December 2019, they invested $300K in Quicko.com in a seed round.
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Zerodha Business Model
‘Low margin and high-volume model’ is the business model of Zerodha.
Zerodha charges a negligible amount to the dealers for transactions because of which the exchanging volume is normally high.
This expense assortment of more modest amounts from a bigger number of customers leads to a great income for Zerodha. Additionally, one more factor supporting high-profit revenues for the organization is the operational expenses.
They are very low for Zerodha when compared with top dealers due to its online design which permits it to keep up low operational expenses.
Zerodha operates on a B2B business model.
Home Page of Zerodha,
Startup Challenges and Competitors
Every company faced startup challenges and so did Zerodha.
Zerodha is an online platform, it does not have offline support branches so ineffective customer support, and lack of fast customer service is the greatest challenge that this company confronts.
There were technical difficulties on the platform because of heavy trading. Thus, that leads to decreasing customer satisfaction.
Even, it does not give stock advisory or any market-related calls that would permit its customers to decide on what to buy and sell.
As compared to other top brokers in India, the customer support mechanism of Zerodha was not that good.
Daily reports, Quarterly result analysis, news alerts, and many more were missing here which other top brokers have.
Discount broker companies like Upstox are its competitors.
The company also confronted serious competition with full-service brokers such as Kotak Securities, HDFC Securities, Motilal Oswal, and so on.
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The future goal of Zerodha is to add more new investors to the Indian stock market with the help of the platform.
They had incredible growth during the COVID- 19 lockdowns period, that time acts as the catalysts for its development as new retail investors rushed to the share market.
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During the fiscal year 2019-20, the company has managed to grow its revenue over 15% to Rs.1093.63 crores from Rs.950 crores earned in FY2018-19. And, this year on May 30, 2021, as per the Nithin Kamath's tweet, the company has made made PAT (profit after tax) to Rs.1000 crore in the FY20-21 that was Rs. 440 crore in FY19-20.
Hence, it is appreciable that the company barely spends any amount on advertising, still manages to enjoy a tremendous market reputation as noticeable from its impeccable growth.