Where Many Indian Startups Are Floundering, Zerodha Shines Through Expecting 20% Jump In FY23 Revenue But Expects Market Volatility To Continue

Zerodha, leading online discount brokerage firm in India, founded in 2010 by Nitin Kamath and his brother Nikhil Kamath; the company disrupted the traditional brokerage industry by offering low-cost and easy-to-use trading platforms, which made trading accessible to a broader audience.

While Zerodha may be one of the few startups that have achieved the unique accomplishment of not only being a startup with zero funding, it has in the current, especially when Indian startups have been witnessing a severe funding crunch which has also tilted the possibility of reporting much in terms of either revenue or profits – has maintained that it is looking at an estimated 20% jump in its revenue and profits for the FY23.

However, Nithin Kamath, the serial entrepreneur with a passion for technology and finance, has also at the same time pointed to the current trend – public markets volatility triggered by geopolitical conflicts that have subjected supply chain constraints, recessionary fears along with interest rate hikes alongside a steady global macroeconomic downturn – saying that if the present scenario was to prolong, Zerodha’s overall revenues for FY24 could be down by almost 30 – 40%.
In the current, according to the founder, the stock broking firm is already seeing a dip in new account openings by almost 50-60% from its earlier all-time highs.

What Is Expected – Zerodha
Keeping the growth trend from last year, Zerodha is anticipated to clock total revenue (including interest income) of around Rs 5,956.8 crore and a net profit of Rs 2,513.6 crore in the fiscal year 2023. However, these numbers still need to be audited.

In FY22, Zerodha saw its net profit increase 87% to Rs 2,094.3 crore from Rs 1,122.3 crore in FY21 and recorded an overall income of Rs 4,964 crore for FY22.

Zerodha also earned interest from its investments (or profits) in fixed deposits, or government securities, in the fiscal year that closed at March-end, boosting its overall revenue for FY23. This has led the firm to suffer less even as it sees a plateauing of revenue from broking services compared with the pandemic days, which saw an upped demand for stock broking services.

He also pointed to the fact that for March FY23, the firm has seen the lowest month since March FY20 when it comes to new user acquisitions; however, the overall market share of the firm has gone up, suggesting that the prevailing market conditions are very much in the red.

Furthermore, giving insight into the market conditions and a peek into Zerodha’s status at the moment, he mentions that there is an overall trending down witnessed in the last six months and that the existing volatility means that the current customer’s trading has upped a bit which may be compensating for the loss in active users for the firm.

Zerodha is also offering customers the choice of investing in fixed-income products, like government securities, in a bid to avoid the churn caused by losses from stock investments.

Under Nithin’s leadership, Zerodha has grown to become one of the largest brokerage firms in India, with over 6 million clients and a daily trading turnover of over $30 billion. Zerodha has also introduced various innovative products, such as Coin, a mutual fund investment platform, and Kite, a user-friendly trading platform that has received widespread acclaim.

FY 2023, A Tough One For The Markets
While owing to global macroeconomic trends, by large, almost all new-age tech companies have had to restrategize; however, the founder maintains Zerodha will not make “random” calls to sustain its revenue peaks and is satisfied with 50% revenues in FY24.

He further acknowledges that business will be impacted when the market does a significant drawdown in participation; however, this will not force him to make random (changes) to ensure there is no drop in revenues.

Nitin Kamath is known for his straightforward approach; therefore, the above is no surprise.

The company is also expected to launch its in-house order management system (OMS) this year, which has been in the works for some time to remove its reliance on legacy systems.
The new OMS, christened Enigma, will help it drop nudges to customers, helping them make fewer money mistakes, according to the 43-year-old founder.

The larger correction in revenues also comes at a time for Zerodha, when several fintech platforms such as PhonePe with large captive audiences are also firming plans to enter the broking business, even as retail participation in public markets dips.

He believes that the entry of large platforms is essential for overall market expansion and to create a level playing field.

He further asserts that while several newer online players have spent a lot of money competing with Zerodha, they might have the users but don’t have the AUM (asset under management). One must do what builds a credible business.

Meanwhile, Tiger Global-backed Groww, which has not been able to close its fresh round of funding at desired $5 billion valuation, saw its losses bloat up to Rs 239 crore in FY22 while clocking operating revenue of Rs 350 crore.

Currently, Zerodha has a client base of around 11.2 million users, of which approximately 6.4 million are active.

Zerodha’s AMC Plans
In 2021, Zerodha received in-principle approval from the markets regulator Securities and Exchange Board of India (Sebi), to set up an asset management company (AMC) and is now awaiting a final nod.

However, in the past, Kamath has been noticeably clear that the AMC will focus on passive products, which increasingly have been taking a pie of overall equity assets in the country.

In addition to his entrepreneurial ventures, Nitin Kamath is also known for his philanthropic work. He has been actively involved in promoting financial literacy and education in India through various initiatives.

His efforts have helped many people gain a better understanding of finance and investment, which has enabled them to make informed decisions.

In conclusion: Nithin Kamath and Zerodha have revolutionized the brokerage industry in India by offering innovative products and services. His vision to democratize finance and his commitment to customer satisfaction have made Zerodha a leader in the Indian market.

Zerodha is one of the few startups that have managed to post revenue in very tough market conditions.

Nitin Kamath’s leadership and entrepreneurial spirit continue to inspire many young entrepreneurs in India and around the world.