Startups typically look for financial backing beyond a point, get incubated and mentored and become an eventual success. So, in an age of pitch decks and angel investors, networking sessions and venture capitalists, it is unusual for a startup to take a solo trip towards success. But that is how Zerodha has climbed the ladder of success so far.
The popular discount broking firm was founded by the Kamath brothers in 2010. CEO and founder Nithin Kamath has a Bachelor’s degree in computer science. He was introduced to the stock market at the early age of 17. Having started so early in life, Nithin had first-hand experience of two major economic downturns, 2001-02 and 2008-09. Enriched with over 10 years of experience in stock trading, Nithin decided to start a brokerage firm of his own. Joining him in this venture as a co-founder was his brother Nikhil.
Nikhil Kamath is the CFO of Zerodha and takes care of the company’s financial planning. Not someone who held formal education in high esteem, Nikhil started a used cell phone trading business at the tender age of 14. Like his brother, Nikhil has always been an avid stock market trader too.
With Zerodha, the Kamath brothers sought to introduce a new concept in stock broking in India. Zerodha became the stock broker of what Air Deccan had become to Indian aviation two decades ago. Zerodha introduced discount broking in India.
Being a low-cost service provider, customers had doubts about the quality of service that they would be offering. This is one of the reasons why it took a long time for the company to gain a market presence. In its first year, Zerodha got 3,000 account registrations. Another reason for the slow initial growth was their conscious decision not to invest in marketing. Even today, Zerodha doesn’t spend money to market itself.
Since its early days, Zerodha has tried to build a community of investors. The Trading Q&A and Zerodha Varsity are examples of efforts made in this regard. Along with this, the company invested in developing a user-friendly platform that was to make the platform understandable and accessible to common investors.
Through all of their efforts, their low-cost brokerage solution remained the USP of the brand. Large investors typically choose a full-service brokerage firm because their investment needs are different. They need services like investment advisory and alternate investment opportunities. However, transactional cost-efficiency and simplicity are what attract new stock investors. These investors have adopted Zerodha in a big way.
Did you know – Zerodha stands for Zero and Rodha. Rodha is Sanskrit for obstacles. Zerodha was envisaged as an obstacle-free investment experience for Indian retail investors.
As mentioned earlier, Zerodha was founded in 2010. In 2013, the technology-driven platform was ready. It enabled investors to buy and sell stocks in a user-friendly manner. Zerodha Varsity was launched in 2014, which promoted awareness and education among people on all matters related to trading and investing in the capital markets. In September 2015, its online trading platform Kite was introduced. Earlier, in February of that year, Zerodha founders launched the Rainmatter Foundation as a fintech fund and incubator. Kite saw an active customer base of 1 lakh by September 2016. Six months later, they launched Coin. Coin is Zerodha’s online platform for mutual fund investments. In January 2019, Zerodha became India’s largest stockbroker, and they achieved a clientele of 10 lakh clients in June of that year.
In April, it executed the highest number of trades in a single day – 70 lakhs! In August 2020, Zerodha won the Economic Times Startup of the Year Award.
Presently, Zerodha has a customer base of around 1.2 crores. It was valued at $2 billion in 2022, which is more than Rs 16,400 crores. To this day, Zerodha remains a fully bootstrapped startup with no external cash injection. A look at the last three financial years reveals how much Zerodha has grown.
Its operating revenue in FY20 was Rs 938 crores. In FY21, it increased to Rs 2,729 crores and Rs 4,964 crores in FY22. Its profit during this period increased from Rs 424 crores to Rs 1,124 crores in FY21 and Rs 2,094 crores in FY22. Its total expense as a percentage of revenue has decreased from 55% in FY20 to 46% in FY21 and 43% in FY22.
From the Zerodha journey, we can observe a few key reasons behind their success. Firstly, they were able to engineer a product that was a breakthrough in the segment. Discount broking was a new concept that resonated with common investors. Secondly, their success was driven by customer loyalty and tolerance. Existing customers developed this loyalty which then turned into word-of-mouth publicity for the company. The company didn’t have to rely on marketing campaigns for their success. Lastly, the solution offered by the company turned out to be irreversible for the customers. Their clientele is unlikely to go back to a more expensive option as they are getting their basic investment needs fulfilled at an unmatched price.
Based on these strengths, the Zerodha bandwagon continues to roll.