Zerodha, which pioneered the discount broking model in India, has seen impressive growth. In FY24, the company’s profits surged by 62% to Rs 4,700 crore, and revenues grew 21% to Rs 8,320 crore.
Zerodha’s co-founders, Nithin and Nikhil Kamath, are pushing for big changes at their company, with one major goal in mind—turning Zerodha into a bank. Despite their success in revolutionizing the stockbroking industry, the Kamaths have been unable to secure a banking license after years of trying. “We really want to be a bank, but despite all our efforts, we haven’t been allowed to,” Nikhil Kamath shared recently.
Zerodha, which pioneered the discount broking model in India, has seen impressive growth. In FY24, the company’s profits surged by 62% to Rs 4,700 crore, and revenues grew 21% to Rs 8,320 crore. Holding 17% of the stockbroking market, Zerodha is second only to Groww, which leads with 25.1%. However, the Kamath brothers are not resting on their laurels.
“We’re not in a place where we can sit back and say, ‘What do we do with all this money?’” Nikhil said in an interview with CNBC-TV18’s Shereen Bhan. The ambition to expand into banking, he explained, is crucial to their growth plans. “We’ve been trying for a long time to get a banking license, but we feel stuck,” he added, expressing the frustration of hitting regulatory roadblocks.
The journey for Zerodha has felt like a “David versus Goliath” story, as Nikhil described it. Despite their rapid growth, the company still faces immense competition from bigger financial players with more access and resources. “We’re a small team in Bengaluru, trying to compete with giants who have a lot more access than we do,” he noted.
One of the significant challenges they face is navigating an ever-changing regulatory landscape. Nithin Kamath, Zerodha’s CEO, recently highlighted how new regulations imposed by the Securities and Exchange Board of India (SEBI) could impact the company. SEBI’s upcoming rules are set to target F&O (Futures and Options) trades, which make up a large portion of Zerodha’s business. Nithin warned that these changes could affect up to 60% of their F&O trades and about 30% of overall orders once the rules come into effect in November.
What concerns the Kamath brothers most is the unpredictability of regulatory decisions. Nikhil underscored the precarious nature of their business, saying, “We are subject to regulators who we don’t really have any influence with or access to their decisions, who can reduce our revenues by 50% in one day. They can make us shut down.”
To counter these risks, Zerodha has begun diversifying into other areas, such as public market investments, loans against securities, and a joint venture in the insurance sector. But the banking license remains a priority. Nikhil believes that Zerodha can bring something new to the table. “If companies like Zerodha are willing to be transparent and do what banks do, but in a cleaner way, why shouldn’t there be more banks like us?” he asked.
Looking ahead, the Kamath brothers want Zerodha to evolve into a full-fledged financial institution. “We want Zerodha to be more than just broking,” Nikhil explained. “We want to offer everything in finance—whether it’s banking, borrowing, or insurance—with a community-driven approach, unlike traditional corporations.”
