During the selection of the Entrepreneur of the Year award at The Economic Times Awards on January 24th, the jury quickly agreed on the winner without any confusion. Nithin Kamath, the founder of Zerodha, was unanimously chosen due to his leadership of a company that disrupted the competitive stockbroking industry with a cost-effective product and a streamlined trading platform, ultimately becoming the market leader over the past ten years.
Kamath expressed his gratitude to ET for the recognition he has received over the years, noting that the publication was the first to cover Zerodha in 2011 and awarded them the Bootstrap Startup of the Year in 2016 and Startup of the Year in 2020. He also mentioned that he had been reading ET for over 20 years, ever since he first started trading.
Before founding Zerodha in 2010 with his younger brother Nikhil Kamath, Nithin Kamath had been a stock trader for over a decade. Despite having only a brokerage license and a team of thirty people, their bootstrapped startup has since become the most popular retail investment platform in India. The name Zerodha was derived from the English word “zero” and the Sanskrit word “rodha,” meaning barriers.
Zerodha had an active user base exceeding 6.8 million and commanded nearly 18% of retail trading volumes as of March 31, 2022. Notably, while many startups have been grappling with profitability, Zerodha managed to achieve a net profit of Rs. 2,094.3 crore and total income of Rs. 4,964 crore for the fiscal year ending on March 31, 2022. Furthermore, the company has assessed its own value at $3 billion, taking into account valuations of employee stock options.
Zerodha stands out from most other startups in that it does not have private equity firms among its investors. The company is widely recognized for its success in popularizing the discount brokerage model in India, whereby trades are executed at a flat fee regardless of their size. This has opened the doors for millions of novice traders to participate on the platform. In addition to its core business, Zerodha offers mutual funds directly through its Coin platform and facilitates trading in government bonds and treasury bills. Zerodha also operates an enterprise fund called Rainmatter, which is nurturing 12 startups in the wealth management sector.
The company has obtained a license to establish an asset management company (AMC), and industry experts are closely observing to see if it can disrupt the AMC industry with its technology, innovative offerings, and low-cost products. Nithin Kamath’s success can be attributed to his insight that a large proportion of active day traders, who work with razor-thin margins, require an affordable and more efficient platform. Drawing on his experience as a stock trader, he knew what they were looking for.
Kamath financed the launch of the online brokerage firm primarily through personal savings and contributions from acquaintances, as venture capital funds were hesitant to support his idea. In 2009, he resurrected the concept of flat-fee brokerage, which had been discarded by major domestic broking firms. While Zerodha cannot claim credit for introducing the concept of discount or flat-fee brokerage in India, it can be acknowledged for popularizing it.
During his time as a sub-broker with Reliance Money, Kamath closely monitored a product of a similar nature, which was launched in 2007 but discontinued due to dwindling volumes. Presently, online brokerages such as Zerodha have gained a foothold in the industry, prompting conventional competitors like Angel Broking, ICICIdirect, Sharekhan, and Motilal Oswal to upgrade their technology and revise their business strategies.