Zerodha, India’s leading discount brokerage company, has recorded remarkable growth in FY 2024. The company’s profit grew by 62% to Rs 4,700 crore,
Zerodha:-Zerodha, which pioneered the discount broking model in India, no longer wants to be limited to just stockbroking. Its co-founders Nithin and Nikhil Kamath dream of their company growing into a full-fledged financial institution. They have an ambitious plan to turn Zerodha into a bank, but have not been successful in getting a banking license so far. This goal is not just a strategic expansion for them, but is in line with the transparent and innovative approach they have built, which they want to apply to banking as well.
In a recent interview with CNBC-TV18’s Shereen Bhan, Nikhil Kamath said that Zerodha still has the potential to succeed in complex areas like banking. He said, “We really want to become a bank, but we have not got the permission.” This comment highlights that the Kamath brothers want to innovate by going beyond the traditional framework of the financial system. Their vision is to provide a financial service that works like traditional banks, but with a more transparent and community-oriented approach.
Although Zerodha is a strong player in stockbroking with a 17% stake, Nikhil and Nitin are not satisfied with this status quo. They want to make Zerodha a more comprehensive financial service provider, including services such as banking, insurance, and lending. “We are not in a position to sit down and say, ‘What are we going to do with all this money?'” Nikhil said in the interview, indicating that their thinking is not limited to just current profits, but they want to create a long-lasting institutional structure.
However, their plan to obtain a banking license is stuck in regulatory hurdles. The new rules of the Securities and Exchange Board of India (SEBI), especially those applicable to futures and options (F&O) trading, could impact Zerodha’s business. Nithin Kamath warned that these regulations, which come into effect in November, could negatively impact 60% of their F&O trades and about 30% of total orders. The uncertainty of changes in regulations has worried the Kamath brothers, as the challenge for them is not only to sustain the business but also to grow it.
To deal with these challenges, Zerodha has tried to diversify its business. They have moved towards investments in public markets, loans against securities and a joint venture in the insurance sector. Still, their primary goal is to get a banking license. Nikhil believes that Zerodha can bring a new wave in the banking sector with transparency, a cleaner and user-centric approach than traditional banks.
The Kamath brothers believe that Zerodha’s journey is like a story of “David vs Goliath”. Their small team based in Bengaluru is facing bigger and more influential competitors. Yet, he dreams of Zerodha becoming not just a brokerage but a financial institution that offers services ranging from banking to lending and insurance. Nikhil explains, “We want Zerodha to provide everything in the financial sector – banking, lending, insurance – with a community-driven approach.”
Zerodha’s journey is not just about business success but about giving a new direction to the Indian financial sector.