Zerodha Made INR 2.3 In Revenue For Every Rupee Spent In FY23

Nithin and Nikhil Kamath-led stock broking platform Zerodha’s net profit rose 37% to INR 2,908.9 Cr in the financial year 2022-23 (FY23) from INR 2,120.3 Cr in the previous fiscal year as the business continued seeing strong growth. 

Zerodha, founded in 2010 by the Kamath brothers, is a bootstrapped discount brokerage that allows users to trade in stocks and invest in mutual funds. The Bengaluru-based invest tech startup generates revenue from brokerage sales, user onboarding collections, and the sale of its premium tech products such as Kite Connect API.

Its operating revenue grew 37% to INR 6,832.8 Cr in FY23 from INR 4,977.3 Cr in the previous year. Of this, fees and commission charges accounted for 84% at INR 5,727.2 Cr. In FY22, Zerodha earned INR 4,128.9 Cr from fees and commission charges. 

Including other income, the bootstrapped unicorn’s total income zoomed 38% to INR 6,877.1 Cr during the year under review from INR 4,993.6 Cr in the previous fiscal year. 

Where Did Zerodha Spend?

In line with the growth in its topline, Zerodha’s total expenses rose 38% to INR 2,992.7 Cr in FY23 from INR 2,165.1 Cr in the previous fiscal year. 

Fees And Commission Expenses: As a brokerage, fees and commission account for the largest chunk of expenses for Zerodha. In FY23, these expenses stood at INR 2,223.4 Cr, accounting for nearly 75% of the total expenses. This number stood at INR 1,581.1 Cr in FY22.

Employee Benefit Expenses: Zerodha’s employee costs shot up 36% to INR 623.2 Cr in FY23 from INR 459 Cr in FY22. Interestingly, the startup spent a whopping INR 235.8 Cr on ESOP expenses during the year under review as against INR 77.5 Cr in FY22.

On a unit economic basis, Zerodha earned INR 2.3 in operating revenue in FY23 for every rupee of expense.

Earlier, while disclosing some parts of the financial statements for FY23, Zerodha cofounder and CEO Nithin Kamath attributed the growing increase in futures and options trading for the growth in the startup’s topline and bottomline.

“There’s still phenomenal interest in the markets, especially in futures and options. This has been the primary reason for the increase in revenue and profitability over the last three years. We continued to see phenomenal growth even in FY 22/23. That said, the business has plateaued in terms of revenue and profitability this financial year until now,” Kamath said.

Zerodha competes against the likes of Groww and Upstox, which are helping millennials enter the stock market with a user-friendly app interface with easy one-tap creation of free demat accounts. 

Kamath claimed that Zerodha is the only broker in the country to charge an account opening fee of INR 200 and hinted that the company has no plans to change this.

Later, squashing all speculations about valuation, Kamath said that the startup has been valuing itself at INR 30,000 Cr, or about $3.6 Bn, for all buybacks.

Zerodha’s rival Groww also turned profitable in FY23. Billionbrains Garage Private Limited, the parent entity of Groww, reported a net profit of INR 448.7 Cr in FY23 as against a net loss of a whopping INR 239 Cr in the previous fiscal year. 

Meanwhile, Groww surpassed Zerodha in terms of active investors at the end of September 2023. As per the National Stock Exchange (NSE) data, Groww had 6.63 Mn active investors at the end of September 2023 as against Zerodha’s 6.48 Mn.