Discount broker Zerodha has had tremendous growth during the last year with the corona lockdowns acting as catalysts for its growth as new retail investors flocked to the share market.
As per National Stock Exchange data, Zerodha had an active client base of more than 3.14 million as of January 31, 2021, and it stood as the biggest share brokerage firm in India. It sports nearly double the scale as compared to its nearest competitor Upstox which had 1.8 million active clients.
The share brokerage operated under a partnership firm up until the end of fiscal 18-19 after which Zerodha Broking Limited was incorporated in March 2019. The Bengaluru based company has managed to grow its earnings by over 15% to Rs 1,093.64 crore during the fiscal ended in March 2020 from Rs 950 crore earned in FY19.
The company earned an operating revenue of Rs 1,034.8 crore and another Rs 58.86 crore non-operating income via financial instruments. It’s worth noting that operating revenue also includes the charges collected by the brokerage firm on behalf of the stock exchange. A company representative has confirmed this to Fintrackr.
While achieving healthy growth in operations, Zerodha has also maintained a sizable EBITDA margin of 55.37%. And, it’s way ahead of the second top player in the space. Zerodha’s closest competitor in terms of user base Upstox posted annual earnings of Rs 148 crore for FY20.
Floated by RKSV Securities, Upstox had an operating margin of -23.45%. During the same period.
Zerodha has booked around 13.8% of its earnings as tax expenditure and recorded a post-tax profit of Rs 442.4 crore for the financial year 2019-20.
Kamath brothers-led firm shelled out Rs 154.3 crore for employee benefits during FY20 which included ESOP based payments of Rs 56.74 core. During FY20, the stockbroker firm had constituted a stock option pool worth Rs 200 crore for its 850 employees in September 2019.
Following this development, Zerodha announced a buyback scheme of stock options worth Rs 65 crore from around 700 of its employees at the peak of pandemic lockdown in June 2020. The buyback was set at Rs 700 per share and valued the company at around Rs 7,000 crore
Around 67% of the total expenditure incurred by the company were spent on technology and exchange transaction charges. These costs amounted to nearly Rs 334 crore in FY20.
Finance costs of Rs 9.74 accounted for a little less than 2% of the total expenditure incurred by Zerodha, which stood at Rs 500.66 crore in FY20.
Wealth management platforms have witnessed a surge in numbers in the post-Covid-19 period after a bull rally in world equity markets. Led by Zerodha, the Indian stock market investing is being popularised among millennials by platforms including Upstox, Paytm Money, ETMONEY and Groww.
The financial performance of Zerodha has been stellar in FY20 and it’s one of the rare companies to surpass Rs 1,000 crore in revenue with nearly Rs 450 crore profit without any external funding. Kamath brothers have shown the way: how to build and scale a business without venture capital money. The duo and their company are poster boys for the bootstrapping world and their work is exemplary for those who believe in building long term and sustainable ventures.
