Zerodha hits Rs 8,370 Cr revenue with over 55% profit margin in FY24

Stock broking platform Zerodha has reported more than Rs 8,370 crore in revenue and Rs 4,700 crore in profit, according to a blog post by the company’s co-founder and CEO, Nithin Kamath.

This marks a significant increase from the Rs 6,875 crore in operational revenue and Rs 2,907 crore in profit after tax reported in FY23. According to the company, these profits do not account for approximately Rs 1,000 crore in unrealized gains, which will reflect in its financials once recognized. The firm has not yet officially filed its audited annual report.

The data disclosed by Zerodha indicates that more than half of its revenue has translated into profit.

“Given the profitability of the last three years, our net worth is almost ~40% of the customer funds that we manage. It makes us one of the safest brokers to trade with,” said Kamath in the blogpost.

Kamath also added that the firm is already encountering a plateau in revenue and profit, and it is gearing up for a substantial revenue decline later this year.

The firm has linked the expected decline in scale to upcoming regulations from the Securities and Exchange Board of India (SEBI), which will eliminate the volume-based transaction fee model for free equity delivery trades affecting all brokers, including Zerodha.

The SEBI’s true-to-label circular will go live on October 1 and Zerodha expects a 10% revenue dip due to the regulation.

“We expect this paper to materialise into regulation sometime in the next quarter. Index derivatives today are a significant portion of our revenue, and any change will impact us. We anticipate a 30% to 50% drop in revenue,” said Kamath.

Zerodha’s annual maintenance charges (AMC) will also be impacted by the new basic services demat account (BSDA) thresholds set by the regulator. Kamath explained that the company can charge the full AMC for customers with demat holdings of Rs 10 lakhs and above, up from the current threshold of Rs 4 lakhs. Along with the removal of the account opening fee, this would lead to a significant decline in revenue.

Zerodha is confident that it can handle the slow period because of its small team, careful spending, and strong finances. It has 1,200 employees, but only a small portion of them runs the core business.

Last year around this time, headlines had noted how Groww had overtaken Zerodha in terms of active users. However, there remains little doubt that Zerodha is top dog when it comes to its business model and profitability, and recent forays into passively managed mutual funds of its own should also throw up interesting numbers soon. Kamath has also made no secret of downplaying both the profitability of the business, or the long term growth available for players, perhaps with an eye on fund raising prospects of competition, considering its own call to stay private for now. However, the raging bull market has not really stopped, and soon, expect to see stories on the improvement in financials at Groww and many other brokers as well. It remains to be seen if they share Kamath’s pessimism on topline growth in the near future.

Update: The headline and story have been revised to include the exact revenue and profit numbers confirmed by the company.