Zerodha, India’s prominent stockbroking firm, disclosed a revenue of approximately Rs. 6,875 crore for the fiscal year 2023, showcasing a substantial year-on-year growth of over 40% compared to the preceding fiscal year when the company recorded revenue of Rs. 4,964 crore.
Zerodha’s Impressive FY23 Profit and the Challenges of F&O Reliance
During FY23, the post-tax profit surged to Rs. 2,900 crore, marking a remarkable 45% increase from the previous year’s profit of approximately Rs. 2,000 crore.
The primary source of Zerodha’s revenue is futures and options (F&O) trading, with an estimated 45 lakh traders, constituting 15% of the three crore active traders on stock exchanges, engaging in F&O transactions. Nonetheless, the company’s heavy reliance on F&Os exposes it to potential risks in case of regulatory actions or market corrections.
Fortunately, Zerodha’s prudent operational practices, substantial net worth, and absence of debt serve as a protective shield against such risks, allowing the company to adapt as necessary.
Zerodha’s Referral Program at Risk – SEBI’s Finfluencer Consultation and Future Mutual Fund Ventures
Zerodha’s referral program, responsible for 10% of its new business, may face potential impacts due to the Securities and Exchange Board of India’s (SEBI) consultation paper on ‘finfluencers.’ Although CEO Nithin Kamath supports the paper, he recognizes that any regulatory adjustments could affect the company’s referral program. Kamath expressed in a blog post, “The concern lies in the possibility that regulatory changes in this domain may necessitate the discontinuation of our referral program.”
SEBI’s consultation paper, released on August 25, outlines proposed regulations aimed at addressing the involvement of unregistered ‘finfluencers’ in the financial sector. The paper aims to restrict the interaction of SEBI-registered entities with these unregistered individuals and proposes measures to disrupt their revenue model, thus diminishing adverse incentives in the ecosystem. Public input is being sought before formal regulations are put in place.
Furthermore, Zerodha has plans to introduce new mutual fund schemes in partnership with Smallcase within the coming two weeks. This collaboration with the recently registered asset management business is expected to contribute to the company’s impressive growth figures. Kamath stated, “We anticipate having our initial two funds available for investment in the next couple of weeks.”
