Zerodha Case Study

Hi guys, if you are a little bit familiar with the equity market then I am sure you have listened to the name of Zerodha. It is India’s largest broking house. An online website that offers brokerage-free equity investments, retail, institutional broking, and commodities trading.

Zerodha has stock trading information and capabilities. Before we start let me tell you today we will talk about Zerodha Case Study. About their business model and founder.

Before 2010 these financial market were not developed and was not having tech up to date. The main concern of that time was that the people were not literate that much. People were having the negative reputation of the stock market in their minds.

Nowadays this industry is growing at a very rapid pace but all this revolution was taking place due to the introduction of discount brokers in the industry.

Zerodha Case Study

Zerodha is a Bengaluru, Karnataka based broker. It was founded by Nitin Kamath on 15 Aug 2010. It is India’s first discount broker that brings a revolution in the broking house industry. Zerodha is the largest and one of the best broker for stocks in India.

Zerodha is a growing and leading market with its technology and latest features. They believe in customer satisfaction priority first.

Zerodha Case Study- Business Model, Founder

They are now on unicorn valuation. Around 1300 employees working in their office. Zerodha alone now contributes over 15% of the total retail trading volumes in India.

Zerodha is constituted of two words Zero + Rodha which in Sanskrit means barrier. Their main motive was to remove the entry barrier in the stock market. Zerodha promoted financial literacy in the Indian stock market.

Zerodha has a predominantly kite platform for mainly desktop clients and mobile too. They provide Pi downloadable platform for advance algo and analysis. All these are things that helped them to stand out from the competition.

Around 2010 all brokers were charging brokerage based on turnover charges. For eg., if you buy or sell a lot of options then you may end up being charged around 100 rupees per lot. But after Zerodha coming into this industry, they disrupted it by providing 20 flat charges per order.

This thing works very well in market people got attracted towards the fewer brokerage plans. After that discount brokers come on the boom and then the industry changed a lot.

The thing that today even Zerodha is ahead in competition is their technology ahead platforms and 10-year trust of clients. They are always careful with their clients.

Today as of the date they are having the largest client base of 5 Million customers.

Their main motive was not to go for HNI but they were targeting students, housewife, and small investors. They started providing brokerage calculator as well as margin calculator. That made everything transparent to their clients.

Nitin figures out very early that India is not investing in the stock market just because of these full-service broker’s high brokerage plans. So he decided to fill the gap.

Zerodha started their journey with NSE NOW software which is free for brokers as well as clients. But in the case of charts and indicators, they also have to pay.

After some time they started launching some blogging blogs like Z-connect, Zerodha varsity, and Tradingqna.

They launched some cool features like a 60-day challenge in which if you are profitable for 60 days then your brokerage will be refunded to you. But later in 2018, they discontinued brokerage refund.

Today they are providing around 1000+ regional customer care executives. They are also having 23 major cities branches.

Zerodha Founders

As we almost all heard about Zerodha founder. It was founded by Nitin Kamath with his younger brother Nikhil Kamath. He was born on 5 October 1979 in Shimoga, Karnataka.

At the age of around 31, he launched Zerodha. He was graduated in 2001 and after that, he worked in Reliance money on the post of money manager.

Zerodha Case Study- Founders

Nithin was also doing part-time trading at that time. He has been trading since the age of 17. After that college, he used to spend more time on trading, and after that like all trader’s journey, he even went bust once, during the 2001 downtrend.

In the crunch of funds, he also worked call center to earn some funds. As he was a good trader he manages to convince with his returns a person to manage his fund.

After that, he became a sub-broker at Reliance Money. He was much successful trader at Reliance Money. Sometimes even he was used to generating more turnover than 1000 all odd traders.

All were going good but there was something that Rmoney was missing so which lead him to go for the Zerodha foundation. In one of his interview, he said

“The biggest challenge for us is credibility because we charge so less, people assume that there is a catch or the service is bad,” says Nithin.

Zerodha Business Model

Like all other discount brokers, Zerodha also plays on a low brokerage high turnover model. They charge very nominally as a brokerage for trader’s transactions. It leads to high transaction turnover.

As fee collection of many smaller amounts from a larger number of clients leads to the generation of good revenue for Zerodha.

Zerodha Case Study- Business Model

One more thing that aiding high-profit margins for the company is their operational costs.  They operate quite low for Zerodha as compared to some of the top full-service brokers.

Zerodha works on the online structure which allows them to maintain low operational costs.

Zerodha – Revenue and Profit

Zerodha broking business reported revenue of INR 1093 Crore in FY2020. They had a profit of INR 592 Cr in FY2020, as per the financials for Zerodha Broking Limited.

Zerodha has got a total client base of more than 5 million today as of February 2021. Recently they also become a unicorn startup. They always bootstrapped their business. Never raised funding bu equity sale.

Zerodha – Growth

They dethroned the market leader of that time ICICI Securities within some time which was having nearly 8.47 lakh, active clients.

They generate around 2-3 million trades every day. Zerodha is the largest retail brokerage firm across the world.

They are adding 50,000 to 75,000 accounts every month and growing very speedily.

For further growth, Zerodha founder himself quoted –

India is very dependent on foreign capital to drive the country. For any country to do well, you need residents to put their money in the market. The money shouldn’t just stay in fixed deposits and real estate. I want to encourage people to educate themselves and put the money in the ecosystem in some way or the other to drive growth,”

Zerodha Competition

The main competition of Zerodha is with Upstox, IIFL, Finvasia, Angel Broking, SAS Online, Beeline Broking, Greetika Broking, TradingBells, Sharekhan, Edelweiss, and Karvy Stock Broking.

Let’s compare it to basic competition. The thing that makes it different from others.

  • Upstox- They are with almost the same services and almost the same brokerage structure.
  • 5pasia- They are also with the same services but pricing is different as they are offering zero brokerage trading. 5paisa provide better services and brokerage is also lower (Rs.10 per order flat)
  • Flyers- In this case services and pricing structure as the same as Zerodha. But they provide free API.
  • Angel Broking- They also provide the same services but the margin offered is way higher.

The broking field is very competitive in India. It is not easy to stand out in throat cutting edge competition.

Conclusion

As we today studied about India’s top stock broker Zerodha Case Study- Business Model, Founders, Competition the most fascinating thing we learned about the journey of Zerodha founder Nitin Kamath. How he disrupted and changed the broking community completely.

They are growing very rapidly but the thing with Zerodha founders we can learn is they bootstrapped them and took it to the unicorn.

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