From Zero to Zerodha: The Story of India’s Top Stock Broker

Gone are the days when retail investors had to pay heavy brokerage fees for transactions, as discount brokers seem to have taken over. Most discount brokers charge zero brokerage rates on delivery transactions and a minimum flat charge on intra-day trades. This has made the stock market much more accessible to the general public and as a result, stock market participation has increased phenomenally.

Nithin Kamath, the CEO of Zerodha, started trading at the age of 17 and went on to start the biggest stock broking company in the country. Zerodha played an integral role in the rise of discount brokers in the country and became a pioneer in the Indian trading industry.
It is currently the number one discount broker in terms of active retail clients. On August 15th, 2022, Zerodha completed 12 years. The platform had just 18,000 users as of 2014, but this figure has risen to over 6 million today. Let’s look at how Zerodha took over the market and left behind broking giants like ICICI and Kotak.

🌱 The Genesis
During the 2000s, people were reluctant to enter stock markets because of high commissions and brokerage charges. After the 2008–2010 market crash, many significant stockbrokers went out of business and existing ones could not provide the latest technologies or convenient trading facilities.
During this time, Nithin Kamath and his brother Nikhil Kamath decided to offer a user-friendly trading interface at a discounted price and Zerodha was born. Their goal was to make a simple platform that almost anyone could use. As Zerodha charged a marginally lower fee compared to other brokers, it started to gain popularity.

🏆 Capturing The Market
Zerodha never spent chunks of money on advertising. Instead, its vision of low brokerage charges and a convenient platform gave way to popularity through word of mouth. Currently, they charge no brokerage on delivery trades and a flat ₹20 fee on each intraday and F&O transaction. The company’s revenue is based on a low-margin, high-volume model.
In FY22, the firm’s revenue jumped by 60% to ₹4,300 crores. The platform has more than 6.5 million users, making it the top stock broker in India.

🔮 What the Future Holds
Nithin Kamath feels that being a stock broker is like running on a treadmill because the growth chart of brokerage firms is never a straight upward curve. It keeps fluctuating based on market performance. It is also observed that the number of new users closely follows the Nifty chart. When the market is bullish, many new people enter and during a bear market, people naturally hesitate to invest.
In June, the number of new Demat accounts in India fell to a 17-month low. This is not a bad sign, but something that happens due to the nature of the industry. 10% of Zerodha’s clients generate 90% of its revenue and this crowd remains active. Fluctuations come as a part of stock trading anyway, doesn’t it?