In comparison, Zerodha reported overall revenues of Rs 2,729 crore in FY21, with profits increasing dramatically to Rs 1,122 crore in the same fiscal. According to the company’s public filings, Zerodha’s overall revenues in FY20 were Rs 938.5 crore, with profits of Rs 424 crore.

Bengaluru: Zerodha, one of the country’s largest online brokerages, has announced a nearly 60% year-on-year increase in profits and revenues for 2021-22, which are expected to be around Rs 1,800 crore and Rs 4,300 crore, respectively, according to its founder and CEO Nithin Kamath.

“Last fiscal year, we saw a large number of new users, market volatility, and a large number of initial public offerings (IPOs)…“As a result, we were able to record higher daily average users,” Kamath told ET in an exclusive interview.

“The last two years have been an outlier for trading firms.” Trading volumes have peaked, but this is a highly cyclical industry,” he added.

According to the company’s public filings, Zerodha reported overall revenues of Rs 2,729 crore in FY21, up from Rs 938.5 crore the previous year, while profit increased 164 percent to Rs 1,122 crore from Rs 424 crore in FY20.

The Ministry of Corporate Affairs has yet to receive Zerodha’s financials for FY22 (MCA).

According to National Stock Exchange (NSE) data, Zerodha had approximately 6.2 million active clients as of March 31, 2022. According to the company, it receives between 10 and 12 million orders per day.

However, Kamath stated that the company is bracing for a downturn as a result of the slowdown in public markets. “We may see a slowing of growth in the next 3-6 months.” Apart from the LIC IPO, I don’t see any companies going public in the next 3-6 months,” he said.

A new order system is being developed.

In order to reduce its reliance on legacy systems, Zerodha said it is currently working on developing an in-house order management system (OMS), which will be rolled out at the beginning of next year. Zerodha currently uses third-party order management systems (OMS) like Refinitive, with the goal of gaining more control over the overall customer experience.

“We are currently working on replacing that (OMS tie-up) so that we can have complete control over our product because front-end innovations make no sense if we don’t own the OMS,” Kamath explained.

In February 2019, Zerodha faced public investor wrath after its OMS froze during trading hours. For order management, the company’s trading platform used Thomson Reuters’ Omnesys, an exchange-approved OMS vendor.

“We’ve come a long way, and we don’t want to be remembered as a company that had a hiccup once,” Kamath explained.

He also stated that the platform will focus more on its ‘nudge’ feature, which assists traders on the platform in making more informed investment decisions. Last year, Zerodha launched a ‘kill switch’ feature as part of the ‘nudge’ feature to instantly disable trading for investors who are consistently losing money.

“We can’t control what a customer does with their money, but we can influence, push, or nudge them in the right direction, and we send these nudges based on data from the BSE (Bombay Stock Exchange) and Sebi (Securities and Exchange Board of India),” Kamath explained.

Play with a license

Sebi granted Zerodha in-principle approval to establish an asset management company (AMC) in 2021, and the company is now awaiting final approval from the markets regulator. Kamath anticipates that approval will be granted this year.

“I believe there are more AMCs nowadays, and there is very little room for a new name… “Our (Zerodha) product, on the other hand, will be to simplify mutual fund investing, and this will be passive products aimed at long-term investing,” he explained.

Zerodha, according to Kamath, is remaining cautious about opening trading for US stocks. “We don’t want to build another platform to trade US stocks,” he explained. “However, today’s regulations are extremely stringent in this regard… Now, if we provide this service and our platform fails, there is a risk and a grey area.”

The company is also in the lending business, providing loans to individuals and businesses at a rate of 10.5 percent.

“Traditional NBFCs used to charge processing fees or late payment fees to entice people to borrow more, but this has a negative impact… “As a result, we decided not to charge any late fees,” Kamath explained.

However, he stated that it is becoming increasingly difficult to profit from the lending business and that the company is working to improve unit economics.

Zerodha competes with other online brokerages such as Groww and Upstox, which is backed by Ratan Tata.

Groww raised $251 million in a funding round led by Iconiq Capital in October of last year. Now, the online brokerage firm is in active talks to raise another $150-200 million in a new round, raising its valuation to $5 billion.

Upstox was in talks with Tiger Global in November 2021 to raise $25 million and join the unicorn club, with an estimated valuation of $3 billion.