Groww Surpasses Zerodha as India’s Largest Brokerage

In a significant development in the Indian brokerage industry, Groww, a Nextbillion Technology-backed venture, has surpassed Zerodha Broking to become the country’s largest brokerage in terms of active clients. This changing of the guard was confirmed at the end of September, when Groww boasted 6.63 million active clients, approximately 2.3% more than Zerodha, thus ending the latter’s long-standing reign at the top.

Rankings and Key Players

AngelOne and RKSV Securities, operating under the Upstox brand, were positioned as the third and fourth largest brokerages, boasting 4.86 million and 2.19 million active clients, respectively. This data was provided by the National Stock Exchange (NSE), India’s premier bourse.

Changing Landscape

This shift in the brokerage landscape was prompted by several factors. A surge in initial public offerings (IPOs) and robust momentum in the secondary markets resulted in the addition of over three million demat accounts for a second consecutive month in September. This brings the total number of demat accounts to approximately 130 million, roughly 10% of India’s population. However, as of September, NSE had approximately 33.4 million active clients, representing those who executed at least one trade during a 12-month period.

Market Share Breakdown

Groww’s share of the total active NSE clientele stands at about 19.9%, with Zerodha closely behind at 19.4%. This indicates that Groww’s ascent to the top is not only due to sheer numbers but also an expanding market share.

Financial Performance

Although Zerodha has conceded its top position in terms of active clients, it remains the most profitable brokerage in the country by a considerable margin. In the fiscal year 2023, Zerodha reported a net profit of Rs 2,907 crore on revenues of Rs 6,875 crore. Zerodha’s profitability metrics, particularly its margins (profit before tax or PBT as a percentage of revenue), excluding the pass-through exchange transaction charges, are notably high at 70%.

On the other hand, Nextbillion Technology, as per news reports, witnessed remarkable growth in its top line. In FY23, it reported revenues of Rs 1,294 crore, marking a threefold increase from the previous fiscal year. This impressive performance allowed the company to turn a net profit of Rs 73 crore, a significant turnaround from its Rs 239 crore loss in FY22.

Divergent Client Acquisition Strategies

One of the standout features of the Indian brokerage industry is the diversity of client acquisition strategies. Many brokerages adopted aggressive tactics to onboard new clients during the account opening boom of 2021-22. Some spent up to Rs 2,000 per investor to attract new clients. However, this approach did not always yield the desired results, as many clients merely opened trading accounts but executed very few trades.

Zerodha, which pioneered the era of discount broking in India, has typically refrained from such aggressive strategies, preferring a more conservative approach. This approach has helped protect its bottom line. In a blog post, the company mentioned, “We continue to be the only broker in the country to charge an account opening fee… Collecting an account opening fee right at the start also, in a way, helps set this expectation with a potential customer, filtering out users who may not be serious about trading or investing with us.”

Fee Structures

The differing fee structures of Groww and Zerodha provide additional insights into their strategies. Groww does not charge fees for brokerage, trading, and demat account opening and maintenance. In contrast, Zerodha charges Rs 200 for online account opening and additional fees for value-added services. However, the charges for intra-day and futures and options (F&O) trades for both Groww and Zerodha are largely similar at Rs 20 per executed order.

In conclusion, the shift in the Indian brokerage landscape with Groww surpassing Zerodha as the largest brokerage in terms of active clients reflects the dynamic nature of the industry. Each player adopts distinct strategies to attract and retain clients, with varying fee structures and approaches to client acquisition. Nevertheless, Zerodha maintains its position as the most profitable brokerage in the country, emphasizing the importance of financial performance alongside client numbers.