Zerodha CEO Warns of Significant Revenue Decline Later This Year

The Co-founder and CEO of online brokerage firm Zerodha, Nithin Kamath said on Tuesday that the company was experiencing revenue and profit plateauing and was getting ready for a massive revenue hit later this year.
According to a blog post, Kamath said SEBI's true-to-label circular will go live on October 1, 2024 and "we expect a 10 per cent revenue dip."

SEBI recently issued a consultation paper on index derivatives that was open to comments from the public.

"We expect this paper to materialise into regulation sometime in the next quarter. Index derivatives today are a significant portion of our revenue, and any change will impact us. We anticipate a 30 per cent to 50 per cent drop in revenue," said Zerodha CEO.

The Securities Transaction Tax (STT) also increases from October 1.

Though the impact on options trading is minimal, "we would expect a significant effect on futures trading."

"The amount of Annual Maintenance Charges (AMC) we collect varies with the new Basic Services Demat Account thresholds set by the regulator. Effectively, we can charge full AMC from customers with demat holding of Rs 10 lakhs and more-a difference that is going to provide for an enhanced operating scale-because we would not be compelled to offer fee waiver to that customer like a 4 lakh holder. Plus, account opening fee is being waived off. This would meaningfully reduce revenue, said Kamath.

Zerodha's total current assets under custody — the total assets held in its demat accounts — stands at Rs 5.66 lakh crore.
"The exciting bit about this number is that our customers as a whole are sitting on an unrealised profit of more than Rs one lakh crore," the CEO said.
When asked about his company's IPO, he said, "An IPO is not the end; it's a new beginning.".

Kamath said, "when retail investors enter the cap table, the company should be able to predict revenue to some extent. In the last 14 years, I have not once been correct in predicting revenue growth and dips. Our business, while it looks good based on financials, can change in a heartbeat due to a change in regulation or markets taking a turn for the worse."