16 years of Zerodha: Fresh enthusiasm

Hey all, 

We turned 16 on August 15th. It’s for sure been a long journey, but when I look at this picture of our first office from when we started on Aug 16th, 2010, it just feels like yesterday. 🙂

As usual, I thought this would be a good time to share a quick update on how things are going, what we’re thinking about, and what’s happening at Zerodha. If you’re interested in reading last year’s update, here’s the link.

Markets are not playing along

For the first time in a long time, we didn’t have to deal with a barrage of regulatory changes, and that’s a welcome change. So there was little impact on the business from SEBI or the exchanges. There have been some teething issues with the implementation of CAS, but that was, I guess, expected.

That said, the downside is that the bull market has clearly hit a pause, and as a result, the pace of new user growth and overall activity has slowed down significantly. However, there is a definite bull market happening in the IPO space, with issues daily. India is probably the IPO capital of the world right now.

Source: EY

Like I always say, with broking, we have to keep running just to stand still. The inherent benefit of compounding in finance doesn’t really work in our case. Yes, the AMC we charge increases with more clients, but it only adds ~2% to our revenue. The rest is as good as starting with a clean slate every time, especially since we’re required to do monthly/quarterly settlements of funds (sending unused funds back to the bank account). So yeah, there’s no guarantee clients will trade with you the next day. 🙂

With the start of the MTF (margin funding) business in Dec 2024, there’s been some predictability in revenue, since we earn interest income on it. MTF currently makes up ~10% of our revenue. But if you ask me whether MTF is a good product for customers, I’d say it isn’t for most of them. The only thing we can really do is educate customers on the risk and not push it constantly or nudge them into borrowing money to invest.

Nifty500 has gone nowhere in the last two years, while international markets like the US, Japan, Europe, South Korea, and Taiwan have been on a roll. These two years have seen the biggest bull market in AI-related stocks ever, and Indian public markets haven’t really had an AI play. We don’t have frontier labs, big semiconductor plays, memory manufacturers, data centres, or anything of that sort. So Indian markets have been stuck in a sideways phase.

As if that wasn’t bad enough for India, the energy crisis triggered by the war in the Middle East has made things worse. The rupee has been under pressure, and since we import pretty much all our crude, gas, and gold, we’ve been hit badly. FIIs pulling money out have made things worse still for the rupee.

Nifty vs S&P (USA) vs Nikkei (Japan) vs Kospi (South Korea)

And yeah, this isn’t indexed to the dollar. The returns will look much worse in dollar terms.

Fresh enthusiasm

All that said, I can tell you that there is a lot of enthusiasm among our teams internally. 🙂 This isn’t just because of AI, but it helps. Our team is able to iterate and build things much faster without compromising on the quality of the things that we build.

Apart from all the cool products and features our tech team has been building, they’ve also been releasing a lot of the things they build under open-source licenses for others to use and reuse freely. Tools like Whatomate, Logchef, Exampro, and Libredesk are a few recent examples. All these tools we first built for our own internal use, and we then decided to open source.

Similarly, on the content side, everything we are producing is top-notch. Be it Varsity, Varsity Live, Tribe, In Her Interest, our offline events, Zerodha Markets, or Zero1. We get a ton of love for all the effort we put in to ensure the highest quality standards.

With all the high-quality content we are publishing, we are a modern-day financial media platform. Whether it’s learning about a concept or understanding what’s happening in the markets right now, we are creating content for all types of people. The reason our content initiatives are well received and well regarded is that we continue to share things without an agenda, unlike many others.

I get asked often: Why does Zerodha take so long to launch features or product updates? Doesn’t it have to be faster?

I think this has got to do with the size of the business. Unfortunately, we can’t be as nimble as we were, say, from 2017 to 2020, when we were much smaller and could be much more aggressive with product releases. At our current scale, we have to make sure that everything is thoroughly tested and that any new update doesn’t introduce breaking changes to what’s already released. At our scale, even a tiny issue can affect lakhs of customers, and that means we have to be extra careful in everything that we do. Despite all that, if you look at the number of new updates and features we’ve released in the last twelve months, it is significant.

But what has always helped us is that we are a really small team for the scale of our operations. Fewer than 100 people across tech, product, business, and operations run everything. And to top it off, in the age of AI, being small will probably be an even bigger advantage.

Business updates

The pace at which we are adding new accounts has moderated, given that the markets haven’t performed well. The dip in accounts coincides with the market’s peaking in September 2024. Some of our competitors continue to add more people, especially from North and East India.

That said, the one number I look at closely is our assets under management (AUM). The money in the trading account can come and go, but AUM typically sticks around. This AUM number is what matters to a stockbroker.

~₹1 lakh crore was the total AUM of customers we acquired from IL&FS.

In terms of total AUM, we are now the largest in India, and all of it comes from retail or HNI holdings. 🎉 Here’s an estimate of the AUM of other brokers based on publicly available data:

Market share of active customers tends to be volatile, can be gamed, and is often a distraction. 🙂 As you can see, while our share of active customers on NSE and total demat accounts has reduced, our share of retail AUM continues to grow.

Mutual funds are one area where we may have slipped up a little, but given that MF integration within Kite is around the corner, we hope that will significantly improve discoverability and the experience.

We started offering FDs this year and are already at ~₹130 crores in AUM. National Pension Scheme (NPS) is at ~₹155 crore as well. Both have grown entirely organically.

The NRI business is also showing real promise. With the recent SEBI consultation paper on simpler onboarding, I think we have a good opportunity to scale this business. Since NRIs tend to be so closely knit within their communities, word of mouth will be our biggest lever for growth there.

MTF is one area where the business growth is scaring me. Our MTF book now stands at ₹9,000 crores, and the risk here is that the Indian markets could fall sharply. Leverage always looks great when markets are doing well, and the risks become obvious only when things go wrong. So this is one area we are keeping a close eye on.

While the book size is ₹9000 crore, our clients have borrowed ~₹6000 crore, which is ~25% of our net worth. This MTF business is scary, as brokers can borrow up to 5 times their net worth. While we are okay, we might get pulled down if there were a market contagion due to this leverage.

Our net worth as of 31st March 2026, calculated using the methodology followed by the exchanges.

Financial update

Despite our revenue holding steady, it hasn’t really grown in real terms. This is because of two reasons: the rebate on transaction charges going away and the end of the bull market. The good news is that the loss of transaction fee revenues is now being offset by our MTF earnings.

By the way, the working capital requirement is quite high; I don’t know if people realise this about broking.

Given all the regulatory changes over the last few years, you need significant amounts of capital to run a large brokerage today. Outside of MTF funding: if at least 50% of a customer’s margins aren’t brought in as cash and are instead secured through pledged stocks, we have to block the additional amount with us. This happens, for example, if a customer pledges and uses instant margin, or if shares are sold but the credit hasn’t come in yet from the clearing corporation. And there are other cases like that too.

By the way, I think about this all the time. The fact that being at our scale requires something like ₹11,000 crores is in itself a moat for us.

There are also a lot of small add-on costs that other brokers pass on that we don’t. Like, if you sell shares once a day or multiple times, we charge the DP charge only once. A lot of our competition charges you every single time you sell. Or, for example, charging a brokerage fee for MTF with no cap, just questioning the whole pretext of being a discount broking firm.

The upside of having a strong balance sheet and not having the pressure to generate more profits is that we don’t have to make those kinds of decisions out of desperation for revenue. That’s always mattered to us.

Rainmatter investments

I was listening to the ITC episode of Ken’s Intermission podcast recently.

The fact that ITC started diversifying away from its main tobacco business into hotels and other businesses after almost 70 years of existence was an immense feat of foresight, especially considering ITC was never a founder-driven company.

I can’t help but see a parallel with the broking industry. 😬

F&O trading is bad for almost 99% of retail traders. It is unlikely to be banned outright, but regulation will likely keep tightening, and taxes like STT will likely keep rising.

Running a business in an industry subject to constant government and regulatory scrutiny for consumer protection reasons is not easy, to say the least. The risk is not just economic but also the fact that it can be banned almost overnight.

This is also why we have been diversifying our bets across Rainmatter investments and public investments.

And this is how we have allocated funds across our portfolio.

Within our investment portfolio, the core holdings are Zerodha Capital, Zerodha AMC, and Ditto, which has gotten to some scale.

Rainmatter Foundation

Both the Rainmatter Foundation and the for-profit arm are among the reasons I come to work every day. The investments both teams are making, and the potential impact we’re creating, are exciting, to say the least.

The people and organisations we support through the Foundation are tackling some of the toughest problems of our times, ones far bigger than what our for-profit investments alone can solve. Sadly, these stories and their impact don’t get anywhere near the visibility of a typical VC success story. We need to do a better job of changing that.

Sathya, the CEO, shared a short presentation he’d put together for the broader team. The most important point he made, and one that’s in sync with everything we’re doing through Rainmatter Foundation and Zerodha, is that all of us as humans need to think of our impact on the environment as a ledger of credits and debits. Most of us are running a debit. We need to work on balancing that out.

Other updates

We’re about to launch US investing and mutual fund transactions on Kite.

With regulatory clarity now in place, we’ve resumed the 10% referral commission for every new account you refer.

Minor and HUF accounts have also been doing really well, mentioning it here so more customers take notice of the product.

Mission & Vision

I was recently speaking with a few people internally about creating a mission statement for one of the new businesses we’re starting, a mental framework to guide decisions before anyone on the team makes any.

It suddenly hit me that I’ve never actually written down Zerodha’s mission and vision for all of you.

“Don’t do unto others what you don’t want done unto you.” — Confucius

Don’t push a product on someone if you wouldn’t want it pushed on you. Don’t get someone to trade more just because you make more money when they do. Don’t make products unnecessarily complicated. Don’t take risks with customer money that you wouldn’t be comfortable taking with your own.

It’s been 16 years, and while a lot has changed, I hope this never does.

Thank you for trusting us. ❤️