Zerodha CEO Nithin Kamath addresses valuation speculations, reveals growth projections
What's the story
Zerodha co-founder and CEO Nithin Kamath took to Twitter today (September 28) to clear the air about the company's valuation. Despite online chatter estimating the discount brokerage firm's worth between Rs. 1 lakh and Rs. 2 lakh crore, Kamath revealed a more realistic valuation of Rs. 30,000 crore. He also shared that Zerodha anticipates a long-term growth rate of 10-15%, thanks to its core principles, which include zero spam, no revenue and sales targets, and no tracking customer data.
Twitter Post
Take a look at Kamath's post
Every time our financials are out, there is a lot of speculation about @zerodhaonline's valuation. It might sound counterintuitive for me to say it, but most assumptions, I think, are way higher than reality.😬
— Nithin Kamath (@Nithin0dha) September 28, 2023
All of us on the core team have never thought of notional valuations…
Details
Impressive FY23 financial results
The Bengaluru-based online stock trading firm experienced a 38.5% revenue increase in the financial year 2023, reaching Rs. 6,875 crore. Profits also rose by 39%, hitting Rs. 2,907 crore in FY23. In contrast, Zerodha's revenue and profit for FY22 were Rs. 4,964 crore and Rs. 2,094 crore, respectively. However, Kamath mentioned in a blog post that the business has reached a plateau when it comes to revenue and profitability for the current financial year.
What Next?
Zerodha's revenue breakdown and trading activity
Kamath clarified that 25% of Zerodha's revenues are pass-through exchange transaction charges collected from customers and passed on to exchanges. If these charges were excluded, the company's profit margin would be around 70%. Most of Zerodha's revenue comes from futures and options (F&O) traders. Yet, Kamath pointed out that the total number of people trading F&O in India is still relatively small, with only about 45 lakh unique individuals trading at least once a year.
Insights
Steady active client base
As of August 2023, Zerodha boasts an active client base of roughly 64 lakh. Interestingly, this figure has remained consistent for the past 18 months. Kamath's recent remarks on the company's valuation and growth projections offer valuable insight into the future direction of one of India's top online stock trading platforms.