Zerodha has no plans to go public, does not require additional capital: Nithin Kamath

The market growth of past 10-15 years has been 'fast-forwarded', and since Covid, we have seen people explore capital markets as an avenue for to deploy money, Nithin Kamath said.

Online broker Zerodha has no plans to go public, as it doesn’t need funds and wants to avoid the additional scrutiny that comes with being a listed entity, co-founder and chief executive Nithin Kamath told CNBC-Awaaz on March 26.

“We are already in a highly regulated industry, and we don’t want to subject ourselves to even more,” Kamath said in the interview.

Kamath further said that the company has been offering Zerodha employees exits through ESOP buyback programmes every year, and they do not see the equity market offering a very high multiple to their existing valuation. “Possibly, 1-2 times the valuation, not five times,” Kamath said when asked if he would consider listing if the valuation multiples offered are higher.

The brokerage has a philosophy, said Nithin Kamath, and capital market disclosure requirements will be ‘hard’ to follow in terms of quarterly targets, etc. “If regulators come and say we need to list, then we will have to,” added Kamath, but aside from that, he added there are no plans to list.

The market growth of the past 10-15 years has been ‘fast-forwarded’, and since Covid, we have seen people explore capital markets as an avenue for deploying money, Kamath said. “The last 4-5 years have seen the biggest run in terms of participation.”

F&O Activity Has Cooled Down

Since October, the activity in the options market has been significantly down, Nithin Kamath said. “One has to assume that fewer trades will mean lesser losses as well.”

In the futures segment, half of the clients are losing money, and the other half are making profits, said Kamath, but in options, both in terms of participation and market activity, the segment has cooled off. “Options are looking at a quick way of making money, and that’s not really possible in the market,” he added, explaining why so many investors lose money in teh options segment.

Kamath said that the trend of the past six months would be a very short-term view, as the activity has been lower due to the bearish sentiment, especially in the cash segment, Kamath said. “We may be able to spot the trend in the F&O segment based on recent changes over the next year”, he said.

“The retail activity is the mirror image of the market performance. As the last 4-5 years have been a bull run, the market activity too has picked up,” Kamath said. “This is the first time we have seen a ‘bear market of sorts,’ he added, when asked what the emerging trend could be over the next year.

“Now that we have had a bounce back, if this continues, then definitely the activity will be back,” said Nithin Kamath.

Post-Pandemic Bull Run

The recent bull run after the pandemic has also seen a more diverse customer base at Zerodha. However, based on the log-in IPs of trading accounts with the brokerage, users seem more concentrated, though still more diverse when compared to 2016-17, Kamath added, when asked about the big changes he has seen in this rally.

On increasing competition in the business, Zerodha said there everyone can potentially be disrupted in today's changing world, and the brokerage tries to maintain a differentiated outlook to stay ahead. "As and when you get really big, you can't change as fast as we could, say as compared to 2015-16. That said, we keep updating products and offerings, and the uniqueness of our business is the philosophy with which we run. We have these nudges which dissuade people from trading, and I don't think there are many brokers who can take this stance."

"We do not spam, while our competitors send out 5-10 notifications on the mobile app, while we send once or twice a month. That is thinking philosophically differently about the business, as really long term. Whatever fits in the long term vision is what we will work on," Nithin Kamath added.