Nithin Kamath explains why no Zerodha IPO when it can potentially get ridiculous valuations

Zerodha co-founder Nithin Kamath.

Zerodha co-founder Nithin Kamath took to Twitter to explain why the online trading platform will not be opting for an initial public offering despite the ongoing IPO boom in India and scope for “potentially ridiculous valuations”.

In a series of tweets made on November 12, Kamath explained that they did not consider an IPO “the beginning and the end”. He said listing brings “lakhs of conservative retail investors on your cap table” and thus “exponentially” increasing obligations.

Why not IPO @zerodhaonline when you can potentially get ridiculous valuations?
Firstly, we think an IPO is the beginning & not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially. 1/4

Story continues below Advertisement

Remove Ad

— Nithin Kamath (@Nithin0dha) November 12, 2021

“Why not IPO Zerodha when you can potentially get ridiculous valuations? Firstly, we think an IPO is the beginning & not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially,” Kamath tweeted.

He added, “We are in a world where companies are getting priced to perfection based on all the future growth potential. For a stock to do well, you have to outperform. As CEO, I dread to think how you can outperform the already really high expectations that growth companies have today.”

In another tweet he added that Zerodha has never set revenue or growth targets and “always believed that if we can do right for the customer and if goddess luck smiles, the rest will happen”.

“Our core team dreads moving away from that philosophy to be in a chase all the time, which it will be after an IPO,” he noted.

Kamath added that IPO “chase” is scarier for them since “broking has hardly an predictability”.

“When someone asks me for a 3-year projection, I usually respond, can you predict what the Nifty Midcap index can do in 3 years as everything from our user to revenue growth almost mirrors that,” he ended.

Kamath’s tweets comes amid a host of recently startups and unicorns choosing to go the IPO route over the past year.

Earlier this month, in an interview with Moneycontrol, Kamath also explained why he does not invest in cryptocurrencies.

“The first rule in money is, if something seems too good to be true, usually it is too good to be true. If someone claims that they can quickly make money, and this is not just limited to crypto or even stocks, you have to assume that there is a catch somewhere, because there is nothing called easy money,” he told us.

“Personally, I have zero exposure to crypto. I don't understand crypto as an asset class itself. I didn't understand it when it was $500 for Bitcoin and I didn't understand it when it went beyond $60,000,” he added.