Zerodha Broking's net profit nearly doubled in FY22 (2021-22), thanks to an over 80 percent rise in its operating revenue, making the bootstrapped fintech startup one of the most profitable new-age technology companies in India.
Zerodha reported a consolidated net profit of Rs 2,094 crore in FY22, up 87 percent from Rs 1,122 crore in FY21 (2020-21), the company's regulatory filings with the Ministry of Corporate Affairs (MCA) showed. The company's operating revenue surged 82 percent to Rs 4,963 crore in FY22 from a year earlier, according to the filings. Zerodha has not raised a single round of funding to date from external investors.
Zerodha mainly earns revenue by collecting brokerage fees and commissions. For FY22, the company's fees and commission income surged to 4,128 crore from Rs 2,252 crore a year earlier, the regulatory filings showed. Besides commission and fee income, Zerodha earned a little more than Rs 614 crore of interest income, which grew more than 50 percent from a year earlier.
Zerodha's total expenses grew more than 71 percent in FY22 to Rs 2,164 crore. The company's employee benefit expenses grew 45 percent to Rs 459 crore. Unlike most fintech startups, including Zerodha's closest competitors like Upstox and Groww, the Nithin Kamath-led company does not spend on advertising and marketing.
Zerodha has also become one of the fastest-growing new-age technology companies with an over 80 percent rise in revenue and net profit. Zerodha's numbers were on a consolidated basis. News agency Entrackr first reported the development.
Zerodha's strong FY22 growth comes at a time when other fintech startups, most of which have raised PE/VC (private equity and venture capital) funding, are scrambling to cut costs as investments to the startup ecosystem have slowed significantly amid macroeconomic headwinds. However, Zerodha, too, has warned of slower growth in terms of revenue and profitability in the coming years.
In a blog post in December, Nithin Kamath, co-founder, and CEO of Zerodha said that in 2022, Zerodha witnessed a 50 percent drop in monthly new account openings, which was similar across the industry. Kamath also said that while the number of monthly account openings fell, the revenues of brokerage firms would remain unchanged as a drop in new account openings leading to a revenue drop works with a lag.
"While we are on track to do as much revenue and profits as last year, even this year, we think we will be unable to match the current revenues and profitability from the next financial year for a few more years," Kamath said.
"This is not just because we see a dip in new account openings and a drop in the bull market momentum, but also because we think we have temporarily hit a plateau in terms of the target market, customers who have sufficient savings to invest in the markets and an ability to generate revenue for the brokerage firm. The business will also most likely get impacted due to the changing regulatory landscape, where, among many things, the working capital requirements are going up quickly," Kamath added.
Founded in 2010 by Nithin Kamath, and Nikhil Kamath, Zerodha, a bootstrapped startup is one of the largest stock brokers in India, with a user base of more than 9 million as of FY22. The company also has an active user base of 6.2 million.
Zerodha competes with unicorns like Upstox and Groww, two heavily funded companies, sitting on a valuation of more than $3 billion each. However, Groww reported a much smaller operating revenue in FY22 of as much as Rs 351 crore. Upstox's FY22 revenue numbers are yet to be filed, but the company, in May surpassed 10 million users, a million more than Zerodha. However, both Groww and Upstox are loss-making startups.
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