Zerodha’s profit grew 62 percent from the previous year to Rs 4,700 crore in in the financial year 2023-24, the country’s leading stock broker said on September 25.
The firm’s revenue grew 21 percent to Rs 8,320 crore.
"We continued our tremendous financial track record, and FY 23/24 was a fabulous year in terms of both revenues and profitability. The profits don’t consider the ~Rs 1,000 crore of unrealised gain, which will show in our financials," founder and CEO Nithin Kamath said in a blog post.
Zerodha is the country's largest discount broker in revenue and its huge profits mean that its operating margin is at 57 percent. And if the unrealised gains are added, the operating margins could hit 69 percent.
To put the numbers in context, Microsoft's operating margin was 44 percent this year, while Apple, Google and Amazon Web Services reported operating margins of 29 percent, 31 percent and 37 percent respectively.
Nvidia's operating margin was 64 percent.
Unrealised gains are the profits from the investment portfolio that Zerodha has made in gold and equity as a company.
Given the profitability of the past three years, the company’s net worth is almost around 40 percent of the customer funds that it manages, he said. “It makes us one of the safest brokers to trade with.”
The Bengaluru-based online stock trading platform reported a revenue of Rs 6,875 crore and a profit of Rs 2,907 crore in FY23.
The third largest stock broker by active customers, Angel One, reported Rs 1,125 crore in net profit during FY 24. The Mumbai-based listed competitor also reported Rs 4,272 crore revenue in FY 24. Angle One had an operating margin of 29 percent.
Zerodha has an active client base of around 79 lakh as of August this year. The growth, however, has slowed compared to Groww and Angel One. Groww has close to 1.2 crore active investors, according to NSE data. Groww's financials aren't available yet for FY 24.
FY 25 is not looking good
However, Zerodha's FY 25 revenue and profitability could take a hit due to some regulatory changes this year.
According to Kamath, Sebi's true-to-label directive could hit the topline by 10 percent. This means that exchanges cannot pass on volume-based rebates to brokers.
The markets regulator Sebi is also expected to announce measures that discourage futures and options trading (F & O), which could hit Zerodha's topline somewhere between 30 to 50 percent.
Most brokers generate most of their revenue from F & O trading which could be in the range of 65 to 85 percent. This has been Zerodha's biggest advantage and any regulatory changes that restricts F & O trading could hit all discount brokers badly.
Kamath said that this uncertainty is why Zerodha does not want to go for an IPO despite the high valuations it can command in the bull market.
“An IPO is not the end, but rather a new beginning. When retail investors enter the cap table, the company should be able to predict revenue to some extent. In the last 14 years, I have not once been correct in predicting revenue growth and dips,” Kamath said, citing the unpredictable nature of Zerodha’s business.
Kamath made it clear that the company's decision against going public is rooted in the uncertain environment surrounding financial markets and regulation.
Zerodha also attributed the recent decline in market share to their unique decision to charge account opening fees — a practice they have now reversed. Kamath added that this move is part of the company's broader efforts to remain competitive while continuing to attract new clients.
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