India’s largest retail broker Zerodha will not join the likes of Cred, Groww and other promising startups who recently raised funds from investors. Zerodha’s founder Nithin Kamath took to Twitter to explain why his company is not looking to rope in investors even though funds have been lining up to invest. “Right now, is probably the stupidest time for fintech firms like Zerodha to be raising money. It is quite crazy the number of folks reaching out & the different deals,” Nithin Kamath said.
Zero debt, no marketing spends
Zerodha currently has over 32 lakh customers, beating traditional stockbrokers such as ICICI Securities, HDFC Securities and even new age brokerage firms such as Angel Broking. Kamath said that Zerodha does not need the money and will not raise funds “just because someone is ready to give it to you”. “We are profitable, have zero debt. And we don’t spend on marketing and advertising which is probably the single biggest reason for folks raising money,” he added.
Right now, is probably the stupidest time for fintech firms like @zerodhaonline to be raising money. It is quite crazy the number of folks reaching out & the different deals. We might regret it in the future, but we are not raising & here are the counterintuitive reasons why. 1/7
— Nithin Kamath (@Nithin0dha) April 7, 2021
Although he conceded that Zerodha might regret not raising funds in the future but remained adamant about not doing so. Nithin Kamath added that he does not want Zerodha to “grow just for sake of growth with random businesses”, but instead wants to build things around the company’s core competency.
Hard to continuously grow
Zerodha is the leading player in India’s stock brokerage industry by the number of active clients. Nithin Kamath, who is also the CEO of Zerodha, said that the business he runs is directly linked to the fortunes of the stock market. “The hotness of our industry can disappear overnight with a 20% fall in the markets,” he warned, adding that taking investor obligations to continuously grow would be hard in such an industry.
The discount brokerage has recently introduced steps that help customers from making trades that could result in significant losses using its ‘Nudge’ feature. Nithin Kamath said that this reduces their trading volumes but his company is focusing on getting the “right product for the customer”. “…all of these theses may be wrong. But the freedom of not being obligated to an investor is much more valuable than the biggest cheque,” he added. Zerodha has nearly 25% retail volume share in India and has one of the highest daily trades globally, according to a recent Bernstein report. Zerodha had self-assessed its value at $1 billion in 2020 when it went for an Espo buy-back.