Zerodha has reported a 38% growth in both revenue and the net profit in FY23, the company said on Tuesday. The brokerage clocked Rs 6,875 crore in revenue for the year ended March 2023 while the net profit came in at Rs 2,907 crore.
In a blog post, co-founder Nithin Kamath said Zerodha remains the only brokerage to charge an account opening fee, citing costs incurred during account opening, such as KYC and verification.
“If there was no account opening fee to recover the cost, the business could implicitly be pressured to get a customer to transact to recover that cost. This isn’t good for the customer or the business in the long run if a customer transacts due to a push from the broker,” said Kamath.
The brokerage charges Rs 200 for account opening. It saw close to 12,000 unique accounts opened in June 2023. The company also said it accounts for one-fifth of the total active clients trading on the NSE.
According to a Motilal Oswal report, Zerodha had a market share of 19.4% as of August 2023, up from 17.6% in August 2022. However, it was marginally down from 19.8% in July.
The F&O segment has been the primary source of the increase in revenue and profitability over the last three years. Close to one-fourth of revenues are ‘pass-through exchange transaction charges’, which are passed on to the bourses and not actually realised by the firm.
Kamath highlighted the concentration of revenue from F&O as the biggest risk, given that any regulation or change in market conditions, or newer competitors with better products, could reduce retail trading activity in F&O at Zerodha.
On the regulator’s proposal to have an ASBA-like mechanism using UPI mandates in the secondary market, Kamath said it would require large technical changes in the order path, which is extremely risky.
“There is a business risk with a change in how we collect brokerage, DP charges, penalties. If the funds aren’t lying with the broker and the money moves directly from the customer’s bank account to the clearing corporation, these charges will need to be collected from the CC or the customer separately, which will not be easy,” he wrote.
While Kamath welcomed the regulator’s proposal to restrict brokers from associating with unregistered entities or ‘finfluencers’, he pointed out that it could lead to the firm stopping is referral program that brings the firm 10% of its fresh business.
Having received the licence to start MF operations, the brokerage could launch its first two funds
in the next couple of weeks, Kamath said.