The Success Story of Zerodha

Introduction

Zerodha is a company that has eliminated trading barriers. It is the first discount brokerage firm in India.

Zerodha has established itself in the stockbroking industry in this digital age. The company has developed solely on the basis of technology by providing customers with valuable services.

Zerodha began its journey with a team of only five people and now employs over 1,200 individuals. The innovative concept of the Kamath brothers and the innovative use of technology have elevated this venture to its current status.

It is the most prominent and largest online broker that offers services to invest in equity, currency, commodity, initial public offerings (IPO), and direct mutual funds.

But do we know about its journey throughout? Let’s explore!

About Zerodha

Zerodha is a financial service company that was founded on the 15th of August, 2010. It is an online discount brokerage whose primary objective is to provide customers with reduced prices.

In addition, it is a member of the NSE, BSE, MCX, and MCX-SX and provides brokerage services for stock market participants.

The components of the name Zerodha are ‘Zero’ and ‘Rodha. This term is derived from Sanskrit, and its combination with zero means “barrier-free.”

As the first discount merchant in the country at the time of their establishment, the company has amassed a large customer base and has its headquarters in Bangalore.

A further factor that has made things fascinating for the business and contributed to its success is that the company consistently generates innovative ideas supported by varied strategies and consistent efforts.

“The Free Trade Zone” is the company’s slogan.

Additionally, Zerodha operates a number of well-known online education and community initiatives for retail merchants and investors.

Zerodha Founders

Nithin Kamath and his brother Nikhil Kamath are the brains behind the successful business model. Nithin, the eldest, is the company’s CEO and creator; his younger brother, Nikhil, is a superb trader who oversees the company’s prop trading desk, risk management, and anything else that has to do with trading.

Nithin’s interest in trading began when he was 17 years old. He invested most of his time in college in the stock market. Even he split his time between the trade floor and the call center.

As a result of his diligence and enthusiasm for trading, Nithin quickly gained new clients through word of mouth.

Zerodha’s Success

There is, however, no other way to achieve one’s goals. But Nithin, when he set up this cheap broking firm, opted to provide services that were both technologically advanced and reasonably priced.

He observed a massive gap between what other brokerages charged in commissions and what their clients actually made.
Nithin has a similar motivation for developing a new trading platform: to make it easier for customers to conduct business in an online setting. To compete, he thought about charging less for his services
He also hoped to attract younger customers, who are often deterred from trading by the large commissions that are often required.
This was the impetus for him to launch what would eventually become the most successful discount brokering enterprise in the world.

In recent times, Nithin has words over his journey around de-risking and spoke about a sustainable, bootstrapped business approach focusing on conventional growth metrics.

How does Zerodha make money?

The business strategy behind Zerodha is convoluted. However, it is arguable that this company’s trading network is the most popular in all of India. Investors and traders from all around the country use this hub.

Each F&O and intraday equities trade is assessed a fee of 20 or 0.03%, whichever is greater. The platform brings in money due to the high volume of transactions taking place there. In addition, there is a yearly fee of $300 to keep an account with the company.

The number of people using the service has skyrocketed in recent years. Still, this helps more than 2% of its platform’s investors access the stock market, which could boost Zerodha’s earnings in the long run.

The fact that Zerodha was valued at $1 billion without having sought outside funding became a major news story. According to the Hurun Global Unicorn List of 2020, the company is currently worth a staggering $3 billion.

“I want to tell people that it is possible to be successful at business by questioning the true cost of revenue, valuations, and growth, instead of continuously chasing them,” writes Nithin Kamath

Funding

Rather than making direct investments, Zerodha has created a fund and incubator for Indian fintech firms called Rainmatter.

On January 28, 2021, Rainmatter participated in GrowFix’s $2 million funding round, making them the eleventh investor overall and the seventh lead investor.
On 28 January 2021 Rainmatter invested $2M in GrowFix in a seed round funding.
On 24 November 2020, they invested ₹100M in ERPNext in a venture round.
On 09 September 2020, they invested ₹27M in Walnut Knowledge Solutions in a seed round.
On 18 June 2020, they invested ₹ 3.5M in GoldenPi in a seed round.
On 20 March 2020, they invested $400K in ImStrong Health & Wellness in a pre-seed round.
On 30 December 2019, they invested $300K in Quicko.com in a seed round.

Zerodha Business Model

‘Low margin and high-volume model’ is the business model of Zerodha.

Zerodha charges negligible transaction fees to merchants, which contributes to the high volume of transactions.

This expense assortment of smaller amounts from a greater number of clients generates a substantial income for Zerodha. In addition, operational expenses are another contributor to the organization’s high-profit revenues.

Due to its online design, which allows it to maintain minimal operational costs, Zerodha’s operational expenses are significantly lower than those of leading dealers.

Zerodha employs a business-to-business (B2B) model.

Startup Challenges and Competitors

Since Zerodha is an online platform, it faces the largest difficulty of inefficient customer support and slow customer service due to the lack of offline support branches.
Heavy trading activity resulted in platform technical issues. That’s why consumer satisfaction is falling as a result.
Even yet, it does not provide customers with stock recommendation or other market-related calls that would help them make investment decisions.
Zerodha’s customer care wasn’t great when compared to other leading brokers in India.
There are a number of features offered by competing brokers that aren’t available here, like daily reports, quarterly result analysis, and news alerts.
Upstox, another discount broker, is in direct competition with them.
There was also stiff competition from other full-service brokers like Kotak Securities, HDFC Securities, Motilal Oswal, and so on.

Zerodha Online Account Opening

In order to engage in online trading with Zerodha, the investor must create an account. Fill out the form to establish an instant account and begin trading immediately.

Just go to Zerodha.com.
To join up, select the appropriate option from the top menu’s right side.
Put in your phone number here.
A one-time password has been sent to your mobile device.
A valid Social Security number (PAN) and bank account number will be required to proceed.

Conclusion

Zerodha’s long-term plan is to continue attracting new users so that more people can start investing in the Indian stock market.

During the COVID-19 lockdowns era, they had phenomenal expansion as many new retail investors flocked to the stock market.

Hence, it is appreciable that the company barely spends any amount on advertising, still manages to enjoy a tremendous market reputation as noticeable from its impeccable growth.