In a previous interaction with ET in April, Kamath had estimated a 30-40% dip in the company’s overall revenue in 2023-24 as account openings were down 50-60% from all-time highs. It was expected to clock total revenue, including interest income, of about Rs 5,956.8 crore and net profit of Rs 2,513.6 crore in 2022-23, he had said. Those numbers were not audited.
“Public markets are at an all-time high. There is activity around account opening which has picked up again. The reason our revenues haven’t dropped is because the active trading population in India – which trades options – has picked up over the last two to three years. And there is no drop in that activity,” Kamath told ET.
On a daily basis, Zerodha witnesses 300,000-400,000 individuals trading futures and options (F&Os). On an annual basis, 10% of the company’s active user base would be trading F&Os.
At present, it has a client base of about 11.2 million users, of which nearly 6.4 million are active.
At an industry level, Kamath said, only a million individuals actively trade options monthly, and 3-4 million on an annual basis, which contribute significantly to the broking industry.
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Zerodha, like other brokers, earns revenue through individuals trading in F&Os. It also charges for new account openings on its platform. “If I look back, I was possibly wrong that the activity will drop off. But that activity (of options trading population) has plateaued this year compared to last. These active traders are really helping us from a big dollar drop in our earnings. Almost 75-80% of our revenues come from options trading,” said Kamath.
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New signups back to healthy levels
After the slowdown in the stock markets in the beginning of this fiscal, Zerodha is back to adding a healthy number of new customers every month, Kamath said.
The Bengaluru-headquartered brokerage firm is adding about 250,000 new customers every month, up from about 150,000 in the first half of this fiscal.
During the boom period of 2021, it was reportedly adding about 400,000 new traders every month.
Its competitor Angel One added about 1.3 million new traders in the first quarter of this fiscal.
“We had gone from like 4 lakh (at the peak) to 1.5 lakh and now we are back to 2.5 lakh account openings a month,” said Kamath.
AMC business
Earlier this month, Zerodha received the final approval from market regulator Securities and Exchange Board of India to launch its asset management business. It is launching the asset management company (AMC) in partnership with Smallcase, which was incubated within Zerodha’s in-house corporate fund Rainmatter.
“For Smallcase, it was a natural extension because users who want to invest Rs 1,000 to Rs 2,000 cannot invest in a portfolio of stocks. For us (Zerodha), managing others’ money is not our core competency,” said Kamath. “And in this business, distribution is important, and we both have built that. Therefore, there were a lot of synergies. And anything that’s an adjacency for us we have always partnered.”
Zerodha is a majority holder in the AMC with Smallcase.
Sticking to his guidance, Kamath said the AMC will launch its first fund in the next three to four months. “I think in the next three to four months, we should be able to have our first fund. Our role in this is more of a sponsor (of the AMC). The philosophy is to keep it simple and be a passive only. I don’t think there is space for an active only fund,” he said.
Kamath had earlier said that the AMC would focus on passive products, which increasingly have been taking a pie of overall equity assets in the country. The idea is to make investing simple for investors.
Unlike active funds, passive funds are low cost and don’t have a fund manager to actively pick stocks for investments, making them easier to track. Further, returns are in line with market performance. However, on the flip side, passive funds have a higher gestation period since there are no fund managers trying to beat the market index.
Kamath declined to disclose the total corpus that Zerodha will look to invest to expand the AMC in the coming years.
“Zerodha was there when markets expanded. Similarly, there will be a moment like that for passives in the country. The idea is to be around when that’s happening,” he said.
A recent report from Motilal Oswal Asset Management Company this month said passive funds have gained market share from 1.4% of overall assets under management (AUM) in the country to 17% today, with more than Rs 17,000 crore in AUM across 30 index funds, exchange-traded funds and fund of funds.
Earlier this year, Navi Mutual Fund also launched a passive ELSS tax-saver fund.
