Correlation between Customer Acquisition Cost (CAC) & Market share in discount broking industry

Walk into any conversation about retail investing in India and the name Zerodha comes up almost immediately. That is not an accident. The Bengaluru-based discount broker spent years building a product that traders genuinely liked using, and the growth it saw was largely organic referrals, word of mouth, and educational content did more for the company than any advertising campaign could have. For a long time, Zerodha sat at the top of the active client rankings without spending anywhere close to what rivals were spending on marketing.

However, the rankings have changed. By September 2023, Groww had more active investors than Zerodha, and the gap has only grown since then. In FY25, Groww had a 26.3% market share and nearly 13 million active clients. Zerodha's market capitalization was 7.9 million, with its share price falling by approximately 16%. This is a significant reversal for a company that once appeared untouchable.

Groww's rise came on the back of a very different playbook. Zero account opening charges, no annual maintenance fees, heavy digital advertising, and an interface designed for someone opening their first demat account, that combination worked particularly well with younger investors in smaller cities who came to the market through their phones. Upstox took a broadly similar approach, but its growth has been more modest, with approximately 2.75 million active clients in FY25.

The contrast between Zerodha and Groww reveals a larger picture of where this industry is headed. User numbers and revenue are not the same thing. Zerodha's revenue in FY23 was over five times that of Groww despite having fewer active users. Acquiring customers cheaply is one thing. Getting them to trade regularly and generate meaningful revenue is another problem entirely.

That is the question the entire discount broking industry is now sitting with.