Zerodha Essentials

ISIN

INE03HI01011

Face Value

₹10.00

Total Share

10,00,00,000

Total Income

₹4,963.22 Cr

Profit After Tax

₹2,094.39 Cr

EPS

₹209.44

P/E

8.51

P/B

6.71

Market Capitalisation

₹17,830.00 Cr

Enterprise Value

₹16,539.20 Cr

Book Value

₹265.79

Earnings Yield

11.75 %

Sector

Financials

Sub-sector

Stock Broking

Category

Unicorn

Cashflow - Operations

₹2,850.94 Cr

Cashflow - Financing

-₹0.82 Cr

Zerodha Growth

Compounded Sales Growth

  • 81.88%

    1 Year

  • 113.98%

    2 Year

  • 429.20%

    3 Year

Pro Only

Compounded Profit Growth

  • 86.61%

    1 Year

  • 122.26%

    2 Year

  • 385.38%

    3 Year

Pro Only

Return On Equity

  • 77.25%

    2022

  • 101.72%

    2021

  • 128.34%

    2020

Pro Only

About Zerodha

  • Zerodha Broking Limited is an Indian financial services company. The company offers retail and institutional broking and is primarily engaged in the business of being brokers, sub-brokers, dealers, or intermediaries of all kinds of shares, commodity derivatives, futures, units of mutual funds and trusts, derivatives, and other forms of financial instruments.
  • Founded in 2010, the company is headquartered in Bangalore and has a presence in nine Indian cities. It is also an official member of NSE's consultative committee for growing business. 
  • The company aims to break all barriers that traders and investors face in India in terms of cost, support, and technology. The company was named Zerodha, a combination of Zero and "Rodha", the Sanskrit word for the barrier. 
  • Zerodha is the most technologically advanced stock broker in India. Zerodha has built its trading software Zerodha Kite (web and mobile trading app), Coin (mutual fund investment platform), Varsity (investor education program), Trading Q&A, and many other tools. Zerodha also offers Small case (thematic investment platform), Streak (algo & strategy platform), Sensible (options trading platform), and GoldenPi (bonds trading platform).
  • Zerodha charges Rs 0 brokerage for equity delivery trades and direct mutual funds. For intraday and F&O, it charges flat Rs 20 or 0.03% (whichever is lower) per trade. With Zerodha, the maximum brokerage you pay for any transaction is Rs 20 for an order (of any size, amount, or segment).
  • Today the company has more than 1 crore (Cr) clients.

  • Zerodha IPO Details

  • The company does not plan to bring its IPO any time soon

  • Zerodha Merger & Acquisition

Merger

  • On 3rd April 2020, Zerodha Securities Private Limited was merged with Zerodha Broking Limited. Previously Demat accounts were held with Zerodha Securities Private Limited, and trading accounts were held with Zerodha Broking Limited.
  • Zerodha Broking Limited, being the parent entity took over the Depository Participant business of Zerodha Securities Private Limited. 
  • Zerodha Subsidiaries

  • Zerodha Asset Management Private Limited (ZAMPL)
  • Zerodha Trustee Private Limited (ZTPL)
  • Zerodha (IFSC) Private Limited (Z(IFSC)PL)
  • TrustX Internet Private Limited
  • Rainmatter Climate Investment (RMCT)
  • Rainmatter Fintech Investment (RFCI)

Zerodha Business Model

  • ZAMPL:- The company has been incorporated to act as Asset Management Company for the schemes of Zerodha Mutual Fund
  • ZTPL:- The company is proposed to act as a trustee company or trustees for the schemes of Zerodha Mutual Fund
  • Z(IFSC)PL:- The company was incorporated with the objective to pursue the International Financial Service Centre (IFSC) business providing share broking services, financial services, and portfolio management consultancy services.   
  • TrustX Internet Private Limited:- The company is engaged in providing Computer Software services such as cloud computing and other information technology services.
  • RMCT:- The company is engaged in the business of Investing in organizations working to restore the environment through direct action, research, climate advocacy, and policy.
  • RFCI:- The company acts as an incubator and provides well-equipped workspaces, and mentorship & invests in innovative startups in the capital market space    
  • Zerodha Revenue Segmentation

  • Fees and Commission
  • Interest Income
  • Other
  • Dividend Income
  • Zerodha Product & Services

  • Kite: - Flagship trading platform application available on Android and iOS devices with streaming market data, advanced charts, and an elegant UI
  • Console: - The central dashboard for the Zerodha account to gain insights into the trades and investments with in-depth reports and visualizations
  • Coin: - An application available on Android and iOS devices to buy direct mutual funds online, commission-free, delivered directly to the Demat accounts.
  • Kite Connect API:- An Application Programming Interface (API) to build powerful trading platforms and experiences with simple HTTP/JSON APIs for startups to build an investment app.
  • Varsity mobile-: An easy-to-grasp, collection of stock market lessons with in-depth coverage and illustrations. Content is broken down into bite-size cards to help learn on the go.
  • Zerodha Assets

Assets (FY22) Value (Rs Cr)
Cash & Cash Equivalents1,290.8
Other Financial Assets18,805.2
Non-Current Investments

2,560.1

  • Zerodha Industry Overview

Industry Statistics

Blue Ocean Strategy

  • BLUE OCEAN STRATEGY is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand.
  • It is about creating and capturing uncontested market space, thereby making the competition irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players.
  • Examples:- Discount Broking, Electronic Vehicle, Ethanol, and Hydrogen Fuel 

Red Ocean Strategy

  • RED OCEANS are all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.
  • Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to a cutthroat or ‘bloody’ competition. Hence the term red oceans.
  • Examples:- Automobile, Chemicals, and Banking

Major Differences between Blue Ocean Strategy and Red Ocean Strategy

Blue Ocean StrategyRed Ocean Strategy
Create uncontested market space Compete in existing market space
Make the competition irrelevantBeat the competition 
Create and capture new demandExploit existing demand
Break the value-cost trade-offMake the value-cost trade-off
Align the whole system of a firm's activities in pursuit of differentiation and low costAlign the whole system of a firm's activities with its strategic choice of differentiation or low cost

Overview:-

Discount Brokers: -

  •  Discount brokers are those brokerage firms that charge a reduced fee/commission for helping investors purchase and sell on the stock markets. Such discount brokers utilize the best technology to provide a sophisticated trading experience.

Example: - Zerodha, Upstox and Groww

  • Zerodha demonstrated the use of the Blue Ocean Strategy to create a discount broking market in India.
  • Zerodha was not the world's first-ever discount brokerage company; it was the Charles Schwab Corporation in 1975 in the US, a discount brokerage model which significantly reduces the commission charged for transactions, enabling the masses to invest.
  • Zerodha used this already successful solution and customized it to the Indian markets, addressing the pain points of the existing services, and providing an attractive option to investors.
  • It also addressed the non-customers of the industry—people refusing to enter the market due to various reasons, including complicated offerings. 

Value Innovation

  • Value innovation is a process in which a company introduces new technologies or upgrades that are designed to achieve both product differentiation and low costs.
  • In 2010, when hardly 1.4% of the Indian population traded in the Indian capital markets, Zerodha pioneered online discount broking in India. It was able to not just cater to the needs of the existing investors, but also create a value offering for the previously untargeted buyer groups. At the same time, it was able to lower the commission charged. This is what is defined to be value innovation

Market Size:-

  • The industry clocked a total revenue of Rs. 27,000-28,000 Cr in FY22 over Rs 24,860 Cr in FY21 clocking a growth of 10.5%. This growth is mainly attributed to the first-time investors investing in the market along with the record number of new IPOs hitting the market 
  • The revenue of the industry is expected to grow to Rs 380-400 bn by 2025 registering a growth of 11.0%-12.0%

Competitive Landscape:-

  • Client Acquisition Cost vs Revenue Per Client

Market Share of Different Players

Broker
Active Clients (Lakh)
Market Share (%)
Zerodha65.9
18.6
Groww51.6
14.6
Angel One42.4

12.0

Upstox38.6
10.9
ICICI Sec26.8
7.5
HDFC Sec11.2
3.1

Key Drivers

  • Rise in the number of smartphone users vs Featured Phone. Smartphone penetration is further expected to increase to 68.0% vs 32.0% by FY26.

 

  • Rise in the number of first-time investors. Month on Month (M-o-M) data of new Demat accounts in 2022 shows the interest of first-time investors towards investing. 
Month (2022)New Account Addition (In Lakhs)
January
34.0
February
28.3
March28.5
April

24.3

May25.0
June23.0
July18.0
August21.0
September21.0
October18.0
November18.0
  • Proportion of data subscribers in overall subscribers to increase dramatically over next few years



Key Trends:-

  • Favorable Demography:- By 2022, the median age in India will be 28 years; in comparison, it will be 37 in China and the United States, 45 in western Europe, and 49 in Japan. the median age of Indians will jump 10 years to almost 38 by 2036  
  • Shift in the investors towards equity markets to earn better returns:- In order to grow their money in the inflationary environment, most investors are looking for better opportunities to earn better returns and hence moving to equity markets
  •  Penetration levels:- Number of people investing in the stock market remain extremely low vis-à-vis US and China. While investing in stock markets has become more popular in India in recent times, overall penetration remains low – only 55.0mn Indian invest in the stock markets, which is around 4.0% of the country’s population. In comparison, over 50.0% of Americans own stocks. Even in neighboring China, the percentage of the population that invests in the stock markets is 7.0%. India’s figure of 4.0% indicates plenty of headroom for India’s stock market penetration to grow

How Zerodha became a champion in the industry

Identifying the Problems in the industry 

  • Lack of transparency related to costs:- Clients in the industry were charged hidden costs for the trading
  • Paying for services not required:- Traditional brokers were offering a complete package of products and clients use to pay for the complete package irrespective of whether they availed the services or not
  • Lack of Smooth seamless process:- Customer experience of conventional brokers was not sufficient to cater the millennial investors  

Understanding the Customer

Customers in the capital markets can be divided into three categories:-

  • First would be the budding investors who were aware of the options but who could not afford the current offerings and those who were trading but were unhappy with current offerings (services provided by various firms) in the industry. 
  • The second would be the risk-averse ones who have long believed in instruments like fixed deposits
  • The last would be the ‘unaware’ ones who do not know anything about investing

 Blue Ocean Strategy at Use

  • At a time when smartphone penetration was less than 10.0% in the country. Zerodha visualized going into unknown territory and conquering it by putting pieces of puzzles into places. Over the years it has become the undisputed king in the discount broking industry by solving the problems that persisted in the industry.

Unique Selling Proposition of Zerodha

  • Reduced Cost:- Moving everything online reduced the costs of offline branches. 
  • Cutting Edge Technology:- It increased the speed of trading and executions using technology.  
  • Diversified Product Offering:- 
  • It started different financial literacy programs like 'Varsity' and 'TradinQnA'—a forum for traders to ask questions. 
  • It created several new features like automating fund updates and Kite–a self-service booking platform. 
  • It also brought advanced trading tools like 'Pi' and 'Q' for charting and analysis. 

  • To solve the problem of awareness, it made a book called Rupee Tales that educated children about financial investments.

Future Prospects

  • The revenue of the industry is expected to grow to Rs 380-400 bn by 2025 registering a growth of 11.0%-12.0%
  • Revenue Market Share (RMS) of discount brokers to remain the fastest growing among all the brokers.


Government Initiatives

  • SEBI, in 2021, introduced a blocking mechanism in the Demat account of clients undertaking sale transactions, for ease of operations in the Early Pay-in mechanism.
  • In August 2021, SEBI prescribed provisions pertaining to the Electronic Book Provider (EBP) Platform for the issuance and listing of Non-Convertible Securities, Securitized Debt Instrument, Security Receipts, Municipal Debt Securities, and Commercial Paper, stipulating the issuances which necessarily be made through EBP, the eligible participants, obligations/ responsibilities of various entities, provision to an issuer to withdraw offers, the process of bidding and allotment, etc.
  • SEBI had issued guidelines regarding the execution of ‘Demat Debit and Pledge Instruction” (DDPI) for the transfer of securities towards deliveries/ settlement obligations and pledging/ re-pledging of securities. DDPI shall serve the same purpose as Power of Attorney (PoA) but will significantly mitigate the misuse of PoA.
  • Govt says exceeded FY22 asset monetization target; Rs 96,000 Cr realized: The Centre has completed asset monetization worth Rs 96,000 Cr during FY22, surpassing the target of Rs 88,000 Cr.
  • For FY23, it has set itself a goal of Rs 1.62 trillion and already has a pipeline of assets worth Rs 1.6 trillion under advanced stages of implementation.

Zerodha Awards & Achievements

  • ET Startup Awards 2020
  • Zerodha – India’s best retail brokerage for 2018 by NSE
  • Nithin Kamath: -EY Entrepreneur of the Year Award Winner 2017
  • ET Startup Awards 2016 in the Bootstrap Champ category

Zerodha Strengths

  • The company is a market leader in its segment in terms of having a maximum market share of 18.1% in terms of active clients
  • Experienced management. Promoters have been associated with the company since its inception in 2010
  • Company is financially very strong. In FY21, total revenue of Rs 2,728.7 Cr and profit of Rs 1,122.3 Cr 
  • Company with zero client acquisition cost makes the maximum revenue per client of Rs 2728.7 among all the discount brokers  

Zerodha Shortcomings

  • Business is too concentrated on generating revenue from trading and investments. In FY21, 82.5% of total revenues came from brokerage and commission fees

Zerodha Opportunities

  • Company has the opportunity to venture into other financial products like the distribution of mutual funds and financial advisory 
  • Huge opportunity to onboard big ticket-size individuals and institutions

Zerodha Threats

  • Conventional brokers like HDFC Sec and Kotak Sec are launching their products in the discount broking segment
  • Business due to its nature is dependent too much on market conditions and therefore is cyclical in nature
  • Zerodha Detail Info

Industry Statistics

PUBLIC LIMITED

Registered In

India

last Updated

16/12/2022

Registered Date

25/09/2018

Planify Ticker

Zerodha

Reg Office: 153/154, 4th Cross, 4th Phase, Dollars Colony, Op p o s i t e Cl a r e n c e School , J .P NAGAR, Bangalore KA 560078

Visit Website