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Zerodha’s FY23 Earnings Show Slower Growth, but Optimism Prevails for F&O

ByNishat Manzar

Sep 26, 2023

 In the dynamic world of India’s stock trading, Zerodha stands tall as the biggest and most innovative platform. While the fiscal year 2023 saw a moderation in growth compared to its stellar performance in preceding years, Zerodha remains undaunted, especially in the realm of Futures and Options (F&O). Let’s delve deeper into Zerodha’s FY23 performance and its outlook.

Zerodha’s FY23 Earnings Overview: Despite encountering a slower growth trajectory than the previous two fiscal years, Zerodha reported an impressive 39% surge in net profit in FY23, leaping from INR 2094 crore to INR 2900 crore. Furthermore, the company’s revenue witnessed a substantial uptick, rising by 35.5% to INR 6875 crore from the fiscal year ending in March 2022 to the fiscal year ending in March 2023.

Diverse Revenue Streams:

 Zerodha’s revenue is a mosaic of various income streams. These include earnings from stock brokerage, onboarding fees, commissions derived from selling mutual funds via Zerodha Coin, and proceeds from API sales. This diversified approach to revenue generation has contributed to the company’s resilience even in the face of a somewhat decelerated growth rate.

Challenges and Plateauing Growth:

Addressing the issues surrounding the company’s slow growth, Nikhil Kamath, Zerodha’s co-founder and CEO, acknowledged a dip in customer satisfaction from May 2023. This decline was primarily due to account deactivation by exchanges and depositories because of the failure to link PAN (Permanent Account Number) with Aadhaar numbers. Nikhil Kamath affirmed, “The business has plateaued in terms of revenue and profitability this financial year up until now.”

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Optimism in Futures and Options:

Despite the challenges, Zerodha remains optimistic, especially in the futures and options market. Kamath highlighted, “The markets continue to attract tremendous interest, particularly in futures and options. Over the previous three years, this has been the main cause of the rise in sales and profitability.”

Past Success and Growth: Zerodha’s journey has been nothing short of remarkable. Over two consecutive fiscal years, the company witnessed staggering sales growth of 82% and 191%, respectively. In tandem, net profit soared by 87% and 165%. This exceptional performance was attributed to a surge in new investors flocking to the stock broking platform, seeking opportunities in a market recovering from the pandemic-induced freefall.

Market Dominance:

Founded by Nithin and Nikhil Kamath in 2010, Zerodha has now emerged as the industry leader, boasting the highest number of active traders. The company faces stiff competition from traditional brokerages and large-owned trading platforms like ICICI Direct, Sharekhan, and Motilal Oswal. Additionally, it contends with venture capital-funded and publicly-listed platforms such as Groww and Angel One.

Conclusion:

 While Zerodha’s FY23 earnings growth may have tapered off compared to previous years, the company remains optimistic, particularly in the realm of futures and options trading. Its ability to adapt and diversify revenue streams, coupled with its remarkable journey to market dominance, positions Zerodha as a formidable force in India’s stock trading landscape.