Zerodha Bracing For Big Revenue Hit Later This Year: CEO Nithin Kamath

New Delhi: Zerodha’s Co-founder and CEO, Nithin Kamath, said on Tuesday that the company is witnessing a plateau in revenue and profits and is preparing for a significant revenue hit later this year.

In a blog post, Kamath mentioned that SEBI’s true-to-label circular will go live on October 1, 2024, and added, “We expect a 10 percent dip in revenue.”

SEBI recently published a consultation paper on index derivatives, which was open for public comments.

“We expect this paper to turn into regulation sometime in the next quarter. Currently, index derivatives constitute a significant portion of our revenue, and any changes will impact us. We anticipate a 30 to 50 percent drop in revenue,” said the Zerodha CEO.

The Securities Transaction Tax (STT) will also increase from October 1.

While the impact on options trading is minimal, “we anticipate a significant impact on futures trading.”

“The amount of Annual Maintenance Charges (AMC) we collect will change with the new Basic Services Demat Account (BSDA) thresholds set by the regulator. Essentially, we can now charge full AMC from customers with demat holdings of Rs 10 lakh or more, compared to Rs 4 lakh today. Combined with the removal of the account opening fee, this will lead to a meaningful drop in revenue,” Kamath explained.

Zerodha's total current assets under custody, which include all assets held in its demat accounts, amount to Rs 5.66 lakh crore.

“The exciting part of this figure is that our customers, as a whole, are sitting on unrealised profits of over Rs 1 lakh crore,” the CEO shared.

Regarding the company's IPO, Kamath emphasized that an IPO is not the end but rather a new beginning.

“When retail investors enter the cap table, the company must be able to predict revenue to some extent. In the last 14 years, I have never once accurately predicted revenue growth or dips. Our business, while appearing strong based on financials, can change in an instant due to regulatory shifts or unfavorable market conditions,” Kamath explained.