Zerodha Preparing for Significant Revenue Decline Later This Year: CEO
Nithin Kamath, Co-founder and CEO of online brokerage firm Zerodha, announced on Tuesday that the company is experiencing a plateau in revenue and profit and is preparing for a substantial revenue decline later this year.
In a blog post, Kamath highlighted that the Securities and Exchange Board of India (SEBI) will implement its true-to-label circular on October 1, 2024, which he predicts will result in a 10% drop in revenue.
Kamath noted that SEBI recently released a consultation paper regarding index derivatives, which was open for public comment. He expects this to lead to new regulations in the coming quarter. Since index derivatives account for a significant portion of Zerodha’s revenue, he anticipates a potential revenue decrease of 30% to 50%.
Additionally, the Securities Transaction Tax (STT) will increase from October 1. While the impact on options trading will be minimal, Kamath foresees considerable effects on futures trading.
He also mentioned changes to the Annual Maintenance Charges (AMC) related to the new Basic Services Demat Account (BSDA) thresholds set by the regulator. The new regulations allow the company to charge full AMC from customers with demat holdings of ₹10 lakhs or more, up from ₹4 lakhs previously. Combined with the removal of account opening fees, this could lead to a notable revenue decline.
Zerodha’s total assets under custody currently amount to ₹5.66 lakh crore, with customers collectively holding unrealized profits exceeding ₹1 lakh crore.
Regarding the possibility of an initial public offering (IPO), Kamath emphasized that an IPO is merely a new beginning. He expressed uncertainty about revenue predictions, stating that despite the company’s solid financials, factors like regulatory changes or market downturns can dramatically alter their business landscape.
