Zerodha CEO Nithin Kamath explains why his Rs 30000 crore company is 'bracing for big revenue hit'

As Zerodha celebrates a monumental financial year with revenues soaring to ₹8,320 crore and profits reaching ₹4,700 crore, a sense of unease fills the air. Co-founder and CEO Nithin Kamath reveals that despite this impressive growth, the company braces itself for a significant revenue hit later this year due to impending regulatory changes and market uncertainties.

In a recent blog post, Kamath shared the company’s remarkable achievements for FY24, noting a 38.5% year-on-year revenue growth from ₹6,875 crore in FY23. However, he warned that this success might be short-lived as several risks threaten their financial stability.

Starting October 1, 2024, the Securities and Exchange Board of India (SEBI) will enforce a new circular aimed at improving transparency. Kamath predicts a 10% revenue dip from this change alone. Additionally, SEBI's consultation paper on index derivatives could lead to a staggering 30-50% drop in revenue, as this segment accounts for a significant share of Zerodha's earnings.

Moreover, upcoming increases in Securities Transaction Tax (STT) could impact futures trading. While Kamath believes the effect on options trading will be minimal, the ripple effects could still destabilise their financial model. The new Basic Services Demat Account (BSDA) regulations will also reshape their revenue structure, eliminating the ability to charge full Annual Maintenance Charges (AMC) for accounts below ₹10 lakh.

In a further blow, Zerodha is halting its partner and referral program due to new exchange guidelines, limiting growth potential. Kamath reflects on the risk of an end to the current bull market, stating, "We are well covered to get over the lull period with a lean team, efficient expenses, and strong net worth."

While Zerodha stands resilient with a core team of 1,200 and robust financial backing, the path ahead is fraught with challenges. As Kamath navigates these turbulent waters, stakeholders remain on high alert, wondering if Zerodha can weather the impending storm.