In FY20, the company reported Rs 1,093.64 crore revenue, 15 per cent higher than Rs 950 crore earned in FY19. Profit after tax stood at Rs 442 crore as of March 2020. This is likely to grow much more in the just-concluded FY21, as the year turned out to be a stellar one for broking companies thanks to a huge spurt in trading volume as well as client addition.
Naturally, many investors will be interested to invest in such a business, and the question is often asked if and when Zerodha might go public.
Founder CEO Nithin Kamath has a short answer to that question: ‘no such plan.’
He then goes on to add that the company can come out with an IPO on one condition. “We have no plan for an IPO as such. We haven’t really raised outside money. There is no need to raise capital to grow. The edge we have is how nimble we are,” said Kamath.
Having said that “the only reason we will have an IPO… if at all you can somehow make your customers your shareholders as well. Can the word of mouth help us even more? That could probably be the only reason we will have an IPO someday,” Kamath said.
Zerodha has mostly relied on the word-of-mouth publicity for its growth and does not have any marketing or advertising teams. It banks on its tech-based products, which the company claims are superior to others, to drive its growth.
As the market booms, companies hitting the capital markets have also grown exponentially. Many startups, especially from the financial sector, are planning to go public.
However, Kamath believes, going public is not always in the best interest for his customers. “Because we are so nimble this way that we can get up every morning and do what is right for the customer. Otherwise, you will have to start worrying about investors. And typically, what is right for the investor is not always right for the customer,” he said.
Kamath said the flexibility to do what is right for his customer is the edge he has over his competitors, which might not have that much room to maneuver.
Out of about 300 brokers registered with NSE, only a handful, like Angel Broking, ICICI Securities,
, IIFL Securities, Motilal Oswal, 5Paisa Capital and JM Financial are listed on the bourses.
What attracts people to IPOs?
Even though Kamath is not very keen on taking his own venture public, he believes the recent frenzy in IPOs is good for the market. According to him, IPOs are simple products and that’s the reason behind this craze.
“In the stock market, usually greed is an enabler. IPOs are the simplest products for customers to understand. You apply, you get it (allocation), you get listing gains, you make money. It is natural a lot of people get attracted to it,” Kamath said.
“Generally, I think IPOs are good to grow the capital market. When a new type of company comes and lists, it is easier to grow the audience. Nazara (Technologies) came, now we have a gaming company on exchanges. It can attract a newer kind of audience,” he said.
Nazara Technologies listed with much fanfare earlier this week. In the opening tick, it gained 81 per cent over the issue price but soon tumbled. Many investors believe the premium it traded at is not sustainable given the earning profile.
Kamath said many IPOs are getting high subscription multiples because a lot of people are applying from multiple accounts to try and get share allocation. He said the exuberance is there also because the whole world is in a bubble territory, not just the IPO market.