Stock-broking platform Zerodha could take 30-60 per cent revenue hit in the coming months once SEBI’s proposed regulatory framework for index derivatives is implemented.
In a blog post, CEO Nithin Kamath wrote that they are ‘bracing for a big revenue hit this year’. He listed the reasons for this as the expected new regulations around index derivatives trade and the true-to-label circular issued to the stock exchanges. In total, the company is expecting around 40-60 per cent drop in revenues.
The online stock broking major recorded a 61 per cent jump in its consolidated profit after tax (PAT) to ₹4,700 crore in FY24, from ₹2,909 crore in the previous year. The company clocked a revenue of ₹8,320 crore during the year under review, from ₹6,875 crore it reported in FY23, Zerodha Co-founder Nithin Kamath said in the blog post.
Kamath noted that the SEBI’s ‘true to label’ circular will result in a 10 per cent drop in revenues and its new rules around index derivatives will create a 30-50 per centdrop in revenues for the company.
The new regulations are expected around index derivatives trade and the true-to-label circular issued to the stock exchanges.
“We have run a decent-sized partner and referral program from the very beginning relying on customer word of mouth. Customers referred other customers, and we shared a small percentage of the brokerage as a commission. We have had to stop these payouts because the exchanges issued new guidelines saying a payout can be made only to Authorised Persons (AP) registered on the exchanges. Due to this, thousands of people referring will now be reduced to only a few registered APs, affecting growth,” he noted.
Zerodha has also seen a slowdown in terms of business due to competition from Groww and Angel One and others. Its share of active clients on BSE has dropped to 16 per cent in June 2024, compared to 17 per cent in March 2023 and 19 per cent in March 2022.
Additionally, Zerodha has withdrawn the account opening charges which it used to levy on its users, responding to competition in the market, which will also convert into a significant revenue drop for the company, Kamath commented.
Kamath also commented that the company has diversified through the Rainmatter fund, where the group owns stakes in around 120 companies and has already invested ₹680 crore.