India’s largest retail broker, Zerodha, will not be joining Cred, Groww and other promising startups that have recently raised funds from investors. Zerodha founder Nithin Kamath took to Twitter to explain why his company was not looking to attract investors even though funds were lining up to invest. “Right now, it’s probably the dumbest time for fintech companies like Zerodha to raise money. It’s pretty crazy the number of people contacting and the different offers, ”said Nithin Kamath.
Zero debt, no marketing expenses
Zerodha currently has over 32 lakh clients, beating traditional brokers such as ICICI Securities, HDFC Securities and even new age brokerage firms such as Angel Broking. Kamath has stated that Zerodha does not need the money and will not raise the money “just because someone is willing to give it to you”. “We are profitable, have no debt. And we don’t spend on marketing and advertising, which is probably the number one reason people fundraise, ”he added.
Right now, it’s probably the dumbest time for fintech companies like @zerodhaonline to raise funds. It’s pretty crazy the number of people contacting and the different offers. We might regret it in the future, but we don’t raise it and here are the counterintuitive reasons why. 1/7
– Nithin Kamath (@ Nithin0dha) April 7, 2021
Although he admitted that Zerodha might regret not raising funds in the future, he remained adamant that he did not. Nithin Kamath added that he didn’t want Zerodha “to grow up just for growth with random businesses,” but instead wanted to build things around the core competencies of the business.
Difficult to grow continuously
Zerodha is the leading player in the stock brokerage industry in India in terms of the number of active clients. Nithin Kamath, who is also the CEO of Zerodha, said the company he runs is directly linked to stock market fortunes. “The dynamism of our industry can disappear overnight with a 20% drop in the markets,” he warned, adding that taking investor bonds for continued growth would be difficult in such an industry.
The discount brokerage recently introduced measures that help clients make transactions that could result in large losses by using its “Nudge” feature. Nithin Kamath said this reduces their trading volumes, but his company is focused on getting “the right product for the customer.” “… All of these theses can be wrong. But the freedom not to be obligated to an investor is much more valuable than the biggest check, ”he added. Zerodha owns nearly 25% of retail volume in India and has one of the highest daily trades in the world, according to a recent report by Bernstein. Zerodha had self-assessed its worth at $ 1 billion in 2020 during a takeover of Espo.