Zerodha profit jumps 61.5% in FY24; CEO warns of regulatory challenges
Source: Business Standard
Discount stock broker Zerodha reported a 61.5 per cent year-on-year jump in profit during the financial year 2023-24 to Rs 4,700 crore, while revenues jumped 21 per cent to Rs 8,320 crore.
If the brokerage firm were a listed entity, it would be the 63rd most profitable company.
Zerodha’s chief executive officer Nithin Kamath, however, has cautioned that the company faces significant challenges ahead due to several regulatory changes.
These changes, termed ‘regulatory risks’ by Kamath, include possible changes in the norms on index derivatives, a surge in the securities transaction tax (STT), and a true-to-label mandate by the market regulator Securities and Exchange Board of India (Sebi).
Sebi has proposed seven key changes in regulations around index derivatives with an aim to limit retail participation and, thus, the losses in the speculative segment.
“Sebi recently published a consultation paper on index derivatives that was open to public comments. We expect this paper to materialise into regulation sometime in the next quarter. Index derivatives today are a significant portion of our revenue, and any change will impact us. We anticipate a 30 per cent to 50 per cent drop in revenue,” wrote Kamath in a blog.
Kamath added that the company may face a 10 per cent revenue dip once Sebi’s “true-to-label” circular comes into effect from October 1.
Stock exchanges charge a fee based on the overall turnover from a specific broker. The slabs for the fee depend on the turnover, which leads to lower transaction charges if the turnover is higher. Broker firms received rebates at the end of the month on the difference between what they charged the customer and the fee levied by the exchanges on the broker.
Sebi has now guided stock exchanges to charge a uniform fee, irrespective of the turnover from them—thus putting an end to this practice of rebate.
Simultaneously, effective October, STT will go up as per the announcement made in the Union Budget.
“Although the impact on options trading is minimal, we anticipate a significant impact on futures trading,” said Kamath.
Kamath further added that there would be an impact from the changes in basic services demat accounts (BSDA) on revenue and the removal of the referral programme, which could impact growth.
While dismissing the possibility of listing, the Zerodha founder also detailed the company’s plans for diversifying the business. It plans to launch margin trade funding (MTF), public market and private investments, loan against securities (LAS), insurance, and its fund management business.
Kamath said that given the profitability of the last three years, Zerodha’s net worth is almost 40 per cent of the customer funds they manage—making them one of the safest brokers to trade with.
Zerodha’s total current assets under custody, which refers to the total assets held in the demat accounts, stand at Rs 5.66 trillion. As of June, Zerodha commanded a 16 per cent share of the active clients on BSE.
First Published: Sep 25 2024 | 7:37 PM IST
