Zerodha, India’s largest discount brokerage firm, has reported an impressive 62% jump in profit for the financial year 2023-24, taking its earnings to Rs 4,700 crore. The company also achieved a 21% revenue increase, bringing the total to Rs 8,320 crore. CEO Nithin Kamath confirmed these results on 25th September, emphasizing the company’s consistent financial success. The firm continues to set a benchmark for the industry with robust growth in both revenue and profit.
Operating Margin Hits 57%, Topping Global Companies
Zerodha’s operating margin for FY24 reached an extraordinary 57%, outperforming several major global tech companies. When unrealized gains of Rs 1,000 crore from its investments are considered, this margin could soar to 69%. For comparison, Microsoft reported an operating margin of 44%, Apple 29%, Google 31%, and Amazon Web Services (AWS) 37% in the same period. Even Nvidia, the leading chip maker, posted a margin of 64%, still falling short of Zerodha’s potential.
This impressive performance underscores the efficiency and profitability of Zerodha’s business model in the competitive world of brokerage firms.
Investments Drive Unrealized Gains
The unrealized gains that boost Zerodha’s operating margin stem from its smart investments in gold and shares. Kamath explained that a significant portion of the company’s profit comes from its investment portfolio. Zerodha’s net worth over the last three years has consistently stood at around 40% of its customers’ funds, making it one of the safest broking firms in India.
79 Lakh Active Clients and Growing
As of August 2024, Zerodha boasted 79 lakh active clients. While this number is lower than some of its competitors like Groww, which has 1.2 crore active clients, Zerodha continues to maintain a strong presence in the industry. It posted a revenue of Rs 6,875 crore and a profit of Rs 2,907 crore in FY23.
Future Challenges Could Impact Revenue
Looking ahead, Zerodha’s revenue growth could face challenges in FY25. Regulatory changes from SEBI, such as the True-to-Label directive, may impact the firm’s profit margins. This rule prevents stock exchanges from offering rebates to brokers based on trading volume, which could reduce Zerodha’s revenue by 10%. Additionally, SEBI’s move to limit retail investors’ participation in futures and options trading may cut Zerodha’s revenue by as much as 30-50%.
Despite these potential setbacks, Zerodha’s remarkable performance in FY24 highlights its position as a dominant player in India’s brokerage market. The company’s future will depend on how it navigates the evolving regulatory landscape.
