Success story of Zerodha – The India largest broking start-up
“Do not chase the money, let it float towards you,” says Nithin Kamath, India’s youngest billionaire along with his brother Nikhil Kamath. The man has found clear gaps in the market and has come up with products to fill those gaps. Nithin Kamath is an entrepreneur, a stockbroker, co-founder, and director of Zerodha. Bangalore-based discount broking firm was founded in 2010. He serves trading services at discounted brokerage fees and a user-friendly interface with reliability. More than 15% of India’s retail trades are done through the platform called Zerodha, which is one of the largest discount brokerage platforms in the country. Trading and Investments are the two sides of the coin which everyone wishes to flip and experiment with but are reluctant to step in due to many reasons like lack of hefty commission and brokerage charges, knowledge, and uncertainties in the market, and so on.
What does the word Zerodha mean? It is derived from Sanskrit where rodha means barrier and the word Zerodha means zero barriers. Hence, the founder aimed at providing a hassle-free, low brokerage trading platform. He launched various platforms like Zerodha, Kite connects Varsity. Nithin was very much interested in the stock market and he got introduced to the stock market at the very early age of 14 when his marwadi friends told him about it and it was one of the easy ways of making money which was running into his mind. He started investing in the market at the age of 17. He had losses as well and he had made money out of it. But it was not sufficient for his survival. So he decided to join a call center where he used to trade the whole day and sacrifice his nights in the call center through which he made some money which he reinvested in the market.
After that, he joined a Franchise called Reliance money as a sub-broker and made a lot of money by adding big clients to Reliance money, and one day when he was in the gym he got introduced to his first client. Nithin showed his trading account to this gentleman who got very interested and impressed in Nithin’s passion and love for the share market. The gentleman asked Nithin to do that for him and Nithin happily replied yes.
He started moving from 1 client to 10 clients in a span of 1 month and he used to just login to an account. But it was difficult for him to login to 10 different accounts simultaneously. He continued to do this for a while and then came the year 2008, where the market crashed and Nithin made a decent amount of money which he reinvested in his business.
Few days passed and his brother joined him. His name was Nikhil Kamath. ‘Nikhil is a sharp trader and he is better than me in instinct’ admits Nithin Kamath. Nithin felt that he should take a break from the share market. He thought of his brother handling them as he is better at it. So Nithin stopped working for his clients and started something new. He felt digitization and online user-friendly platforms are the need of an hour when he first thought of starting Zerodha. This was when the Zerodha journey was initiated. Nithin Kamath also observed that the reason why the young generation is not willing to start trading is that there are high brokerage charges implemented on the transactions. Kamath’s goal was to become an online broker using the trending technologies that are more people-first than profit-first. Back then it was just an offline company. Nithin with his bunch of employees would go to individual houses, collect their documents, sign them and open their accounts. Meanwhile, Nikhil Kamath was focusing on the chess tournament. Nikhil was a national and international chess player. He liked sports so much that he dropped out of school at the age of 14 to play. Later he was helping his brother in his business.
Now the company has grown substantially, it was very difficult for his team to go to individual houses. So Nithin was very much pissed off. He thought that his business would not expand a lot.
Earlier investment processes were too complex and brokerage fees were very high in India. That was the reason why Nithin was constantly thinking about how he can simplify the process. He noticed that there is a big lag between the commissions charged by the other brokerage firms and the amount of money actually received by the customers.
The technology which was being used was too old and Nithin felt there is a need to introduce a smart platform that helps users to trade online comfortably. His aim was to serve the services at a low cost where the idea of charging low commission clicked into his mind. It was his need to attract more young customers who often do not step into trading due to high commission charges. Afterward, Nithin started investing in small Indian startups and his first investment was in a company called Tech-Labs. They helped him build a desktop trading named Kite. The Tech-Labs company members worked really hard to make the platform really simple and affordable to each and every individual.
Fast forward to the year 2010 when the company changed its brokerage system from 20Rs per trade to 0Rs per trade. This was the watershed of the company. Back then they only had just 60,000 clients and after this zero brokerage, they just gained 1.4 million new clients. With these intentions in his mind, he started his firm and today it has become the biggest discount broking firm. He thinks that ‘if we do not depend too much on foreign capital and invest for our own companies, the day is not far when India will become an economically strong country. To date Zerodha has never invested a penny in advertisements may it be Google ads or Facebook ads. They gained popularity through word-of-mouth publicity.
“It took a long time, it was a slow transition that happened over the last eight years. In our first year, we opened 3,000 accounts. When the cost of any product or service is less, people automatically question the quality. That was a big challenge for us right from the start. We were able to build a community around us, which helped in the long run. Even today we don’t spend any money on advertising,” he said.
Today, Zerodha is not only one of the largest brokerage firms in India but is thriving despite the coronavirus pandemic. In 2020, the pandemic really helped to grow their business because people were not getting a substantial amount of interest from the bank.
“Seeing this happen for the first time in my 15 years of broking. Account openings going through the roof after a crash in the markets, new customers being smart, not panicking, and telling them that it is a good time to start buying for the long term. It is unreal!”
They were just getting around 4-5% to 6% of interest on the FD’s or if they saved their money in the saving account. So people started investing in stock markets and that was when Zerodha gained around 1 million new customers in Quarter 3 and Quarter 4 of 2020. In addition, Zerodha has also partnered with a lot of huge stock market platforms and portals like Streak, Sensibull, etc to create more value for their clients.
“The problem we are trying to solve with this is how to grow the capital market ecosystem in India. It can only happen through educating people on a platform that has content and engagement both,” Nithin said.
In October 2020 the Kamath brothers entered the Forbes list of India’s 100 richest 2020. With a combined wealth of more than $1.55 Billion. “For me, wealth before all of this happened was a bigger car, better watch, and all of that, but now it is about being content and you hit that point where you are satisfied in life. Being in a nice house is part of it. I am not talking about the flashy house, etc. It should be a place where you can sit down quietly at the end of the day after a hard day’s work,” he says. That was how Nikhil Kamath became India’s youngest billionaires.
“India is very dependent on foreign capital to drive the country. For any country to do well, you need local residents to put their money in the market. The money shouldn’t just stay in fixed deposits and real estate. I want to encourage people to educate themselves and put the money in the ecosystem in some way or the other to drive growth,” Nithin added.
