Nithin Kamath's remarks spark public spat between Zerodha and Groww over direct mutual funds

A social media post by Zerodha founder and CEO Nithin Kamath triggered a public spat with rival investment platform Groww over direct mutual funds. Kamath's comments on platforms moving away from the direct mutual fund model prompted Groww to respond, leading to a debate between the two companies on social media.

The debate began after Kamath reiterated Zerodha's commitment to offering direct mutual fund plans at no cost. Without naming any company, he said the company will continue to offer direct mutual funds for free, even as several platforms that started with the same model have either shut down, changed direction or are rethinking the business.

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In a post on X, Kamath said Zerodha’s pricing philosophy has remained the same since it launched the discount broking model in India in 2010. The company decided then to charge a flat fee per trade, regardless of trade size, because the effort required to execute a small trade and a large trade is the same.

“When we started the discount brokerage model in India in 2010, we decided to charge the same fee regardless of trade size. The logic was simple: if the effort to execute a trade is the same, why should customers pay differently?” Kamath said.

The remarks came shortly after reports that Groww had introduced regular mutual fund plans under its subscription-based Groww Prime offering.

Kamath said Zerodha's philosophy has always been to keep investing costs low for customers. He noted that the company launched its Coin platform only after it was able to offer direct mutual fund plans and argued that charging percentage-based fees for mutual fund transactions is inconsistent with the idea of low-cost investing.

Kamath also highlighted that Coin manages nearly Rs 1.6 lakh crore in direct mutual fund assets and has helped investors save substantial commission costs over the years. “Direct mutual funds are a no-brainer if you’re a DIY investor,” Kamath said.

The post by Kamath also points to a broader shift in India’s investing industry. Several fintech platforms entered direct mutual funds in the past few years, but many later moved to other products or changed their revenue models. Direct mutual funds are popular with investors because they are cheaper, but they are difficult for platforms to monetise because they do not generate distributor commissions.

Groww responded with a detailed statement, saying there had been confusion around its latest offering. The company clarified that direct mutual funds remain the core of its platform and will continue to be available free of cost for do-it-yourself (DIY) investors. According to Groww, more than 1 crore investors have built mutual fund investments worth over Rs 1.9 lakh crore on its platform using direct plans.

"For every DIY investor, Groww stays exactly what it has always been: direct, zero-commission, and free. Forever," the company said. It added that it will continue to launch new features for direct mutual fund investors.

The company explained that Groww Prime is an optional subscription service designed for investors seeking research-backed recommendations, portfolio reviews and investment guidance. It said the new offering does not replace direct mutual funds, and investors who prefer to manage their own portfolios can continue using direct plans without paying any additional charges.

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"MF Prime is not a shift. It is an addition -- a fully opt-in product for a different cohort: investors who want research-backed guidance on what to buy, hold, exit, and rebalance," Groww said.

The company said many investors wanted to invest through Groww but held back because they needed help. MF Prime is meant for such users, it said.

"If you are a DIY customer on Groww today, nothing changes for you. Not the plans, not the pricing, not the experience," Groww said. "Any commentary claiming Groww has changed its approach to mutual fund investing is simply incorrect."

Direct plans are purchased without intermediaries and typically carry lower expense ratios, while regular plans include distributor commissions that are built into the fund's expenses. Over long investment horizons, the lower costs associated with direct plans can have a meaningful impact on investment returns.

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