ET Entrepreneur of the Year: Nithin Kamath - the man who brought the average Indian to Dalal Street

When the high-profile jury met on January 24 to pick the winner of the Entrepreneur of the Year category of The Economic Times Awards, there was little confusion over who the recipient should be. As the leader of a company that became a disrupting force in the cut-throat stockbroking industry with a cheaper product and an efficient trading platform, emerging as the market leader in the past decade, Zerodha founder Nithin Kamath was a unanimous pick.

“I thank everyone at ET for all the acknowledgement over the years,” Kamath told ET. “ET was the first to cover us in news in 2011 and gave us our first award — Bootstrap Startup of the Year in 2016 — and then Startup of the Year in 2020. ET has been my companion at the breakfast table for over 20 years, from when I first started trading. Reading about Zerodha in ET has been an unreal experience over the years.”

Kamath was a stock trader for over a decade before he founded Zerodha— derived from the English ‘zero’ and the Sanskrit ‘rodha,’ which means barriers — in 2010 with younger brother Nikhil Kamath. Since then, the bootstrapped startup, which was equipped with only a brokerage licence and a team of thirty people, has emerged as the most-used retail investment platform in India.

On March 31, 2022, Zerodha had more than 6.8 million active users and a market share of almost 18% of retail trading volumes. More significantly, even as most startups have been struggling to turn profitable, Zerodha posted a net profit of `2,094.3 crore and total income of Rs 4,964 crore in the financial year ended March 31, 2022. The company has valued itself at $3 billion, based on valuations of employee stock options.

Unlike most other startup peers, the firm does not have private equity firms as investors. Zerodha is credited with scaling up the discount brokerage model in India — trades, irrespective of their ticket-size, are processed at a flat fee. This has enabled millions of first-time traders to join the platform. Besides its core business, Zerodha sells mutual funds directly through its platform Coin. The platform also offers products such as trading in government bonds and treasury bills. Zerodha has its own enterprise fund, Rainmatter, which is incubating 12 startups in the wealth management segment.

The company has received a licence to set up an asset management company (AMC). Industry participants are watching to see whether it will be able to shake up the AMC space with technology, innovations and low-cost products. Kamath’s success has been in recognising that a large section of active day traders, who work on wafer-thin margins, need a cheaper and savvier interface. Having worked as a stock trader, he understood what they wanted.

As venture capital funds shied away from backing his plan, Kamath relied on savings and contributions from friends to start the online brokerage firm. In 2009, he picked up a concept — flat-fee brokerage — which had been discarded by leading local broking firms. Although the concept of flat fee or discount brokerage in India was not introduced by Zerodha, the firm can be credited with popularising it.

Kamath had observed the product closely during his stint as a sub-broker with Reliance Money, which launched such a product in 2007 but subsequently scrapped it due to falling volumes. Today, online brokerages such as Zerodha have broken into the big league, forcing traditional rivals such as Angel Broking, ICICIdirect, Sharekhan and Motilal Oswal to raise their technology game and change their business models.