Zerodha is a leading discount brokerage firm in India that was founded in 2010 by Nithin Kamath. The company’s aim was to provide cost-effective and technology-efficient trading platforms for modern traders and investors. Zerodha has been able to attract a large user base due to its innovative approach and focus on providing value to its customers.
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Zerodha Highest Bootstrapped
Zerodha has a unique distinction of being the highest bootstrap company in India with a user base of over 64 Lakhs customers. The company was built on the principle of frugality and has been able to achieve success without raising any external funding. This has enabled the company to maintain complete control over its operations and focus on providing the best services to its customers.
Zerodha’s Net Profit
Zerodha has reported an impressive growth in profitability for the fiscal year 2021-22, with a consolidated net profit of Rs. 2,094 crore, which is an 87% increase from the previous financial year’s 2020-2021 figure of Rs. 1,122 crore. The company’s operating revenue has also shown a significant increase of 82%, reaching Rs. 4,964 crore in FY22 from the previous year.
Zerodha has been able to achieve this remarkable growth by focusing on cost optimization and providing value to its customers through innovative products and services.
Zerodha’s Revenue Model
Zerodha makes money through various sources, with the following breakdown:
- 70% of Zerodha’s revenue from broking and trading fees.
- 15% from treasury investments in debt and fixed deposits
- 3-3.5% comes from float, which is unused customer funds parked as short-term FDs with clearing corporations
- 15% from various charges such as account opening fees, annual maintenance charges, DP charges, and others.
Zerodha’s business model allows free equity investing, with active trading clients subsidizing non-paying equity investors. Interestingly, the majority 85% of the Zerodha’s trading revenue comes from 10-20% of traders.
Let’s explore the various revenue streams of Zerodha.
How Does Zerodha Make Money
#1. Zerodha Makes Money Through Account Opening & AMC Charges
Zerodha charges Rs. 200 for online Demat account opening for intraday, equity F&O, and currency F&O trading. While you can open the trading account free of cost.
However, if you want to open an MCX commodity account with Zerodha, you will need to pay an additional fee of Rs. 100. Zeridha also charges an extra fee for offline account opening.
Charges for Zerodha Account Opening –
| Segment | Online | Offline |
| Equity trading and demat account | 200 | Rs 400 |
| Equity trading, demat, and commodity account | 300 | Rs 600 |
Zerodha AMC (Annual Maintenance Charges)
Zerodha charges AMC of Rs. 300 per year or Rs 75 per quarter for maintaining a Demat account.
Three stock brokers – Upstox, Groww, and Fyers, do not charge any annual maintenance fees.
#2. Zerodha Makes Money Through Brokerage Charges
Zerodha’s revenue model is based on its lowest brokerage charges of 0.03% or Rs. 20 per trade, whichever is lower. Moreover, Zerodha offers equity delivery trades at zero brokerage cost, which is a unique and attractive feature for its clients.
These low-cost trading services have helped Zerodha gain a large market share and become one of the leading players in the Indian broking industry.
Here are the Zerodha brokerage charges:
| Trading Segments | Zerodha Brokerage Charges |
| Equity Delivery | Rs 0 (Free) |
| Equity Intraday | 0.03% or Rs. 20 per executed order whichever is lower |
| Equity Future | 0.03% or Rs. 20 per executed order whichever is lower |
| Equity Options | Rs. 20 per executed order |
| Commodity Futures | 0.03% or Rs. 20 per executed order whichever is lower |
| Commodity Options | Rs. 20 per executed order |
| Currency Futures | 0.03% or Rs. 20 per executed order whichever is lower |
| Currency Options | Rs. 20 per executed order |
#3. Zerodha Earn Money Through Other Charges
Zerodha generates revenue from various charges in addition to brokerage fees.
- Zerodha Charges For Auto-square Off – Zerodha levies a charge of Rs. 50 for auto-squaring off all open intraday positions at or after the cut-off time.
- Zerodha Depository(DP) Charges – Rs. 13.5 (charged by CDSL + Zerodha on the selling of stocks bought in delivery)
- Zerodha Pledging Charges – Rs. 30
- Zerodha Call and Trade Charges – Rs. 50 per order
- Zerodha Off-market transfer charges – Rs. 25 or 0.03% of the transfer value (whichever is higher).
- Zerodha Payment gateway charges – You can add funds in Zerodha through netbanking with charges of Rs. 9 per transaction except for UPI (No charges on UPI).
- Delayed Payment Charges – Interest charged 18% a year or 0.05% per day on the debit balance
#4. Zerodha Makes Money Through Intraday Trades Charges
Zerodha also earns revenue through its charges on Intraday trading. For equity intraday trading, Zerodha charges 0.03% or Rs. 20 per trade, whichever is lower. It’s important to note that Zerodha charges a maximum of flat brokerage fee of Rs. 20 per transaction irrespective of the transaction size.
You can also get the margin up to 5 times (20% margin) in Zerodha for equity intraday using the product MIS and CO. Zerodha doesn’t provide a margin on equity delivery (NRML).
#5. Zerodha Earn Money Through High Volume of Transactions
Zerodha’s business model is based on a high volume of transactions. As more and more people trade on Zerodha’s platform, the revenue from brokerage fees increases.
Rather than charging a higher fee per transaction, Zerodha focuses on providing a user-friendly trading platform that attracts a large customer base.Through this approach, Zerodha earns a flat rate of Rs. 20 on the millions of transactions executed daily.
The result is a highly effective business model with significant revenue potential. This model has helped Zerodha become one of the largest stockbrokers in India.
#6. Zerodha Earn Money Through Incubation of Startups
Zerodha earns money through the incubation of new businesses by providing seed funding and mentorship to startups through its innovation hub, Rainmatter.
As these startups grow and become successful, Zerodha benefits from its stake in their success through equity ownership, providing a source of revenue for the company.
Additionally, successful startups in Zerodha’s portfolio can also help attract new customers to its trading platform and other services.
Here is a list of some of them:
#1. Smallcase: An investment platform that enables users to invest in pre-selected baskets of stocks or exchange-traded funds (ETFs). You may find the promocode for Smallcase.
#2. Streak: An algo-trading platform that allows you to create trading strategies without any coding knowledge.
#3. Sensibull: A platform that simplifies options trading for retail investors by offering advanced trading tools and strategies.
#4. Digio: A digital document verification and management platform that helps businesses digitize and streamline their workflows.
#5. TradeLab: A market research and analytics platform that provides insights into market trends, sentiment analysis, and trading strategies.
#6. LearnApp: Online learning platform that offers courses and tutorials on a wide range of subjects including finance, investing, and trading.
#7. CRED: Credit card management platform that rewards users for paying their credit card bills on time and provides tools for managing multiple cards.
#7. Zerodha Makes Money Through True Beacon
Zerodha launched an alternative investment fund (AIF) called True Beacon in 2019 to help wealthy individuals deal with market volatility. With a minimum investment of $2 million, True Beacon returned 13% or more in its first year.
Zerodha earns revenue through True Beacon’s charges of 10% of the profits as a performance fee.
#8. Zerodha Marketing Strategy for Higher Profitability
Zerodha’s marketing strategy focuses on offering cost-effective and user-friendly services to attract young consumers who were hesitant to invest due to high brokerage charges and outdated technology.
Zerodha believes in the power of word-of-mouth marketing and building brand credibility. They also educate millennials about trading, instead of spending huge amounts on advertisem*nts.
To increase profitability, Zerodha can diversify product offerings, focus on upselling and cross-selling, personalize marketing communications, and expand its reach through digital channels.
Conclusion
Zerodha is a successful discount brokerage firm in India that has achieved impressive profitability and growth by focusing on cost optimization and providing value to its customers. Zerodha earns its revenue through various sources, including account opening and AMC charges, brokerage charges, other charges, and intraday trade charges.
The company’s revenue model is based on its lowest brokerage charges of 0.03% or Rs. 20 per trade, whichever is lower, and it also generates revenue from various charges in addition to brokerage fees.
Overall, Zerodha’s innovative approach, cost-effective trading platforms, and focus on customer value have enabled it to become one of the leading players in the Indian broking industry.
