How Zerodha became one of the few profitable unicorns

In India, around 300 stockbrokers are registered with SEBI and several stock exchanges. As of June 30th, 2021, there are 314 registered stockbrokers in India (including debtors or banned) on the National Stock Exchange (NSE).

When looking for the finest stock broker to open your demat and trading account with, one of the most obvious variables to consider is the overall number of active clients. Although a large client base does not guarantee better service, being a large firm reduces the likelihood of the brokerage firm disappearing or running out of service too soon, thus it is considered safe.

Also just because the firm is listed under SEBI it does not make it reliable, as many firms do get expelled or they just shutter the firm and declare bankruptcy This causes a lot of problems for their clients.

So choosing the right brokerage firm is important where you can put all your eggs in without much worry.

What is a brokerage firm?

A brokerage business is basically a platform where investors and dealers may purchase and sell stocks. The company operates as a go-between for buyers and sellers and provides a trading platform for everyone. On these transactions, it charges a commission. When an investor purchases a stock, he or she must pay a transaction fee.

Previously, brokerage services were only provided in the firms' actual offices. The majority of transactions are now done online through websites and applications. Trading has become considerably easier and more efficient as a result, particularly for day traders.

Inception

Zerodha Broking Limited is an Indian financial services company, which offers retail and institutional brokering, foreign exchange and commodity trading, mutual funds, and bonds. Established in 2010 by Nithin Kamath and Nikhil Kamath, the company has its headquarters in Bangalore and is present in several major Indian cities.

Zerodha is a financial services firm that is a member of the NSE, BSE, MCX, and MCX-SX and offers brokerage services to stock market participants.

The company is led by the brother duo Nithin and Nikhil, Nithin being the founder and CEO of the company always had a keen interest in trading he started trading at an early age whereas Nikhil being an amazing trader himself manages every trading-related thing in the company.

Nithin's inspiration for starting this company was when he saw the gap between the commissions charged and the money in return obtained by the clients his vision was to make trading easy and hassle-free for people and also by providing services for low costs, he wanted more young people to start trading who are often overwhelmed by the high commissions.

It took them a long time to build their business rapport. It was a gradual transformation that took place during the last decade. In its first year, Zerodha opened 3,000 accounts. In India, when the price of a product or service is reduced, people begin to question its quality.

That was the most difficult milestone for the Zerodha founders to overcome. As a result, they established a community, which aided them in the long term. Zerodha still does not spend money on advertising marketing.

Nithin and Nikhil Kamath, the brother team behind Zerodha, are at the pinnacle of their profession. They are India's richest self-made billionaires. The brothers began trading as youngsters and never finished high school. They were zealous about it, and they recognized a lack of transparency in the field.

They were both Reliance Money and Way2Wealth sub-brokers. Their trading prowess led to the founding of Kamath Associates, a firm that handles other people's money. The duo came a long way and now Zerodha is at its zenith.

Services provided by Zerodha

Zerodha is the number one stockbroker right now. They offer a great online trading platform, charge low broker fees, and are the most transparent securities dealer. Continuous improvement and innovation made them the fastest-growing fintech company in India. Here are the key strengths of Zerodha:

• The largest stockbroker by active clients, market volume, and new customer acquisition.
• One of the most secure, reliable, and trustworthy brokers.
• Offers the most cutting-edge online trading tools.
• Zero brokerage fees for delivering equity and mutual funds.
• The maximum brokering invoiced is Rs 20 per trade. You save between 60% and 90% on brokering compared with traditional brokers.
• Provides up to 20x leverage on intraday deals.
• Provides zero-fee direct mutual funds.
• Suitable for all types of investors, including active and passive investors, entry-level, active traders, and algo traders.

Also, Zerodha has its web and mobile trading app known as Zerodha kite along with Coin which is a mutual fund investing platform, Varsity is an investor education program, and many other tools are available. Zerodha also offers Small case (thematic investment platform), Streak (algo & strategy platform), Sensibull (options trading platform), and GoldenPi (bonds trading platform).

How Zerodha works

Zerodha operates on an online discount brokerage model, where users can only access online trading services. It relies primarily on technology to serve its consumers and has very few branches and offices.

With the help of technology, Zerodha tables to scale and cut operational costs, allowing them to sustain massive profits despite offering low-cost trading. It has an advantage because it was the country's first bargain broker. Zerodha was founded to remove barriers to trading, hence the name Zerodha.

Challenges faced by Zerodha.

Every startup faces challenges when at its nascent stages and Zerodha too faced some rough days but pulled itself up and now is India's leading brokerage firm.

Zerodha is an online platform with no offline support branches, the most significant difficulty that this company faces is inadequate customer assistance and a lack of quick customer care.

Also because of the volume of trading, the platform experienced technical difficulties. As a result, client satisfaction suffers. It also does not provide stock advice or market-related calls that would allow its consumers to select what to purchase and sell.

When compared to other top brokers in India, Zerodha's customer care was lacking.

Business model

Zerodha operates on a B2B model if you don't know what a B2B is let me break it down for you B2B is Business to business is a form of transaction between businesses. Zerodha charges a small amount to the dealers for transactions because of which the exchanging volume is normally high. Zerodha operates on a 'low margin, high volume model.'

The expense assortment of more modest amounts from a bigger number of customers leads to a great income for Zerodha. also the online design of the company keeps up with the low operational expenses

The company is widely used across the nation Zerodha charges a small amount of 0.03% 20 rupees for each F&O and Intraday equity trade. The company charges an annual 300 rupees fee for account maintenance, and a large volume of transactions takes place so the company generates enough revenue. There is a rapid growth in the user base over the few years. Zerodha without any financing valued at $1 Bn now the company has a valuation of $3 Bn

Zerodha does not invest directly but it has initiated funding also Zerodha is a business incubator for a fintech startup "rain matter". To date, Rainmatter has made 11 investments of which 7 are lead investments and their most recent investment was made on Jan 28, 2021.

Zerodha has now received approval from the SEBI (Securities and Exchange Board of India) to provide mutual fund services, according to Zerodha co-founder Nithin Kamath on Twitter. In February 2021, the company applied for a license for the same.

Competitors

The company faces serious competition from full-service brokers such as Kotak Securities, HDFC Securities, Motilal Oswal, etc. Discount broker companies like Upstox are its competitors. The few drawbacks of Zerodha are their customer service is not up to the mark thus it leaves clients dissatisfied. Also, they don't have offline customer support Daily reports, Quarterly result analysis, news alerts, and many more were missing here which other top brokers have.

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