How Zerodha is well suited to be a top 100 company in terms of profit in the coming years?

In FY20, Zerodha’s core broking business reported revenue of INR 1093 Cr, with a profit of INR 592 Cr, as per the financials of Zerodha Broking Limited. The company is leading the market with a huge margin, with the second best company Upstox reporting a net loss of INR 37.05 Cr in the same year.

In comparison to the non discount brokers as well, Zerodha now has the highest number of active customers which has increased phenomenally in 2020. Zerodha has been growing 100% month on month in the lockdown and its growth is much higher than other biggies like ICICI and HDFC Securities

These numbers for a bootstrapped company without any marketing expenditure and frugal way of building the company clearly differentiates them from current startups and their valuations. Nithin & Nikhil Kamath have been building the company like how other traditional companies were formed focussing more on the fundamentals rather than advertisements and marketing.

Also I am big fan of Mr Nithin Kamath, CoFounder of Zerodha for his ideology of not raising money just because someone is ready to give it to you and building a company around core competency & growing the business on fundamentals. You can check the complete twitter thread here

While investing in stock markets has become more popular in recent times, overall penetration remains low — only 2.78 crore Indians invest in the stock markets, which is around 2% of the country’s population. In comparison, over 50% of Americans own stocks. Even in neighbouring China, the percentage of the population that invests in the stock markets is 7%. India’s 2 percent figure indicates that there’s plenty of headroom for India’s stock market penetration to grow. So given the potential of growth of investors in stock markets in the coming years and Zerodha’s rate of acquiring customers, its customer base would surely increase at a very good rate going forward in the future as well.

Also just looking at the numbers for FY20, which would surely increase as Indian investors penetration increase in the stock market, it’s well placed to have its place in top 100 company in India in terms of revenue & profits in the coming years. Just a heads up to justify my claim, Jubilant Foodworks Ltd, one of the top 100 company in terms of market capitalisation had reported revenue of INR 3954 Cr and profit before tax as INR 393.5 Cr, so numbers of Zerodha doesn’t look that bad currently as well.

So to conclude, it would be very interesting to track the growth of Zerodha in the coming years and in my personal opinion, it has huge growth potential.

Thanks for reading this!