Nithin Kamath is the founder of the biggest stockbroking company, Zerodha.

Who is Nithin Kamath?

Nithin Kamath was born on October 5th, 1979 in Karnataka, India.

He completed his education at the Bangalore Institute of Technology in electronics and telecommunication.

Nithin Kamath’s Early Life:-

Nithin Kamath had earlier worked in a call center before entering the world of the stock market.

At the age of 17, he was introduced to the stock market by one of his friends, and that completely changed his fortune. At that time, he used to work in the call center at night and then trade in the morning hours.

He earned a good amount of money from the market during that time but then lost almost 5-10 lakh rupees during the 2001-2002 financial crisis when the markets heavily crashed.

During the crash, he kept working in the call center and made some capital for trading.

However, at that time, he landed a cheque from a foreign high-net-worth individual (HNI) to manage his money.

With this help and other savings, he started as a sub-broker and partnered with Kamath Associates, as a proprietary trader, and became a franchisee of Reliance Money in 2006.

He then made a lot of money by adding big clients to Reliance Money.

Soon after that, he again lost a huge amount of capital in the 2008-09 financial crisis.

He worked there for over six years and made a good sum to start his venture.

Later, in 2010, Nithin, with his younger brother Nikhil, started their own stock-broking firm, “Zerodha”.

What is Zerodha?

Nithin, along with Nikhil, founded Zerodha in August 2010. The company was started with a team of five people.

Zerodha is derived from the Sanskrit word Rodha, which means “obstacles”. The name Zerodha means “No Obstacles.”

By keeping the meaning of the company in mind, the company aimed at providing a hassle-free, low brokerage trading platform.

The main target of the company was the younger generation, who are more tech-savvy because they contribute more to the capital market ecosystem.

With just five members, the company now has over 1300 employees.

Business Model of Zerodha:-

Zerodha works on the principle of the “Low Margin and High-Volume Model”.

The tagline of the company is “The Free Trade Zone.” Source: Zerodha Web

The examples given below are the very few distinguishing features of the model:

  • The company hardly spent any money on advertising or marketing because they believed in word-of-mouth publicity, thereby making it a very low operating cost model.
  • The company operates on a B2B model.
  • They provide free equity delivery investments.

Zerodha Founder Nithin Kamath’s Success Story:-

After analyzing the market, the founder got to know that people were paying heavy commissions for their trades. This in turn leads to less money earned because, from the profits earned, a good sum of money is paid as brokerage, thereby leaving behind a small amount of money in the hands of a trader.

Putting this idea into mind, the idea of charging a low commission or low brokerage struck his mind.

With the aim of attracting young customers, he implemented the concept of low commission, and today the company has become the biggest discount broking firm.

Kamath was convinced that India would soon become an economically strong country because new businesses had begun to invest in their own ventures.

The login portal of the company is also very user-friendly and helps beginners.

How is Zerodha making money?

The company, as such, does not have any straight-forward revenue model, but it is one of the most used trading networks in the country.

The company charges only Rs. 20, or 0.03% brokerage, which is lower than all other broking firms, for every F & O and other intraday equity trade.

The company charges only Rs. 300 annually in the name of account maintenance.

With this concept, the company saw a rapid increase in its user base, which contributed 2% to the revenue of Zerodha.

After seeing the success of Zerodha, Nithin Kamath wrote: “I want to tell people that it is possible to be successful at business by questioning the true cost of revenue, valuations, and growth, instead of continuously chasing them.”

Zerodha’s Innovations and New Additions:-

To stay competitive, the firm launched many products that are very versatile. The following are the new introductions in their business portfolio:-

                                     New Introductions 
KiteTrading and investment platform using latest technology, thereby providing ease to the customer to trade and transact
ConsoleProviding in-depth reports and visualizations for getting more insightful ideas
SentinelThis platform helps you to create market alerts
Kite Connect APIFor building innovative trading and investment platform
Z ConnectPublish articles and blogs related to the stock market, trading, and investments.
CoinCommission-free purchase of mutual funds which will be directly delivered in the demat account of the customer
VarsityProvides a vast collection of stock market lessons and tips on the go
Rain matterIncubates funding as well as mentorship to startup companies, as well as by giving a minority stake in the exchange

Challenges and the competitors faced by Zerodha:-

There are always two sides to a coin. After having tremendous success, Zerodha faced several challenges, as below:

  • Being an online platform, the company lacks a backbone in providing offline support, leading to major challenges faced by the company in terms of inefficient customer support and a lack of quick customer service.
  • Due to high market traffic situations, many times the application goes down or there is an increase in the charting errors.
  • The customers are unable to decide what to buy or sell because the company does not provide any stock or market-related advisory calls.
  • The company also doesn’t provide any research reports like others, because many other stock companies provide either weekly or quarterly reports.
  • Upstox, being a discount broker company, is its competitor.
  • The company faced serious competition from full-service brokers like Motilal Oswal, Kotak Securities, etc.

Awards and Honors received by Nithin Kamath:-

  1. The emerging brokerage firm of the years 2014 and 2015 by BSE & Dun and Bradstreet
  2. Emerging Entrepreneur Award 2014 by the Confederation of Indian Industry (CII)
  3. Ranked in the list of Forbes 30, under 30 in 2016
  4. Startup of the Year (Bootstrap) 2016 by The Economic Times
  5. Topped the list of IIFL Wealth Hurun India 40 in 2020
  6. The Economic Times also featured Nithin among the top 10 Indian businessmen to watch out for in 2016

Conclusion:

The owner, Nithin Kamath, does not believe in running after the money and wishes to continue with his own low-margin strategy and do the right things for a very long period of time.

In the last eight to nine years, the company has become the top-most brokerage firm in the country.

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Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.