Zerodha, one of India’s top discount brokerage firms, is getting ready for a big drop in revenue due to new regulatory changes. According to Nithin Kamath, Zerodha’s CEO and co-founder, these changes from SEBI (Securities and Exchange Board of India) will take effect on October 1, 2024.
Kamath shared that Zerodha’s revenue and profits have already stopped growing. He said, “We are already seeing revenue and profits level off, and we expect a 10% revenue drop later this year due to SEBI’s new ‘true-to-label’ rule.”
He also expressed concern about possible changes to rules around index derivatives, which are a major part of Zerodha’s earnings. Kamath estimated these changes could cause a 30% to 50% drop in their income.
Another issue is the change to Annual Maintenance Charges (AMC) under the new Basic Services Demat Account (BSDA) limits. Right now, Zerodha can charge AMC from customers with holdings over ₹4 lakh, but under the new rule, it will only apply to those with holdings over ₹10 lakh. Kamath added, “This, combined with us removing the account opening fee, will significantly reduce our revenue.”
Zerodha’s referral program has also taken a hit due to new stock exchange rules, which now only allow registered authorized persons to receive payouts. This has led to fewer referrers for the company.
Despite these challenges, Kamath remains confident in Zerodha’s market position but admits the company is heading into a tough period due to these regulatory changes. This situation highlights the major effects new regulations are having on India’s brokerage and fintech sectors, even for leading companies like Zerodha.
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