INTERVIEW: Zerodha founder defends the ‘self-valuation’ of nearly a billion dollars⁠ — and why he never raised funds from investors

Nithin Kamath, co-founder, ZerodhaBCCL
  • The 10-year old profitable startup which has been bootstrapped all along also saw its revenues touch ₹950 crore in FY20, up by 11% from last year.
  • Co-founder and CEO Nithin Kamath said the $1 billion is conservative, comparable to a listed peer like ICICI Securities, and backed by the strong growth in revenue last year.
  • In an interview with Business Insider, Kamath shares why having no external funding actually helped the company.
Zerodha decided to buy back the company’s shares given to its employees at a price that took the valuation of the online broking firm to ₹7,000 crore, nearly $1 billion. Founder Nithin Kamath’s defence of this ‘self assessed’ valuation is that it is ‘conservative’, comparable to a listed peer like ICICI Securities, and backed by the strong growth in revenue last year.

The 10-year old profitable startup which has been bootstrapped all along also saw its annual revenue touch ₹950 crore at the end of March 2020, up 11% from a year earlier. The success of the startup also booked Kamath a place in the Hurun rich list of billionaires with a net worth of ₹6,600 crore.


Financial MetricICICI SecuritiesZerodha
FY20 revenue₹1725 crore ₹950 crore
Market Valuation₹16500 crore ₹7000 crore
Valuation/revenue multiple9.5 times7.4 times

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Kamath explains how they valued their company and believes that the valuation would have been higher if they were valued as a technology firm. “Given our profitability in the last few years and price-to-equity margins this is a fairly conservative valuation from our standpoint. We derived this by looking at our closest publicly- listed competitor ICICI Direct and thought to be valued on similar lines. This number could have been much higher if we had been valued as a tech firm, rather than just as a brokerage firm as people value tech businesses based on growth,” Kamath told Business Insider.

According to reports, Zerodha makes for 15% of the Indian retail trading volume with a customer base of 2.8 million. The average age of users is between the age bracket of 25-35.

Multiple plans for the next few years

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Zerodha’s next few years are planned with new features, including setting up a NBFC. “We will soon allow clients to avail loan against their shares and mutual funds via our NBFC entity, we have applied for our AMC license in February which might take a year or two to set up, and enabling Indian residents to invest into US listed stocks,” shared Kamath.

Kamath added that from the ESOP pool of ₹200 crore last year, employees will be permitted to sell 5-50% of the 33% of their shares that vest this year. About 800 employees are set to benefit from the buyback plan, just ahead of the startup’s 10-year anniversary. “The quantity of shares an employee can sell will be based on performance,” he said.

Why Zerodha never went to external investors?

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While startups turn to investor money for growth, throughout their journey, Zerodha has never raised money. But as their journey grew, investors have come knocking their doors. “Yes, we have been approached for being funded multiple times but today, we don’t really have any need for external funding. The need to raise huge sums of money arises when there is a requirement to spend on marketing etc., which we feel that there is currently no need to do so. Also, not having any external board of investors, allows us to be nimble and move fast which is an edge in itself,” he said.

No marketing

Kamath shares that Zerodha has never relied on any marketing or paid promotional activities. “This organic growth worked in our favour because we didn’t have to spend huge amounts of money on marketing. Our customers word of mouth was the best marketing for us,” he said.

Smart hiring
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While the company put a lot of focus on customers, it did that by building a resilient team. “We have deliberately tried to build a certain kind of growth culture within the company and hired people who fit in our model. This has helped in retaining our employees, in fact the first 100 employees who joined us are still with us,” said Kamath.

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