How Zerodha Conquered The Discount Broking Industry
A look into the history of the company and the factors that have brought it this far.
Nithin Kamath worked at a call centre at night. He was introduced to the stock market around the age of 17. He lost a significant amount of money during the 2001 and 2002 stock market crashes, as well as the 2008 market crash. After trading for over ten years, he was frustrated by the lack of a user-friendly online trading platform. He also noticed that most brokerage services at the time had high brokerage fees. He aspired to be a broker who prioritized people over profits.
Thus, Zerodha was established on August 15, 2010.
Zerodha started its journey as a discount broker, focusing on providing low-cost brokerage services to retail investors. The company took a major step forward in 2010 by becoming a member of the National Stock Exchange (NSE). This was a crucial development for Zerodha, as at the time, NSE had its own trading platform called NOW (Neat on Web), which greatly facilitated the brokerage firm's early operations. Using NSE's trading platform, NOW, allowed Zerodha to focus on the operational side of the business, rather than technology. However, this platform came with certain limitations, such as a lack of customization options and compatibility with other exchanges. Recognizing this, Zerodha decided to develop its own trading platform, partnering with Omnesys Technologies to create Kite. This new platform was built using Omnesys' NEST trading software, which is a widely used and popular trading software in India, used by companies such as ICICI Direct and Kotak Securities.
This partnership with Omnesys Technologies enabled Zerodha to launch a robust and reliable trading platform that was easy to use and offered advanced features like real-time market data, charting tools and research reports. This was a crucial step in the success of Kite and helped Zerodha establish itself as a leading discount broker in India.
Kite, Zerodha's flagship trading platform, was designed with simplicity, speed, and ease of use in mind. It boasts a clean and modern interface that is easy for investors to navigate. The platform offers advanced features such as real-time market data, charting tools, and research reports to aid in making informed trading decisions. Its ease of use and advanced features were well received by customers and helped Zerodha attract more retail investors. The popularity of Kite among retail investors has played a significant role in the company's growth. Zerodha continues to update the platform with new features and tools to make it more efficient and user-friendly, keeping up with the ever-evolving demands of the market.
In 2017, Zerodha launched Sensibull, a platform which allows users to create and manage options strategies and track their performances. Sensibull also provides educational material such as webinars and lectures to its users. It makes options trading more accessible to newcomers. It also allows users to backtest and optimize their options strategies, which can help to identify potential opportunities and minimize risk. The product was profitable within a year. As of 2021, Sensibull has over 5 lakh users.
In 2019, Zerodha undertook a Series D funding round and convinced American hedge fund management company Tiger Global Management and the Indian venture capital firm Sequoia India to invest 30mil USD collectively. Zerodha announced that the funding would help expand the company's product offerings and to increase its customer base. Since then Zerodha has grown considerably, crossing the 10 million client milestone in 2022. It has also diversified its business. As of 2021, Zerodha is the largest discount broker in India and has a market share of around 20-25% in the Indian retail broking industry.
Zerodha's partnership with Upstox was declared in 2019 as a strategic partnership between two of the largest discount brokers in India. The partnership allows Zerodha customers to access a wider range of financial products and services offered by Upstox, such as options trading and mutual funds. It provides Zerodha's customers with access to Upstox's trading platform, which is known for its advanced features and tools. Customers can also take advantage of Upstox's research and advisory services, which can help them make more informed trading decisions. The partnership is a win-win situation for both companies as it allows them to expand their customer base and increase their market share. Zerodha and Upstox have similar business models and target a similar customer base of retail investors. The partnership allows them to leverage each other's strengths and offer a more comprehensive suite of services to their customers.
Zerodha's success can be attributed to a few key factors
One of the main factors that has contributed to the company's growth is its low-cost brokerage model. Zerodha's business model is based on providing low-cost brokerage services to retail investors, which has made it possible for retail investors to trade in the stock market at a much lower cost than traditional brokers. This has helped to increase the number of retail investors and has been a major driver of the company's growth.
Another key factor that has contributed to Zerodha's success is its user-friendly trading platform, Kite. Known for its ease of use and user-friendly interface, the platform has made it easy for retail investors to trade in the stock market, even if they have little or no experience. The platform offers advanced features such as real-time market data, charting tools, and research reports to aid in making informed trading decisions. It has also expanded its offerings over the years to include a variety of financial products and services such as mutual funds, bonds, and insurance, which has helped the company to attract a diverse range of customers. Additionally, the company is known for its strong customer support, which has helped to build trust and loyalty among its customers. Zerodha has also been successful in building a strong brand and creating a positive image in the minds of retail investors through its marketing efforts. Furthermore, the company has been able to adapt its business model to changes in the market, such as the growing popularity of online trading and the increasing demand for low-cost brokerage services, which has helped it stay ahead of the curve and remain competitive in the market.
Zerodha has provided a seamless and user-friendly experience for users wanting to trade, and invest in stocks, mutual funds and other securities. Which has made it the largest retail broking industry.