'A lot of first-time users who have entered the markets after Covid are increasingly investing in mutual funds, exchange-traded funds, and stocks for their long-term goals.'
Participation of retail investors in equity markets has been on the rise over the past few months.
"We're in a bull run right now and so see a lot of new interest in the markets. So how long this bull run continues will be a big factor for revenues and profits," Nithin Kamath, founder and CEO, Zerodha, tells Puneet Wadhwa.
Zerodha was one of the early starters of the discount broking cult in India. Do you think this space is becoming overcrowded now?
The term 'discount broking' does not mean much anymore.
Price is no longer as big a factor as it once was.
What users today are increasingly looking for are good products and platforms.
Today, nearly all brokers have some kind of a discount pricing model and the pricing model on its own doesn't hold too much importance.
The reason this model works is because of the cost efficiencies involved.
Our focus for the past several years has been to ensure we offer a good product that users like, and this has paid off quite well.
Right now, brokers with the best platforms are seeing the biggest spikes in terms of new users.
How does Zerodha plan to stand out over the next few years?
Broking is a high-beta business. What this means is that the revenues for a broking company are quite closely correlated with the market performance.
We're in a bull run right now and so see a lot of new interest in the markets.
So how long this bull run continues will be a big factor for revenues and profits.
To be able to stand out, we will have to continue to find a way to stay ahead of our competitors in terms of our products and offerings.
When can we expect Zerodha to go the Robinhood way and list at the bourses?
As a business, we have always remained bootstrapped right from the beginning, and that's how we have managed to build a profitable business in the last decade.
Since we have not raised any external capital in the past, we don't have any additional pressure of giving exit to any investors.
We do not see any value that listing would bring to our business.
We may think of listing some time in the future, but only if the listing adds value.
How has the investing behaviour of retail investors and high-net-worth individuals changed since the onset of the Covid pandemic in 2020?
In the past one-and-a-half year's lockdown, we saw a lot of first-time investors entering the capital markets.
A lot of first-time users who have entered the markets after Covid are increasingly investing in mutual funds, exchange-traded funds, and stocks for their long-term goals.
All these first-time users are making use of the extra time they have to take stock of their personal finances.
How has trading via the mobile platform played out for Zerodha?
The mobile order volume accounts for about 75 per cent of the orders placed on our platform.
Mobile trading has seen rapid growth to being the dominant mode of trading with more people using mobile phones and cheaper data costs over the past several years.
When we started offering a mobile app back in 2014, only 10 per cent of orders came from the app.
Yes, we are seeing a lot more participation from Tier-2 and Tier-3 cities as well.
Will more lockdowns, if any, increase the retail participation as people save on costs and divert those surplus funds towards equities?
It's anybody's guess. But it's unlikely that we'll have a sharp surge in investor participation like we did the first time.
Also more than lockdown, I guess participation has got more to do with how stock markets perform.
If this bull market continues, participation of retail investors might continue to increase going ahead.
How has Zerodha's customer base grown in the past year and what is the road ahead? How many would-be first-time investors? Is the investor base getting younger?
We have opened close to 3.7 million accounts in fiscal year 2020-2021.
The trend has continued somewhat in the first quarter of 2021-2022 as we managed to open close to 1 million new accounts.
As pointed out earlier, our growth depends entirely on how the markets perform in the future.
We are constantly working towards providing a wholesome experience to our customers.
Almost 70-80 per cent of our investors are in the age group of 25-35 years.
How are investors viewing the fintech/food tech companies after the Zomato IPO?
The response has been quite strong because these are brands that today's millennials identify with.
Ultimately, investing in these companies is a bet on continued strong growth.
But we'll have a better sense of how investors look at these companies once we see the response to the upcoming Paytm and PolicyBazaar IPOs.
Feature Presentation: Aslam Hunani/Rediff.com