In the stock and commodity markets, Zerodha, an Indian provider of financial services, acts as a brokerage. It is well renowned for its unconventional and disruptive approach to the conventional brokerage business model. The Kamath brothers, Nithin, and Nikhil, founded Zerodha, a discount brokerage firm, with their own money on August 15, 2010.
There is hard data to support the claim that Zerodha was one of the greatest startup concepts ever. The statement itself, however, does not elicit any criticism. Few individuals in India were aware of the Zerodha business strategy when it first entered the brokerage industry as a bargain broker. The term “Discount broker” has been added to the language of Zerodha. People realised they needed Zerodha since they were unconsciously looking for an alternate way to invest their money. Zerodha was the first bargain broker in India. In less than ten years, Zerodha surpassed ICICI Securities to become India’s largest stockbroker in terms of active users. With more than 6 million active users as of right now, Zerodha has a volume-based influence over more than 15% of all transactions.
Origin and History
The brothers Nikhil and Nithin travelled in totally different directions but ultimately ended up at the same place. Because schools never explained why something needed to be done and instead asked kids to complete the assignment, Nikhil detested going to school. When Nikhil was 17 years old, he took his first work at a call centre and chose the night shift since he traded stocks during the day. When he was 18 years old, his father gave him his funds and asked him to manage them. This is when he began to take trading seriously. By effectively handling their money, Nikhil attracted more clients from the call centre, including his boss, and demonstrated his trading prowess.
Nithin, however, continued his education and studied engineering at the Bangalore Institute of Technology. Nithin shared his brother’s fascination with the stock market and spent most of his college years trading stocks and commodities. Nithin and Nikhil launched their own business named Kamath Associates, which was a franchise of Reliance Money where they worked as Propriety traders, after gaining a significant amount of knowledge and experience by handling money for numerous clients.
The brothers decided it was time to solve the issues and make it simpler for young investors to enter the stock market and begin their investment journey after realising the challenges and obstacles that traders and investors face while working for a full-service brokerage like Reliance Money.
On August 15, 2010, Nithin and Nikhil Kamath founded Zerodha. The terms “Zero” and “Rodha” are combined to form the name “Zerodha”. The word “Zero” alludes to the number “0,” while the word “Rodha” is a Sanskrit word that means “obstacle or hurdle.”
The name, which translates to “zero obstacles,” thereby captures the core tenant of Zerodha’s business concept, which is to offer traders and investors in India a frictionless experience. By coining the phrase “discount brokerage” in India, Zerodha revolutionised the stockbroking industry and paved the door for numerous other discount brokers in the country. Zerodha was already making money when it was a startup, which allowed the Kamath brothers to expand and build the business into what it is now without having to seek outside funding.
Due to Zerodha’s distinctive business model, the startup won numerous accolades along the route to the top, including The Economic Times’ “Startup of the Year” Award in 2018. Currently, the corporation is worth $2.2 billion. Let’s examine the amazing Zerodha Business Model, which revolutionised the Indian stock brokerage market and brought the revolutionary concept of discount brokerage to the nation, paving the way for businesses like Grow and 5paisa.
Zerodha Business Model
The Zerodha Business Model is a multi-branch tree that includes all the numerous goods and services that the Zerodha company offers, as well as the tactics used to generate income and keep costs to a minimum.
Zerodha’s business model trees has 6 branches:
THE KITE APP: The interface that Zerodha provides to traders and investors is the Kite app. It is an essential component of the Zerodha business plan. Users can purchase or sell stocks, futures, and commodities from the NSE, BSE, and MCX using this user-friendly program with an attractive user interface. After documents are uploaded, and validated within a week. Opening an account on Kite is simple, and even students without a source of income can do so. Creating several watchlists and setting up notifications to prevent trade misses are just two of the app’s many intriguing features. Through the app, you can also submit IPO applications.
No matter the amount of the order, the app charges a fixed price of Rs. 20 per order for intraday and futures trades
COIN APP: Like Kite, Zerodha’s Coin app allows users to buy and sell Mutual Funds directly from Asset management firms without having to pay a commission or other fee to the seller. Initially, Coin charged a DP fee for every sale transaction, however on August 24, 2018, it became free for all users. Now, Coin lists over 2000 Direct Mutual Funds. An essential component of the Zerodha business plan is the currency app. The Coin app lets you schedule SIPs and stop or adjust your term plan according to your needs.
VARSITY: For the Indian stock market, Zerodha has a vision. a belief that everyone wishing to invest money or trade should be able to do so with ease on the Indian stock market. And Zerodha introduced Varsity, a free and open online learning platform, to carry out this ambition. Even still, Zerodha’s revenue is not equal to that of Varsity. The Zerodha Business Model includes it as a key component. For novice investors who wish to learn more about the stock market before investing their hard-earned money, Varsity offers free tutorials and videos on the stock market and finance. Varsity’s 13 courses cover a wide range of subjects, including personal finance, taxation, technical analysis, and many others. Additionally, it is a fantastic marketing technique used by Zerodha to draw in new clients. When someone goes to Varsity to learn about the stock market, they may end up becoming a client of a brokerage company.
RAINMATTER STARTUP INCUBATOR: Another programme launched by Zerodha in 2015, Rainmatter, invests in cutting-edge business concepts. Additionally, it serves as an incubator for startups, nurturing some fantastic business concepts like Small Case, Digio, and Streak. It exposes these businesses to Zerodha’s enormous client base and gives them access to a variety of tools, such as their platform for developing applications using application programming interfaces (APIs), which can be used to design applications and test them to validate goods.
TRUE BEACON: Zerodha introduced True Beacon in 2019 as an asset management programme for HNIs and UHNIs who desire to participate in India’s economic expansion. Zerodha wants to reinvent how HNIs and UHNIs build wealth via True Beacon. It is an addition to the Zerodha Business Model that is quite fresh.
KITE CONNECT API: Zerodha provides Kite Connect API, a platform that allows startups, developers, and retail investors to create fully functional trading platforms. It is a group of various APIs that can be used to design algo trading settings, backtest a project, or create new trading applications. Small Case, which enables you to invest in an idea rather than a business or stock, is one of India’s most promising businesses. It is one of the startups that Zerodha has incubated through Rainmatte.
Conclusion
The story of Zerodha is proof of how innovation and a focus on the client can upend established markets. Zerodha has succeeded in redefining brokerage through its business strategy, making it more inclusive, reasonable, and technologically oriented. The strategy taken by Zerodha is a significant illustration of how a business may add value in a constantly changing market environment by defying convention and putting the demands of its customers first.
Written by – Sneha Jain
Edited by – Mehansh Barthwal