How does Zerodha make money?

Short Answer

Zerodha has established itself as the number one stock broker and has way more users than its competitors in the Indian brokerage companies. Zerodha continuously reported rising revenues every year and and is a profitable organisation due to various factors which have led to their growth apart from collecting brokerage from traders.

Detailed Answer

Zerodha is the number one Indian discount broker and the company has progressed over various folds in the last few years. Zerodha continuously reported profits and even higher revenues year after year and reported an 87% hike in profits in the last financial year. Various factors have contributed to the growth of Zerodha as one of India's most profitable brokerage businesses.

Zerodha makes money from the following sources:

1. Brokerage from Intraday and Options trading:

Zerodha charges broker fees on every intraday trading transaction as 0.03% of the stock value or Rs.20, whichever is lower but does not charge any commissions on long-term investing. Zerodha charges a flat Rs.20 commission for trading in futures and options.

Out of all stock transactions in the country, 15% of the total stock market transactions by retail investors and day traders are made through Zerodha, contributing to their large brokerage collection and ultimately higher revenues.

2. Account opening Fees:

Zerodha charges a nominal account opening from its users to complete the account opening procedure, unlike other Indian stockbrokers. They charge Rs.200 for opening an account on their platform. This nominal fee contributes to a major chunk of Zerodha's revenue as they have more than 1 crore active users. And hence this allows the company to improve its products and services more than its competition.

3. Kite Connect API:

Zerodha offers its services to new companies, developing financial products, for programmers practising algorithm trading, an API called Kite connect API, which gives the programmer access to various features including executing orders in real-time, managing portfolio, streaming live market data in their application through their servers.

4. Limited Marketing:

Since its start in 2010, Zerodha as a company has always believed in execution rather than spending huge capital on marketing on various platforms. Zerodha only promotes its content via social media influencers and limited affiliate programs and majorly focuses on improving its product and user experience. This saves a lot of capital for the company for other expenses and contributes to the company's growth.

So, these are some reasons of the success of Zerodha's business model and establishing trust among its users.

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