Zerodha bracing for revenue drop due to SEBI's regulatory changes
Zerodha, a prominent discount broker in India, is bracing for a substantial revenue drop later this year. The firm's co-founder and CEO, Nithin Kamath, has attributed this anticipated decline to forthcoming regulatory changes. In a recent blog post, Kamath mentioned several challenges facing the company, including new regulations from the Securities and Exchange Board of India (SEBI), set to take effect on October 1.
Kamath anticipates a 10% revenue dip
Kamath has expressed concerns about possible changes to index derivatives regulations, which could significantly affect the company's earnings. "Index derivatives today are a significant portion of our revenue, and any change will impact us," he stated. He further estimated that such changes might lead to a 30% to 50% reduction in earnings.
Impact on Zerodha's referral program
Another factor contributing to the possible revenue decline, is the modification of Annual Maintenance Charges (AMC) under the new Basic Services Demat Account (BSDA) thresholds. Kamath explained, "We can charge full AMC from customers with a demat holding of ₹10 lakh and more, as opposed to ₹4 lakh today." Additionally, Zerodha's referral program has been impacted by new guidelines from stock exchanges, that limit payouts to registered authorized persons only.
Zerodha's assets under custody stand at ₹5.66 lakh crore
Despite such challenges, Kamath maintains that Zerodha remains in a strong market position. Zerodha's total current assets under custody stand at ₹5.66 lakh crore, with customers holding an unrealized profit of more than ₹1 lakh crore.
