₹25,620 crore foregone! Nithin Kamath shares why Zerodha stuck to the hard path of zero brokerage

Nithin Kamath, founder of discount broking platform Zerodha, recently revealed that the firm's decision to avoid squeezing a bit more revenue from customers has cost it around ₹25,620 crore in the last nine years.

In a post on April 16 on X, Nithin Kamath said Zerodha remains among the few brokers that still charge zero brokerage on equity delivery trades. Based on back-of-the-envelope calculations, he said that charging even 0.3% per trade could have generated significant revenue, but the company’s core philosophy has kept it from doing so. Most full-service brokers charge 0.3-0.5% as an equity delivery fee.

Why did Kamath choose not to charge any brokerage?

While highlighting the precarious nature of the broking business, Kamath said that their revenues are heavily tied to stock market performances and face regulatory risks, but despite that, they have not only refrained from charging a fee but also avoided new ways to extract revenue, such as pushing to trade more, cross-selling financial products and advertising.

That has, in turn, likely increased customer trust in the company as 25 to 30% of its accounts still come from referrals. Traders and investors who use Zerodha like what they see and tell their friends and family — a number means more to us than most metrics, and we’re genuinely grateful for it, according to the blog post tagged in Kamath's tweet.

He added that the temptation to make small tweaks, to nudge users a little harder or squeeze a bit more revenue, exists, but the "philosophy we started with on day one has stayed unchanged: don’t do unto others what you don’t want done unto you".

He said that in case he were burning money on advertising and incentives, they would have needed to find ways to make it back, and that’s where the compromises start. "We can offer zero brokerage on equity investing, free direct mutual fund investments, and dirt-cheap intraday rates. Our brokerage has stayed flat even as the rest of the industry has revised theirs. In fact, if we’d simply adjusted for inflation, we’d have to charge ₹50 today," said Kamath.

What has helped Kamath stay on the zero brokerage path?

According to the billionaire entrepreneur, a major reason why he has managed to stay on the no-brokerage path is the bootstrapped nature of his firm. No investors to show growth numbers to and no pressure to justify revenue targets has certainly helped this initiative.

"Not having to answer to investors or chase revenue targets is a huge advantage and, honestly, a blessing. It's what has allowed us to stick to our philosophies like not spamming users, not tracking behaviour, not having different pricing for different people, and not doing things that aren't in the interest of customers," said Kamath's post on X.

He said that it is a freedom that "we don’t take lightly".

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