Recently gold and silver crashing and we lost 50 crores in one day and that's just gold and silver. Imagine if it were to happen across the equity markets.
Back in 2010 we spent three lakhs for a website and 7 lakh rupees for computers for the office.
That's the only money that's gone into Zerodha as a business. In the last 6-7 years I never hang around with people who are talking startups, business, revenue, profits, etc. If you hang around with people like that, we'll slowly start becoming like that.
If today an entrepreneur comes to you and they say that they're also building a broking business, they come to you for money and would you want to fund it through Rainmatter?
So the thing is, welcome to this first episode of an unnamed show. Most people figure out a name and do this but we do this the other way. The idea of this show was for most people Zerodha means it's you and Nikhil to some extent, it's K. But there are more people behind what Zerodha is today and not many of people are known to people apart from the LinkedIn profiles and occasional posts. But the idea of the series was to put those people on the spotlight because a lot of them have accumulated so much context about the business. I keep telling the new people who join the business like these are some of the smartest people in the Indian capital markets and for one or the other reason they don't get to share what they want to do.
So, we figured we'll take all the people who made Zerodha the success it is today and shine the spotlight on them, so to speak. Because I've been this is my 10th year, so I know a lot of I have more context. So, this is my colleague Rohit. We figured we put somebody new who doesn't know a lot of the things that has happened over the last 16 years. So, we'll see how it goes. Hopefully I don't watch it.
I mean so I mean the additional context, the additional idea is also to start off with you is because people know you, you've done so many interviews in the past and you keep tweeting and posting content out there as well but also there's so much behind the scenes context that people don't know whether it's about the business, it's about the industry or how you think about it. Right. So that is what the idea was to bring it out to the public.
The human side of Zerodha.
The human side of Zerodha. Yes.
I think I want to start off this conversation just to ask you because you've done this so many times in the past. You've answered hundreds of questions whether it's around Zerodha, the markets, just your philosophy, right? But what are three topics or three questions that you would want people to ask but no one's really asked you?
No. Firstly, you know, it feels odd to be doing this because I haven't done it for at least two, two and a half years, you know. So, so it's not showing so far. Yeah. So yeah in terms of you know in terms of all the questions I get asked I think people don't ask about the risk of doing Zerodha as much. I mean because at the end of the day we are a leverage business so you know our customers who come trade with us as in I think 85% of our revenues comes from leverage trade.
Leverage as in you know people who trade for more than the money in their account. So the risk of that is significant and people have short memories you know. So and the last 15-16 years from the time I started Zerodha it's actually been kind of quite a pleasant ride. You know there has not been really big incidents. In a while 2020 was a big incident. But then you know the markets bounced back so fast. So it never really felt as a broker that you are in trouble. So yeah. So I think the risk of doing this business is pretty high.
We had a small preview though that crude going negative and I mean recently gold and silver crashing.
Yeah. And we lost 50 crores in one day, right? As in 50 I mean we had lost 70 crores, we recovered 20 crores, we are down 50 crores on that day. And that's just one day just one day and that's just gold and silver. Imagine if it were to happen across the equity markets, right? you know and so yeah so right from the start of the business you know I've been taking out and keeping 10% of all the profits we make as a buffer saying that potentially 10% of profits that we make we have to give back at any point of time you know so that 10% has added up and it's significant right now. But that's a risk you know and what else? I think see no that I don't know it's not just about Zerodha it's about me personally so people assume success is easy.
Like you know people come you know look at you as successful and say dude your life must be so easy but it's complex.
I'll blame your tweet for it.
No, because it's really tough, you know, because and the problem is I don't you know, not just about me. It's about all the entrepreneurs who've seen some success, you know, you're made out to be like this demigod and so yeah, so I think the complications that success brings is extremely hard and there is no one talking about it.
Yeah. You know, like I think being on the spotlight all the time and just being under the radar for whatever you say.
Yeah. That's a given, right? But the thing is for example like say someone joined the company. Okay. Say someone joined the company 10 years back. Now he's contributed nothing in this journey but say assuming he leaves right now. So he's assumed that he has contributed so much in the success like how do you manage him?
Yeah. you know, so are you hinting towards...
No, but you know, I think it's a tricky thing, you know, is I mean, of course, it's really hard being in spotlight, you know, like so many people come to me and, you know, like they assume that I have answers to all the problems and definitely I don't have, you know, so yeah, so basically I think managing this complication that success brings is something that is not spoken about much.
Right is there anything third you've spoken about risk you've spoken about the success...
Okay so we'll come to those aspects as well in the later stage but what I wanted to speak about now is the Zerodha philosophy right when I came in last year I've only heard about the Zerodha philosophy right. And obviously the word philosophy is sort of cliched as well because every organization says that they have some philosophy but when it comes to our philosophy it is what has kept us really grounded as far as I've seen. Even K who's our CTO he also says that Zerodha's real moat is its philosophy because we get to stick to it. What is the Zerodha philosophy and like if you have to explain it to the outside world what is that Zerodha philosophy and why does it matter so much?
See the thing is at the core of it, it's about being the best possible broker a customer can get. Like that's really the core of it like you know the best I mean if I when we started Zerodha back in 2010 I was not trying to be like you know like this large broker like you know we had very small dreams and but basically we were saying that you know traders have this problem and we want to solve for this and that has remained the core philosophy as in how does for example like when we started the business we said we're going to not spend any money on customer acquisition like at that time it was not like a philosophy it was because there was no money in the table you know so but we knew that we don't want to spend any money on client acquisition and that's something that we stuck around you know for all this while because the thing about is okay the cost of acquisition of a you know when you spend 1,000 to 2,000 rupees as a CAC for a customer acquisition you're as a business you're then wired to recover that back.
Yeah. And there are so many things that can potentially you know can be done to recover and it's not good for the customer.
Yeah. By the way, that doesn't exist in any finance app. It's literally every app is meant to trigger you into doing something.
I mean, that is the business, right? Like it's not even that. It's like I think I mean, not to dunk on platforms, but everybody gets some undue joy about sending X number of notifications a day as if there's some god-given target.
See, the thing is I know me and K keep talking about this that we are in this Goldilock zone. We essentially you know we can become a large business without raising any external capital without really having this traditional targets.
And that all of that I mean and the reason we are able to stick to the philosophies is because of that because if we had gone raise money from someone else then for sure we would have to be you know wired towards this.
Yeah. And yeah so you know I think the philosophy is that the core philosophy is like just be the best possible broker for a customer and the best possible broker will be a broker who doesn't get into nudging trades doesn't do random push notification doesn't do spammy no I mean like for example the Varsity you know we have the education initiative you know which we've been running from 2013 not once I think we've gotten a few million people register on that not once have we asked any of those millions of people to open an account with Zerodha like you know so so you know we are in essence not really like your traditional you know type.
I forgot where this line I think you might have said it in an interview or I don't know where it was. It was I wanted Zerodha to be the broker I didn't have.
Yeah. Yeah. I mean that's a whole thing is in 2010 we were saying you know that like let me build something that I don't have as a trader and the thing is a lot of people start off with that as a good intention but what happens is along the way you raise money and then once you raise money you'll keep having to raise money it just becomes a rat race where you're just...
So yeah so you know for example not having anyone in the team look at the revenue targets. No, I mean not giving any revenue targets to anyone on the team.
Yeah. In fact, we don't even have a sales team, right? So, no sales team, no revenue target. I mean I met with this founder recently and I was telling him the financials for this year and he started asking me like you know like last year to this year the financials are kind of flat and he was saying you know doesn't your team get involved in all of this so and I was telling him you know we don't work like that. And you know generally in terms of data also I don't think we don't have a data team as such you know which analyze customer data and then say what will get him to click on this button versus this button.
Correct. So see I come from a marketing background and I've done marketing before I entered Zerodha then when I hear obviously I knew about this before I joined right the no advertising philosophy no pushy sales and all of that but now that I'm actually inside and I see how things work when I try to explain this to marketeers outside that we don't do advertisements we don't push we don't do any push notifications none of that their mind sort of boggles around it like how are you getting your business.
My I want to understand from you this philosophy that we have obviously we started this 16 years ago and obviously you said that we did it that time because we didn't have any money at that point but now that we have so much money now that there's so much more competition right every broker now wants to what is doing ads is doing influencer whatever they're doing right just to get business how do we or how do you hold the company back from taking those actions that need to be taken to compete with these people in the market.
I mean so until 2013 I was not really close to any startup founders you know so there was no startup experience or anything like that no benchmark for you to no nothing of that sort so in 2013 I went to a startup conference and where people started saying like CAC and MAU and these words I still remember I was in my head I was like dude what are they talking you know so and then someone I got to know that cost of acquisition was CAC and they asked me what is CAC and I said minus 500 rupees because we were charging an account opening fees of 500 you know so yeah but coming back to your question okay what is competition.
Anyone that is doing the same business.
But what is the competition?
What is a competition? Anyone that is taking away business from us is a competition.
No. What is the competition? Like and is competition is what time frame? Because competition if you put a time frame to it, you know you really are going to be wired to that competition, right? Like if your competition is like forever. So you can't have like someone winning someone losing etc.
So it's not that's a problem. The problem is like a lot of people around us think of this as a competition.
It's not a competition. The competition is to be best version of yourself.
Right. That's very cool. Very cool.
And that would have been a better title for you. And that's a target. That's a goal. I know it's not easy to be sticking to that goal saying, you know, how do I get up and continue doing the best possible for my customer?
Right. you know, and so many forces around me trying to dissuade me and triggering me to do something that seems like it's good for...
I think that was the question like how do you stay sane when everybody around you is going insane?
Yeah, I think having K helps, you know. So the worst part about finance is you have numbers everywhere. Everything is quantified. There's absolutely nothing which is unquantified. So yeah. It's I mean that's like one of the biggest challenges is to not get dissuaded by you know people around me and even when I think about what next after Zerodha and now what next for Zerodha you know in case I was not there what next you know it's the next leader who comes in who thinks and acts like because that's what makes Zerodha right you know it's not like you know the product etc definitely it helps but what makes Zerodha is how unorthodox we are as a business.
We are an outlier in every sense of the word.
Do you think the philosophy that we have and the way we do our business if someone had to start a business to say a broking business today and if they were to say take the playbook of Zerodha and try to build it in 2026. Do you think that is possible?
See back in 2010 when you started the only money that went into the business is 10 lakh rupees. Like we spent three lakhs for a website and 7 lakh rupees for computers for the office.
And we had a rented office and that's the only money that's gone into Zerodha as a business till date.
You know, so now anyone starting off today, how is it possible to even start something like that, you know. So because you know so what it means is someone starting off will have to raise money from people and as soon as you raise money from someone it's almost impossible for you to be saying things like what we are saying. So I think it's almost next to impossible to be a Zerodha in today's world. But why does someone have to be Zerodha like you know so probably I keep thinking about the broking business and you know what potential problems can be solved. I think like a broker who is you know like advisory first broker and that broker will unfortunately not be able to build a business for millions of customers you know because then you know you get screwed you know so or you will have to screw them over. So yeah so if a broker is happy being small so I think there's an opportunity for advisory first broker in between all these brokers you know including us who are in the platform business as such you know so.
But that being small is a very unnatural aspiration in today's day and age.
That's a problem the problem is no one is happy being small.
Yeah because everyone is always comparing you know there's always a competition.
So and also the thing is now once you raise money to start a business you have to generate returns.
So in a sense I think it's a wrong thing with the capitalism of today.
Or you raise from Rainmatter.
It's a thing about capitalism as in it's like the world is always pushing you to grow and that's a problem and someone has to slow down here and question saying growth at what cost and essentially you know that's what we are doing.
When we started the business so you said no we couldn't afford to spend money on CAC etc which means we couldn't advertise incentives whatever it is like at what point did you figure out this because our referral program is a unique story which you'll have to tell. At what point did that idea dawn on you saying that referrals could be a growth lever for the business and how did that entire story about us figuring out a referral program because it was very unique.
So when we first decided on Zerodha when I first went to the website designer the first two utilities that were built on our website was one was a brokerage calculator which was revolutionary in its own sense which was it was revolutionary because you know it made it transparent you know simple but it changed the way broking works in India and second thing was referral calculator so like we said you know you refer 10 people he generates so much business how much can you make? So referral was like the first thing because even before Zerodha you know I was running this like different I was running like a different groups on platforms like Orkut and Facebook and there was a Trady and things like that. So then I knew that you know how do we get our customers to talk about us and yeah so it started right from then I think for us referral as a lead source as in like 25% of our business has that's just what we know of.
I mean what you don't know of.
Yeah I think it's pretty easily much more I think if 25% have come to us.
So I would say you know probably 50-60% more.
I mean I was also a referral customer because I learned from Varsity and my father and my brother sort of pushed me into using Zerodha because they were very familiar with the platform and you probably didn't come through a...
Yeah. I didn't come through a referral. Yeah. Shadow referrals. So yeah. So in a sense you know we figured that you know giving a customer a reason to refer will possibly be a good reason. I think it was going really well until last 2024 when SEBI's regulation, exchanges regulation came in and said that you know you can't really pay these referrals and then there was clarity on this so now we're about to restart.
About to restart you know so yeah so it's essentially like a way to say Thank you. You know, so thank you for talking about us to your friends and but we so in the initial days we used to pay 10% of the brokerage for as long as the customer stayed with us. We were saying thank you forever. Not many businesses do that. I can't I mean maybe there are other models where it's a lifelong referral fee. But at least in India I couldn't I mean I don't know. We were probably the only few.
I know. I know. I mean like if I could go back in time, you know, we would have probably said thank you for 10 years or something because we couldn't afford to give a whole lot of money in the initial days also.
Correct. Yeah. So yeah, but then it worked out really well for us as a business. So and yeah so hopefully now that the business also is plateauing you know that's also a reason why we thought you know we should bring it back again.
But even without that I think still 15% of the customers again maybe 20-25 it's more or less not really changed dramatically.
I mean because we don't advertise like you know so our customers are talking about us to their friends and you know so so yeah so it's quite crazy actually how many people come to.
I mean I can't think of many other businesses where word of mouth does it's like the chief brand ambassador for our business almost.
This next question has created a lot of debate internally especially in the post-COVID period. So there's this perception that we are not a platform that is for beginners. The typical perception that people have about Zerodha is you know XYZ platform is meant for beginners but Zerodha is meant for serious people who have a lot of money especially traders. We're not really beginner friendly. And this has led to a lot of questions amongst ourselves but it's not really true. In fact if somebody actually took 2 minutes to actually use the platform they would have a completely opposite take of what it but whenever somebody says I mean I get annoyed but like what goes on in your head? Do you feel like just punching?
But the thing is when you started off, we wanted to be a platform for active traders. Like you know, so when someone says that I'm like okay there's truth to it. There is some truth to it like you know. So until 2016-17 we hadn't thought about investors. We had said we're going to we are building a platform for traders.
Not that they would have given money also but that's interesting.
No, because that was our hook, right? Like when we started Zerodha also the idea was we're going to get the most active traders in the country to trade with us and it worked.
And only by 2016 once K you know launched this Kite the app right and then once we realized that the app is you know super fast friendly and it's so convenient. So then we suddenly our ambitions grew and.
And was it also because of the digital boom that happened because of Jio?
No that was 2016-17 onwards. We had thought about it before that.
Like you know so and it kind of coincided you know very well. So yeah so 2016-17 is when we first said we'll go out and start attracting investors and that's also when we had gone zero brokerage for equity investment. Right. So and then what happened was the direct mutual funds in India we could start offering that and we had an option to either bring everything on the same app or keep it separate right so we decided to keep it separate like you know one was Kite for investing in trading and there's Coin for mutual funds and you have to realize that this was a time of web apps. This was not you know not everyone app. So, in hindsight, I think we should have gotten those two platforms to merge and provided a single experience because for a client you know who does both investing and mutual funds as an investing, trading mutual fund, he has to install two apps, correct?
Automatically he thinks because I have to install two apps it's probably complex.
Correct. But we had good reason at that point it would have cluttered the experience I don't think apps would have I don't think the technology was at a place where it could handle all the scale of all that.
Absolutely as in and the customer profile also becomes different for both right and to a certain extent there are hard constraints on what it could do.
Yeah I mean I think you know like Ben rightly said I don't think technologically we were ready until now to integrate and offer it on the same app like right now we're working on you know on making it happen we can transact on mutual funds on Kite but that's also I think one of the reasons why people feel it complex and other thing is you know Kite is completely clutter-free and so there's no 52-week high low there's no top losers the smart money is saying you know so many people on our platform are buying the stock.
Yeah. All potentially all the triggers. Like we don't really have a page to trigger people. So because now that you're opening app and you don't have any of these triggers, it is probably bound to feel a little more intimidating.
Like you know so we're also working on it but it will be a like a page where you can visit if you want to get triggered so but it won't be like a default page but yeah that's I think some of these reasons together has probably led to.
But they're more like misunderstandings rather than reasons.
I think in terms of I mean I've used all our apps, all competitor apps. I find it ridiculously, you know, I mean, I find it ridiculously hard to use them.
This next question ties into the second answer you gave to the first question which was most you said that most people don't understand the risks of business. Of course the I mean the one line you used after that MCX incident that I still remember was it feels like we are picking up pennies in front of a steamroller. But that's the losing money is the outcome of the risk. But today most people think that oh you know broking is easy there's a beautiful platform you press a button they just pass it on to the exchange there's no risk. What could potentially go wrong apart from the mother of all risk is leverage risk but like if you were to explain to people saying that dude this is more complex than what you think it is like how do you define how risky being a broker is apart from the outcome which is losing money.
So I think the first risk is just the onboarding risk like you know you onboard a for example like some terrorist trades on your platform like dude how do we yeah how do you check that yeah so in they have happened in other businesses by the way banks whatever it is this is not a remote risk. So of course there's a onboarding risk and then once a customer starts trading with us. I mean see this thing is there are maybe like 5 million customers streaming data from the exchanges and we send we get this data from the exchanges on a lease line which you have no control on. So and if say something were to go wrong with the lease lines which we have no control on somebody digging the road we are buggered right and that is when customers come to us and say that oh why have you I mean it can happen for multiple reasons or say once the order comes to us before the order gets placed on the exchanges there's a span risk okay like we need to ensure the customer has enough sufficient funds and he checks off on all these portfolio risk as such you know so which exchanges mandated before the order gets placed then once the order gets placed from our server at the data center to the exchange server there's a lease line that connects we have to send the order through that lease line and assuming once the order is placed and this line gets screwed or someone said like you know Mumbai Metro I remember that happened I think during Mumbai Metro construction the lease lines were damaged and we were wow okay so yeah so if this lease line goes I can't just reconcile this order that is placed on other lease line because it's a big process you know so yeah so there are multiple risks So operational risk is immense because once you know say for example we have to pay out funds every day okay every quarterly settlement we send out all the funds in account that's a massive amount by the way we send out like 16-17,000 crores oh wow and that money on that day what if you send out the wrong account oh this is India there's no getting it back I mean so has that ever happened? No, it's not happened. But it's a risk.
As in so yeah. So I think all of this risk exists and it's not immediately apparent because our screens look so nice.
Yeah. But yeah, but I don't know. I mean we have to live with the risk as in.
This next question is it's a little bit micro. I joined in 2017 and until 2019 things seemed relatively boring at least to me. Nothing much happened but what happened after 2020 to my mind it's the most insane phase I've seen in my short-lived you might have seen the calm thing so.
No but I think 2015 to 2020 there were I think 1.5 crore client additions.
2015 to 2025 yeah roughly.
There was 10 crore additions like in the last 6 years we've added the entirety of Indian capital markets history all the growth put together.
Absolutely as And it's kind of ridiculous right as in what just happened. Have you internalized it? I still haven't.
It doesn't because I feel you know because anytime growth happens you know suddenly like this you know excesses get built in the system and that's one of the reasons like I'm generally pessimistic about it because the whole run up seems like.
Yeah. Yeah. Yeah. No, like what would have otherwise taken 20 years.
Like so yeah so I don't know I mean it's tough to internalize and that's why you know like every time the stock prices or competition or exchanges go up you know I'm feeling more bearish.
So I mean I want to go back to that 2020 era like what was that because I'm sure you wouldn't have thought of that. Imagine that.
