Private Capital
The Day of the Unicorn: Silver Linings Playbook
12 Nov 2020

To believe in unicorns, you need a generous capacity for whimsy. How else can you comprehend a YouTube channel’s transformation, in a decade’s time, into the country’s second-highest valued edtech company? Or a six-year-old digital payments company growing its business five times to $25 billion in just the past year? Or, for that matter, a bootstrapped online brokerage firm executing an ESOPs buyback at the height of a pandemic that brought the economy to a halt? “It all seems unreal,” says 41-year-old Nithin Kamath, co-founder and CEO of Zerodha, speaking to Open on the phone from his residence in JP Nagar, south Bengaluru. 

By ‘it’, he means the droves of first-time investors signing up on the platform since March, who then spread the word after coming into some quick money as the markets fell and rebounded during the lockdown. With people spending less and saving more, and fixed deposit rates at an all-time low, the stock trading firm saw a sudden and unexpected spurt in activity.

“There is zero predictability in the business we are in, and given the state of the economy, we thought the next year or two would be hard for us. But our predictions went spectacularly wrong. We were adding 250,000 to 300,000 accounts a month—60-70 per cent of them first-timers who had been on the fence about trading and now found themselves with more time on their hands,” says Kamath, who co-founded the company a decade ago with his brother Nikhil, who he says is “the better trader”. Their net worth is estimated to be about Rs 24,000 crore, sliding them into rich lists this year for the first time.

Zerodha has also been investing in startups through its fintech incubator Rainmatter and has a wealth management arm called True Beacon. “We have been fortunate. And we wanted to share the value we have created over the past decade with our co-workers at a time when many of them may have seen their overall household income take a hit due to the pandemic,” Nithin Kamath says. 

In July, the company, valuing itself at about Rs 7,000 crore, executed an ESOP buyback of about Rs 60-65 crore to put money in the hands of 700-odd employees. “Many of them used the money to buy apartments since real estate prices had crashed. It was our way of infusing some liquidity into the cash-strapped economy.” Monthly signups on the platform are down to 160,000-170,000 now, but Zerodha continues to grow steadily. It is India’s single largest brokerage firm in terms of volume of trade and has clocked 3x growth this year without adding a single resource to its 1,100-strong workforce, all of whom went remote in March.

The full article was originally published in OPEN Magazine.

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