At a time when elite startups are facing valuation cuts, there has been a growing curiosity surrounding the valuation of Zerodha, the brainchild of the Kamath brothers, known for its substantial profit generation.
The curiosity is fueled, in part, by observing the market dynamics of companies like Paytm, which, despite operating at a loss, managed to secure high valuations before going public.
Given the massive profit and revenue growth Zerodha has shown over the last few years, it seems reasonable to suggest that Zerodha could surpass the valuation of startups that are currently grappling with significant losses like Byju’s. The speculation continues to spark discussions and debates in the Indian startup ecosystem.
Earlier, Several media reports claimed that Zerodha is valued at Rs 50,000 crore or 1 lakh crore. Some even suggested that Zerodha is valued at Rs 2 lakh crore.
Nithin Kamath breaks the valuation speculation
Busting the valuation speculation, Zerodha Co-founder & CEO Nithin Kamath, in a tweet revealed that Zerodha is valued at Rs 30,000 crore and not Rs 1-2 lakh crore that media houses were suggesting.
“Every time our financials are out, there is a lot of speculation about @zerodhaonline ‘s valuation. It might sound counterintuitive for me to say it, but most assumptions, I think, are way higher than reality.😬,” Nithin wrote.
Nithin further wrote, “If 10 to 15% is the long-term growth, we value ourselves in the range of 10-15 times our earnings (PAT)”.
Every time our financials are out, there is a lot of speculation about @zerodhaonline‘s valuation. It might sound counterintuitive for me to say it, but most assumptions, I think, are way higher than reality.😬
All of us on the core team have never thought of notional valuations…
— Nithin Kamath (@Nithin0dha) September 28, 2023
Nithin explains why Zerodha is valued at Rs 30,000 crore
Explaining the reason for such a lower valuation compared with other loss-making companies, Nithin said the company is aimed at building a resilient business over focusing on fluctuating market valuations. He said that notional valuations can be highly volatile, subject to the whims of market conditions, and thus, do not serve as a reliable measure of a company’s worth or stability.
Zerodha’s team has consistently prioritized the sustainability and resilience of the business, striving to maintain independence from external capital, he explains.
He acknowledged the inherent cyclical and high-risk nature of stockbroking and capital market businesses, where market conditions largely dictate the quantum of profits.
Nithin explains that the company is aware that the illusion of perpetual growth created during every bull run in the markets is just that—an illusion. Zerodha is prepared for the possibility of a sudden 50% dip in activity and revenue if the markets were to fall, emphasizing the uncontrollable nature of such market dynamics, he said.
Despite the uncertainties, Zerodha aims for potential long-term growth of 10 to 15%, considering the inevitable market drawdowns, he added.
According to Nithin, Zerodha is diversifying its portfolio through initiatives in Rainmatter, public holdings, and substantial investments in various sectors including AMC business, insurance advisory, and loans against securities.
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