Stock brokerage platform Zerodha has announced revenues exceeding 8,370 crore and profits of 4,700 crore, according to a blog post by co-founder and CEO Nithin Kamath.

This represents a substantial increase from the 6,875 crore in operational revenue and 2,907 crore in profit after tax reported in FY23. The company noted that these profits do not include approximately 1,000 crore in unrealized gains, which will be reflected in future financial statements. Zerodha has yet to file its audited annual report.

The data shared by Zerodha shows that over half of its revenue has translated into profit. Kamath stated in the blog post, “Given our profitability over the last three years, our net worth is nearly 40% of the customer funds we manage, making us one of the safest brokers to trade with.”

However, Kamath also mentioned that the firm is already experiencing a plateau in revenue and profit and is preparing for a significant decline later this year. This expected downturn is attributed to upcoming regulations from the Securities and Exchange Board of India (SEBI), which will eliminate the volume-based transaction fee model for free equity delivery trades, impacting all brokers, including Zerodha.

SEBI's true-to-label circular is set to take effect on October 1, and Zerodha anticipates a 10% dip in revenue as a result of this regulation. “We expect this paper to materialize into regulation in the next quarter. Index derivatives currently contribute significantly to our revenue, and any changes will have an impact. We foresee a revenue decline of 30% to 50%,” said Kamath.

Additionally, Zerodha's annual maintenance charges (AMC) will be affected by the new thresholds for basic services demat accounts (BSDA) established by the regulator. Kamath explained that the company can now charge the full AMC for customers with demat holdings of 10 lakh and above, an increase from the previous threshold of 4 lakh. Along with the elimination of the account opening fee, this will likely lead to a substantial reduction in revenue.

Zerodha is confident in its ability to navigate this slow period due to its small team, prudent spending, and solid financial position. The firm employs 1,200 people, with only a small number dedicated to its core operations.

Around this time last year, headlines reported that Groww had surpassed Zerodha in active users. However, Zerodha remains a leader in terms of its business model and profitability. The company's recent ventures into passively managed mutual funds are expected to yield interesting results soon.

CEO Nithin Kamath has been cautious about discussing profitability and long-term growth, likely influenced by the competitive landscape as he opts to keep Zerodha private for now. Despite this, the ongoing bull market suggests that we will soon see improved financial results from Groww and other brokers. It remains to be seen if they share Kamath’s concerns about topline growth in the near term.