Zerodha’s FY21 profit more than doubles to ~1K cr

“THE REPORTED FIGURE (~100 CR) ISN’ T THE ACTUAL SALARY BEING DRAWN. THIS IS AN ENABLING RESOLUTION THAT ALLOWS US AS WORKING PROMOTE RS TO DRAW SALARIES UP TO THE NUMBER IN CASE OF LIQUIDITY REQUIREMENTS” NITHIN KAMATH Co-founder, Zerodha

India’s largest stock brokerage firm Zerodha more than doubled its profit in the last financial year to ~1,000 crore, co-founder Nithin Kamath said on Sunday, as stay-at-home retail investors flocked to the stock market.

In FY20, Zerodha had made a profit of ~442 crore, and collected revenue of ~1,000 crore, according to regulatory filings.

For comparison, the country’s largest listed brokerage ICICI Securities reported a net profit of ~1,067 crore in FY21.

After the country went into a nationwide lockdown last year, Nithin had told a magazine in June that the firm was adding double the number of customers per month than precovid days.

“Our PAT (profit after tax) for FY20/21 (was) ~1,000 crore,” he tweeted, as part of a series of tweets on Friday explaining that the up to ~100 crore salaries of the founder brothers Nithin and Nikhil and Nithin’s wife Seema Patil was an enabling resolution and not an absolute figure.

“Firstly the reported figure isn’t the actual salary being drawn. This is an enabling resolution that allows us as working promoters to draw salaries up to the number in case of liquidity requirements. Didn’t anticipate that this would get this much attention,” he said.

Zerodha’s board passed a special resolution according to which all three will get a basic salary of ~4.17 crore per month each, along with allowances, which add up to ~300 crore per year.

“While the actual salary will be lower, it will still be high compared to the norm. Promoters don’t take out profits through salaries as it is taxinefficient. You end up almost paying 50 per cent in taxes,” Nithin added.

He told Business Standard on Friday that the firm wasn’t looking to go public because that is done when “either you want funding or because you want to give an exit to some of the investors”. “We don't have both the pressures.”

In April, Nithin had said Zerodha hasn’t raised external funds and will not do it in the future as it is profitable, and has zero debt. In addition, it doesn’t spend on marketing and advertising. He explained that companies that raise funds pay higher taxes.

“As a promoter/founder you pay almost 250 per cent more as taxes if you were taking out money from the business as salary/dividends compared to say paying capital gains when selling your stake to an investor (fundraising route),” he tweeted on Friday.