Stock broking giant Zerodha's FY21 profit more than doubles to Rs 1,000 cr

Promoter Nithin Kamath says firm unlikely to raise external resources

India’s largest stock brokerage firm Zerodha’s profit more than doubled in the last financial year (FY21) to Rs 1,000 crore, co-founder Nithin Kamath said on Sunday.

Zerodha’s profit in FY30, according to regulatory filings, was Rs 442 crore, and revenue was Rs 1,000 crore.

“Our PAT (profit after tax) for FY 2020-21 was about Rs 1,000 crore,” Nithin said, as part of a series of tweets that also explained that the Rs 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 Rs 4.17 crore per month each, along with allowances, which add up to Rs 300 crore as salary 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 tax-inefficient, you end up almost paying 50% in taxes,” Nithin added.

He told Business Standard on Friday that the firm wasn't looking to go public, because that means "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 will not raise external funds now or in the future, because it is profitable and has zero debt.

In addition, it doesn’t spend on marketing and advertising.

He also explained Friday in a series of tweets that companies that raise funds pay higher taxes.

“As a promoter/founder you pay almost 250% 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 said.

Kamath has always said that booking is a high risk business, and a change in regulations can also impact profitability.

“We believe that building sustainable businesses & paying taxes is a great step in contributing to society and the nation. We take great pride that we are giving back most of our success through @RainmatterOrg & that we are among the highest tax-paying new-age businesses,” he added on Sunday.

The Kamath brothers also run Rainmatter Foundation, an NGO supporting climate change action. Zerodha said in January it would invest $100 million as grants and equity investments, to fight climate change.