Zerodha Braces For Up To 50% Drop In Revenues Due To New F&O Rules

Zerodha is bracing for a 30-50% hit to its revenues in FY25, as it expects SEBI's new regulations on F&O to get implemented.

"We are already seeing revenue and profit plateau, and we are bracing for a big revenue hit later this year," Founder and CEO Nithin Kamath wrote in a blog post.

Kamath noted an expected 10% revenue hit on account of SEBI’s true-to-label circular for market infrastructure institutions, which will go live on Oct. 1, 2024. Another 30-50% drop in revenue could come from the implementation of SEBI's consultation paper on index derivatives, which is expected to go into regulation sometime in the next quarter.

"Index derivatives today are a significant portion of our revenue, and any change will impact us," Kamath wrote. Further, securities transaction tax on F&Os is set to be hiked from Oct. 1, 2024, due to which Zerodha anticipates a significant impact on futures trading.

Kamath added that the he also expects a hit on topline due to reduction in the annual maintenance charges they are currently levying and reduction of the scale of its referral program.

Zerodha also revealed its FY24 financials in the blog post, highlighting a revenue of roughly Rs 8,200 crore and a net profit of about Rs 4,500 crore. Those financials are up from the Rs 6,875 crore in revenue and Rs 2,907 crore in profit after tax reported in FY23.

"FY23/24 was a fabulous year in terms of both revenues and profitability. The profits don’t consider the ~Rs 1,000 crore of unrealised gain, which will show in our financials. Given the profitability of the last three years, our networth is almost ~40% of the customer funds that we manage. It makes us one of the safest brokers to trade with," Kamath wrote.

Kamath also junked the idea of an IPO in the recent future, adding that revenue predictability is something that he can't assure in the current scenario.