Days after the stock broking platform Zerodha announced its financial results for FY23, the company's co-founder Nithin Kamath on Thursday said that the company's valuation stands at ₹30,000 crore and it aims to grow at 10-15% in the long term. This comes as a surprise as several social media users were speculating the company’s valuation at around ₹1 lakh crore to ₹2 lakh crore.
Calling the speculations "way higher than reality," Kamath in a post on X (formerly known as Twitter) says that the company's focus has always been on building on resilient business, thus meaning never having to rely on external capital.
"Stockbroking and capital market businesses are cyclical and high-risk. Almost every bull run in the markets creates the illusion that somehow participation and activity will keep going up forever. We keep discussing internally that we could see a 50% dip in activity and revenue if markets fall in no time. None of it is really under our control," says Kamath.
The company aims to grow 10-15% in the long run. "We think that at the scale we are at, we can potentially grow by 10 to 15% in the long run, factoring in the drawdowns that are guaranteed. We are trying to diversify with everything we are doing in Rainmatter, our public holdings, and with large investments in the AMC business (@ZerodhaAMC), insurance advisory (@joinditto), and loan against securities @zerodhacapital). Today, the revenues from these businesses are not significant, but hopefully, they will go up and help us maintain long-term growth," says Kamath.
According to Kamath, the company is not looking forward to growing fast which aligns with Zerodha’s philosophy. "The problem with trying to grow fast is that it is very hard given some of our core philosophies at Zerodha, like no spam, no revenue or sales targets, no tracking customer data to push people to do more, no spending on acquiring customers, etc. I think our moat is the philosophy, and without it, we could lose out in the long run. So if 10 to 15% is the long-term growth, we value ourselves in the range of 10 to 15 times our earnings (PAT). At the lower end when near bull market highs. This is how we have been valuing ourselves for all buybacks (founders and team) for a while now. So ~₹30,000 crores and not the ₹1 lakh to ₹2 lakh crores some folks online were guesstimating," says Kamath.
In FY23, the company’s revenue from operations surged as much as 38.5% at ₹ 6,875 crore as compared to ₹4,964 crore revenue in the previous fiscal year. The company's net profit also jumped 38.8% to ₹2,907 crore in FY23 from ₹2,094 crore in the previous fiscal year.