2024-09-25 11:12:10 : Nithin Kamath, co-founder and CEO of Zerodha, India’s largest trading platform, shared the reason why the company has not yet gone public. In a blog post highlighting the company’s results and other business updates, Kamath outlined what he called “pivots.”
Why isn’t there an IPO yet?
Kamath admitted in the post that he had been asked “many times” why Zerodha did not choose to go public, saying they were focused on “building a Bitcoin that can spread risk.”
“I’ve been asked many times why we haven’t gone public. Over the last two to three years, we’ve easily achieved crazy valuations,” he began, adding, “IPOs are not the end, but a new one. When retail investors get to the cap table, the company should be able to predict revenue to a certain extent. I haven’t been right about revenue growth and decline once in the past 14 years.”
“While our business looks good from a financial perspective, things can change suddenly due to regulatory changes or market deterioration. We need to do more in terms of predictability of revenue and just being a brokerage is It’s impossible to do that. So we’re building all kinds of other pieces that don’t make sense today but might make sense in the future,” he said.
“Investors can bring nothing to the business”
Kamath also believes that Zerodha does not currently need to raise investor funds through a listing, saying: “Unless we can do something meaningful with the money and build on it, we don’t need to raise funds. We The question to ask is, as we build strong net worth with our profits, what will we do by raising excess capital?”
“Why should the business carry the burden of investor expectations when it has no strategic or material benefits?” he asked.
Once public, he added, most companies are “forced to shift their focus to quarter-on-quarter growth at all costs,” which doesn’t necessarily align with their corporate goals.
“Our core philosophy, culture and the way the organization operates is based on long-term customer-centric decisions. Whether it’s a business or a product selection, we make it customer-centric rather than carefully based on revenue targets. That’s one we have Important advantages. That’s how we got here and there’s no reason to do it unless there’s an urgent need to take a different path,” he added.
“Business Diversification”
Regarding diversifying the business to cope with future risks, Kamath listed a series of initiatives:
“Perfect Storm”
“Our business is subject to the following risks: regulatory risk, market risk and competitive risk. Given the significant market gains over the past four years, we are prepared for market corrections, which may result in a decline in our business.” Kamath added road.
“By the way, the market is showing no signs of slowing down, and all five of the regulatory risks I mentioned earlier have surfaced. Given this, I imagine every broker’s revenue will be affected and the business model will need to change. . Additionally, our profitability has been attracting new competition over the past few years, so regulations will reduce the business, the market will likely decline, and competition will increase, which is a perfect storm for us,” he said. .
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