ZERODHA BROKING LIMITED

Zerodha is an Indian Financial Service Company. It is entitled as legal stock broker on India. Company is registered with SEBI, CDSL, BSE, NSE, MCX and works under the guidelines by stock market regulatory body. Zerodha pioneered the discount broking model in India and presently breaking ground with its technology.

Nithin Kamath bootstrapped and founded Zerodha and kick started the company’s operation on 15^th of August 2010 with the goal of breaking all barriers that traders and invertors face in India in terms of cost, support and technology.

Company was named after Zerodha with a combination of zero and “Rodha” Sanskrit word for barrier. The company offers retail and institutional broking (run a number of popular open educational and community initiatives to empower retail traders and investors), currencies and commodities trading and mutual funds and bonds.

Team of Zerodha along with Nithin Kamath [FOUNDER- CEO] consists of other 5 members; they are as followed:

1. Austin Prakesh – Director
2. Dr. Kailash Nadh – CTO
3. Venu Madhav – Chief of Operation
4. Hanan Delvi – Chief of Client Relation
5. Seema Patil – Chief of Quality

Today, with its disruptive pricing models and in – house technology made Zerodha the biggest stock broker in India; in terms of active retail clients with 15lakh plus active clients [over 3 million + clients through ecosystem of investment methods, contributing 15% of all Indian retail trading volumes]. Nearly 50,000 to 70,000 new Zerodha accounts are made every month. Record for number of clients over past 5 years is mentioned below:

Zerodha contributes upwards of 2% of daily retail volumes across Indian stock exchange. It is India’s first “Discount Brokerage” firm; with a fee of flat of ₹20 per trade, irrespective of its size.

In June 2020 it entered Unicorn club with a self – assessed valuation of about $ 1 billion. Zerodha’s leading digital platform is build with brand new technologies namely – console, zerodha kite, trading charts etc. and besides this there have been significant improvement in its speed and design.

Other lastest features such as biometric, console widgets, ChartIQ, instant status update and push notifications are also available in Zerodha. It may be surprising that a zero – brokerage business can have such massive gains.

Well, as unlikely it may seem, it is 100% in case of Zerodha; with a net worth of ₹600 crores, the company is very popular among millennials and generation Z population and booted a business gain of massive INR 6600 crore! It has left behind its rivals such as HDFC Securities, Kotak, ICICI Securities, etc. The company in its profit hits revenue of ₹220 crore plus and made a profit of ₹120 crores in just 7-10 years of it’s opening.

Moreover, Zerodha active user count and profit has increased 14 times since 2016. A net profit of ₹350 crores against revenue of ₹850 crores was reported by the company in last Financial Year [2019].

Another important reason for firm’s rapid growth is the company’s effort to keep up with the latest trends, ideas and strategies. To, sum up the secret of Zerodha’s success is its “zero brokerage”. This term attracts the investors who walk in seeing a low investment. It has literally made trading possible for those who hesitated due to high amount.

Also, Zerodha’s automated system for pledging one’s DEMAT holdings to raise margin money is an excellent strategy. No interest is charged on the margin money if an equivalent amount of cash is maintained in the account.

All this together have contributed in current growing position of the company.

Company with its achievements and dedication has been awarded with various awards under the following titles;

It is often said that “there are two sides of a coin” and as every story has two sides; with every company along with its achievements the issues, critics and complains come way by way. Furthermore, to calculate complaint percentage in any company or firm the formula to be noted is:

Complaint percentage = Number of complaints 100

Number of active clients

Number of complaints received from Zerodha clients in past 5 years in comparison to complaint received by clients with accordance to industry average is mentioned below:

COMPLAINT PERCENTAGE:

Moving forward the types of complaints Zerodha clients have are:

1. Delay in payment and account settlement – 7.8 %
2. Documents, contract notes, biased receiving – 0.9 %
3. Unauthorized trade and squaring off without consent – 10.1 %
4. Service related issues such as wrong order, execution, connectivity, non – receipt of corporate benefits – 34 %

Hence, it can be said that the clients of Zerodha are facing issues more in terms of unauthorized trade, squaring off without consent, execution, connectivity and receipts. To add up; on conspiracy theories about Zerodha is derogated under the topics as followed:

1. Zerodha is the only broker that faces technical glitches and downtime.
2. Order management system.
3. Zerodha should upgrade its server.
4. If you are not paying you are the product.
5. Lay down strict guidelines for client data privacy and protection and increasing cyber security.
6. The technical issues are deliberate and are for market manipulation. (this controversy is highest among clients.)
7. Brokers can make money when clients lose money, i.e., by broker counter trading
8. Stop – loss hunting.
9. Zerodha benefits by restricting trading on OTM options.
10. Mock investors; encourage active trading.

COMPLAINTS BY ZERODHA CLIENTS:

1. KIRAN – he says there is problem in zerodha every day. He had lost money because of technical errors.
2. LOKESH KUMAR – he specifies that the management is reckless and damaged, a loss of 30 lakh was caused to him as the terminal went down.
3. YAKUB – cancel order fund not released.
4. MAHIM AGRAWAL – not able to sell for 3-4 weeks.
5. VASUDEV AGARWAL – not updated since march 2020.
6. SHIVA – misleading
7. RUTUJA PATIL – rejection of document.
8. MAYURA JAIN – server not ready.

There are other such complaints but mostly all the complaints and controversies are related to technical issues, management of customer support, delay and squaring off without consent.

LEGALITY OF ZERODHA:

One of the most important point to consider and maintain when a company is started is recognized in the terms of the legality of a company.

Legality of company is maintained on the aspects of number of cases filed against it with respect to any legal violation of stock market regulatory body any fraud or liabilities. In the case of Zerodha; there are no reports of legal violations by the company.

However, the legality of Zerodha was challenged by PRASAD BHAVANA; story for the same in brief can be explained as –

Prasad Bhavana, a punter based in Hyderabad was supremely bullish about the prospects of Tata Motors. Accordingly, he packed his portfolio with a massive consignment of Tata Motors futures. As of 9^th August 2017, on the eve of Tata Motors quarterly results; he held a treasure trove of 30,000 subsequently in September and October also 30,000 was held. Unfortunately, for prasad Tata Motors reported poor results on 10^th August 2017 with the result that there was a massive slump in the prices of Tata Motors Futures.

Simultaneously, the steep slump in the prices of Tata Motors Futures contracts triggered alarm bells in Zerodha’s H.Q. because prasad had a short fall of margin amounting to ₹30.50 lakh. As a result, Zerodha squared off shares worth ₹75,000 without the consent of Bhavana Prasad.

After the incidence Zerodha claimed that it was authorized to do so under clause 19 of the Risk Disclosure Document empowering it to liquidate / close out all of a client’s position for non – payments of margins etc. it was also made clear that all losses on account of such liquidation have to be borne by client. On the other side Prasad alleged that Zerodha was at fault for the margin shortfall.

He also claimed that Zerodha’s abrupt move of liquidating his holdings led the price to fall more than it would have in normal circumstances and that he suffered loss than he would have if he had himself liquidated the holdings. More of it, he added that company or its employees may be a part of “bear cartel” or a “foul play”.

After such incident other tweets on twitter was prevailing with the same issue and to file complaint against it but other complaints were not filed. The matter of Bhavana Prasad was forwarded to Arbitration Tribunal and a panel of 3 arbitrators held Zerodha guilty of not sending proper SMS and email messages regarding the margin statements.

It also held that Zerodha cannot set aside the responsibility to provide the margin statements promptly so that the clients can take the required action and was also slammed for cryptic SMS messages and Zerodha was ordered to pay compensation of ₹ 36.78 lakh.

Zerodha rushed to an appellate panel to challenge the order of arbitration panel but the appellate panel held Zerodha guilty of not undertaking proper due diligence of clients before registering them for derivative and high leverage transactions (how did Zerodha allowed person with income of ₹ 1 to 5 lakh to take exposure of ₹ 4 crore).

However, when the majority among appellate panel was against Zerodha, all was not lost for Zerodha as minority uphold the stand of it.

Hon’ble Ms. A.M. Durga Kumari decided to defy her colleagues and dissented from their view. Hon’ble Durga Kumari slammed Prasad for not monitoring the price movement of Tata Motors and accused him of displaying “lack of seriousness disregarding his high stakes in the stock”. She was not impressed by Prasad’s defense that he did not received any SMS or email.

Hon’ble Durga Kumari further suggested that Prasad was a novice and “ought to have educated himself about the risks involved in Futures Market, the conditions, clauses, procedures and policies applicable and the usage of internet applications”. Ultimately, she branded Prasad as a novice by holding that “he did not act with required urgency and seriousness in the matter considering his heavy stakes in the stock”

At the end Zerodha was issued a clean chit and it was held that it was “professional and fair” in its conduct and that “the squaring off war required as per the parameters on which this market works”.

As a result, there are no legal violations by the company in its 10 years.

As expressed, whether it is about Zerodha valuation, revenue, profit and management the company is doing great in every aspect and prominently heading towards better performance, developments, opportunities and growth overall.

Also, the complaint ratio has been decreased in years and clients are getting satisfaction. Maintaining the same; Zerodha will rise more in upcoming financial years with its hard work and dedication towards market.