Latest news with #Kamath
Time of India
9 hours ago
- Business
- Time of India
Nithin Kamath: Why the broking business isn't as glamorous as it seems
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Zerodha co-founder Nithin Kamath has offered a candid assessment of the hidden risks in India's broking business—particularly what he calls a 'massive concentration risk' that the market rarely talks a post on X, Kamath recalled a conversation with a veteran from private equity who had evaluated a broking firm in 2008 but backed out. 'The revenue was concentrated in just a handful of clients,' the investor had said—something that spooked them. At the time, a very small group of traders generated most of the exchange turnover. 'This was a lot worse back then,' Kamath forward to today, and while the number of retail traders has increased, the problem hasn't gone away—it has only shifted shape. 'For us, it's over 80%,' Kamath said, referring to the share of Zerodha's revenue that comes from just two F&O contracts: Nifty and Sensex. He added that this trend is true for most brokers in a risky dependence. 'That means one change can wipe out a big chunk of our revenues,' he makes it worse, Kamath pointed out, is the lack of alternative revenue levers in India. There's no payment for order flow (PFOF)—a controversial but lucrative practice in countries like the US. Cryptocurrency trading is largely off the table. And new rules such as quarterly fund settlement, which require brokers to return all unutilized funds to customer accounts every quarter, add operational stress.'I wonder why the brokerage business looks so sexy from the outside,' Kamath reflection is a rare public unpacking of how regulatory limits, market behaviour, and structural dependencies create a fragile business model—even for India's most successful brokerages.
Economic Times
9 hours ago
- Business
- Economic Times
Nithin Kamath: Why the broking business isn't as glamorous as it seems
Zerodha co-founder Nithin Kamath has offered a candid assessment of the hidden risks in India's broking business—particularly what he calls a 'massive concentration risk' that the market rarely talks about. ADVERTISEMENT In a post on X, Kamath recalled a conversation with a veteran from private equity who had evaluated a broking firm in 2008 but backed out. 'The revenue was concentrated in just a handful of clients,' the investor had said—something that spooked them. At the time, a very small group of traders generated most of the exchange turnover. 'This was a lot worse back then,' Kamath noted. Fast forward to today, and while the number of retail traders has increased, the problem hasn't gone away—it has only shifted shape. 'For us, it's over 80%,' Kamath said, referring to the share of Zerodha's revenue that comes from just two F&O contracts: Nifty and Sensex. He added that this trend is true for most brokers in India. That's a risky dependence. 'That means one change can wipe out a big chunk of our revenues,' he makes it worse, Kamath pointed out, is the lack of alternative revenue levers in India. There's no payment for order flow (PFOF)—a controversial but lucrative practice in countries like the US. Cryptocurrency trading is largely off the table. And new rules such as quarterly fund settlement, which require brokers to return all unutilized funds to customer accounts every quarter, add operational stress.'I wonder why the brokerage business looks so sexy from the outside,' Kamath quipped. ADVERTISEMENT His reflection is a rare public unpacking of how regulatory limits, market behaviour, and structural dependencies create a fragile business model—even for India's most successful brokerages. (You can now subscribe to our ETMarkets WhatsApp channel)
Mint
10 hours ago
- Business
- Mint
Zerodha CEO Nithin Kamath shares pitfalls of broking business, wonders: Why the brokerage business looks so sexy
Nithin Kamath, the co-founder and chief executive officer (CEO) of discount broking firm Zerodha, recently highlighted the risks of running a broking business, which often appears attractive on the surface — fast-growing revenues, rising trader numbers, and increasing volumes. The 45-year-old entrepreneur warned the broking business faces massive concentration risk—where a single change can wipe out a big chunk of revenue. 'I wonder why the brokerage business looks so sexy from the outside,' he quipped. In a social media post on X on Friday, June 20, Nithin Kamath shared an anecdote wherein he said that back in 2008, a private equity veteran decided against investing in a broking firm due to a glaring issue: revenue was highly concentrated among just a handful of clients. This concentration risk was a major red flag, signaling vulnerability to client attrition or market shifts. "As I've mentioned numerous times, a small number of active traders contribute to most of the exchange turnover. This was a lot worse back then. Fast forward to today, it's still concentrated, but in a different way," Kamath's post read. One might wonder that with the active clients on NSE rising steadily (to 49.2 million in fiscal 2025), these risks must be dissipating, but Kamath claims the situation remains largely similar. "While the number of traders has gone up, but for both exchanges and brokers, the bulk of revenue now comes from just two contracts: Nifty and Sensex F&O. For us, it's over 80%, and it's similar for other brokers as well," Kamath said. This means any regulatory change, market disruption, or shift in trading behaviour affecting these contracts could wipe out a substantial portion of brokerage income overnight. Kamath, however, wonders if this risk is factored in when brokerage businesses are valued. Adding to these risks is the unique Indian regulatory environment, which differs starkly from global markets, as highlighted by Kamath. India does not permit payment for order flow, a practice common in the US that can provide additional revenue streams for brokers. The prohibition limits brokerage firms' ability to diversify revenue sources. Additionally, the quarterly fund settlement mandate — requiring brokers to return all client funds to their bank accounts every quarter — imposes cash flow constraints and operational challenges, akin to a forced 'bank run' scenario. There is also no significant exposure to emerging asset classes such as cryptocurrency, which in other markets offers new growth avenues. Against this backdrop, Kamath wonders what makes the broking business look "so sexy from the outside". Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
The Hindu
a day ago
- Politics
- The Hindu
State didn't release any funds for new development projects in last two years, alleges MLA
The State government, led by the Congress, did not release any funds for undertaking new development projects in the coastal belt during the last two years. Hence, the MLAs in the coastal region did not lay foundation stones for new infrastructure projects, Mangaluru City South MLA D. Vedavyasa Kamath alleged here on Thursday. Addressing the press, the MLA alleged that, except for each MLA's annual Local Area Development Fund of ₹2 crore, the State government did not release any additional funds during its two-year tenure. Mr. Kamath alleged that the State government has reduced the compensation amount payable for property damage due to rain-related incidents. Thus, it has done injustice to those who suffered damages, he said. The government has stated that it can not release the compensation amount as per the guidelines of the National Disaster Response Fund (NDRF), the MLA claimed. Mr. Kamath alleged that the agenda for the meetings of the Mangaluru Urban Development Authority (MUDA) is decided in Bengaluru, not locally. 'When decisions are taken in Bengaluru, the relevance of MUDA is under question,' the MLA said. Jail jammer Mr. Kamath alleged that the government is not bothered about addressing the mobile network problems faced by people residing in the areas surrounding the district jail in the city. The network problems increased after the jail installed a jammer inside the jail. Though people have protested, the government has not taken it seriously to provide relief to the people. The MLA alleged that the State government wants poor people to remain homeless as it has not implemented Pradhan Mantri Awas Yojana–Urban (PMAY-U) 2.0 in the State. Hence, the beneficiaries under PMAY-U have not been identified. Mangaluru City North MLA Y. Bharat Shetty alleged that the MUDA and Mangaluru City Corporation (MCC) offices have turned out to be 'collection centres.' Dr. Shetty alleged that there is a dearth of medicines in primary health centres in the city, and in some cases, doctors spend from their pockets to give medicines to patients, he claimed. The MLA said that the district in-charge Minister Dinesh Gundu Rao is not taking MLAs into confidence and holding any meeting involving MLAs to review damages to properties due to natural calamities. 'Corruption has doubled under the Congress administration,' the MLA alleged. Protest on June 23 Satish Kumpala, president of the Dakshina Kannada unit of the BJP, said the party will hold protest demonstrations in front of the MCC office at Lalbagh on June 23, to 'highlight the State government's failures'.
Time of India
2 days ago
- Business
- Time of India
Why Zerodha CEO's credit score isn't 'good enough'
MUMBAI: Nithin Kamath, the billionaire founder of India's largest brokerage Zerodha, found himself on the wrong side of an algorithm. Despite a net worth of over Rs 40,000 crore, Kamath's credit score of 747, falls short of the 750 required by lenders to provide their best home loan rates. Kamath shared his credit score on social media after making an enquiry through Zerodha Capital. Kamath's score is emblematic of a deeper flaw in India's credit assessment framework. Credit scores were designed to predict default risk, not measure wealth. High net-worth individuals like Kamath often eschew personal credit, reducing the data available for bureaus to assess. As a result, billionaires can look like risky borrowers on paper. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
