Nithin Kamath Curated

Co-founder and director of Zerodha

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This profile has been added by users(CURATED) : Users who follow Nithin Kamath have come together to curate all possible video, text and audio interview to showcase Nithin Kamath's journey, experiences, achievements, advice, opinion in one place to inspire upcoming entrepreneurs. All content is sourced via different platforms and have been given due credit.

  • How I had fun at work

    The great thing about telemarketing is that you can chose to be any character you want. The other person is never ever going to meet you. I used to be a different film character every day. It kept an otherwise potentially boring work extremely fun. I was also part of an office music band.

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  • The best leadership lessons I learnt

    I LEARNT TO SELL. Selling a client a product is similar to selling a goal/vision to a team and together working towards it; it requires similar sales skillset. Telemarketing is probably the toughest of sales jobs, doing this helped quite a bit when we started Zerodha. We cold called most of our first 1,000 clients.

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  • The best leadership lessons I learnt

    I LEARNT TO SELL. Selling a client a product is similar to selling a goal/vision to a team and together working towards it; it requires similar sales skillset. Telemarketing is probably the toughest of sales jobs, doing this helped quite a bit when we started Zerodha. We cold called most of our first 1,000 clients.

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  • The brief I was given and what I did in the first 100 days at work

    THE IDEA WAS to sell as much as possible. The salary was less than Rs 12,000 and earning incentives were extremely important. Other than having decent selling skills, it was important to speak to as many people as possible to get high number of sales every month. I was an average performer in my first 100 days, trying to get a hang of speaking in as close to an American English accent as possible; getting used to my American pseudo name and trying to sell at the same time. NITHIN KAMATH, Founder & CEO, Zerodha.

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  • What are your expectations from the upcoming general budget? What are your expectations as the CEO of an online trading house?

    Keeping the central elections in perspective, I think the general budget will be skewed towards a populist budget with no real big bang reforms. As usual, this time to I’d hope for the ‘Security transaction tax’ (STT) to go away, which will help create better liquidity in the market, making it more vibrant.

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  • When do you see the NBFC sector recovering?

    The recent turmoil in the sector has caused a lot of liquidity concerns with short-term lending rates going up by at least 200-300 basis points. In my view, there will be regulatory changes, leading to even smaller NBFcs reporting their asset – liability position. I think the sector will be under pressure for at least another 6-8 months with NBFC with a stronger balance sheet recovering faster.

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  • Does ‘technology-driven zero brokerage’ model have enough steam left to sustain itself in the long run?

    Certainly. Zero – brokerage is just one aspect of the entire ecosystem. Technology enables us to build products which cater to various segments of market participants. The tech-driven ecosystem is a recent phenomenon and will shape the future of broking in India.

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  • What’s your advice for retail investors?

    These are interesting times to accumulate and build an equity portfolio either directly or via Mutual Funds. If you are building an equity portfolio, stick to a non-leveraged business whose balance sheets are strong and growing. Ensure your portfolio companies have a double-digit margin and a healthy ROE. If you do not have the time to select such companies, then simply start systematically investing in any diversified equity mutual fund from any of the reputed asset management company.

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  • Where do you see Sensex, Nifty from now? What are the major factors that may impact stock markets going ahead?

    Just like timing the market, it is quite hard to put a number and set that as a target for Sensex or Nifty. However, I’m optimistic and I see the markets giving a positive return in 2019. On a shorter term basis, the central budget will drive the markets, but I think the big draw is the Lok Sabha elections. The market is looking for a stable government, irrespective of the party in power.

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  • Where do you see your industry 3-5 years down the line?

    The broking industry in India has to figure a way to broaden the market participation. It is important for the country as well if you look at all the world economies. The ones which became superpowers were countries where the investors backed the entrepreneurs. You cannot just put money in a bank account, savings account and expect the country to do well. You need people to take that incremental risk and invest to help entrepreneurs build businesses and in turn, help the economy grow.

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  • Could the next disruption be in ETFs or mutual funds?

    Even though we are probably the largest broker in the country in terms of futures and option trades or intraday trades, we as a business have always invested into mutual funds or ETFs as a first step for everyone because they are much safer than trying to directly pick up stocks. So, mutual funds and ETFs are important to grow this like. The problem is how do you get this millennial to move from no intent to intent to invest? The right product for them is mutual funds and ETFs and within that how do we do it? Just selling a mutual fund is not enough. We have to find a way to place it for this crowd where it becomes the next big thing for them in their daily lives. So yes, but mutual funds and ETFs are going to be the enablers to get a lot more Indians to come invest in the market.

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  • You have scaled up pretty well so far. How do you plan to achieve further scale from here?

    The challenge for brokerage industry in India is a very shallow market. The number of retail participants in India is very few. The problem with today’s millennials is most of the India’s population is in 20-30-year old age group. Their spending habits are changing but the investing habits are not. People are going online and shopping but they are not really saving for retirement and all of that. Even if they are saving money, it is going to fixed deposits or maybe people are saving for buying a property etc. Investment culture is not there. newer brokers like us today have lesser legacy issues than say someone who has been around for 20 years. What also has not helped India is that we have not really had great IPOs over the last many years. If you look at the US in the last five to 10 years, the reason the markets have done so well is because of FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks. These companies got in a lot of first-time investors. people who used the products and aspired to be a shareholder of the product, actually got an opportunity to invest in the company that they use as a product. In India, unfortunately, there are not too many such companies. Someone like me keeps thinking what is the product that I aspire to own in India and which is actually listed on the Indian exchanges? There are not too many such companies that millennials in India can relate to. Maybe, there is a Royal Enfield. This is a challenge and what brokers like us have to figure out is how do you get this huge population of 20 to 30-year olds in India to go from no intent to invest in the markets to invest. It appears there is a product problem. It is only technology that can solve this. We need a WhatsApp kind of movement or an Uber kind of a movement where we solve this problem of people not investing to investing and we do it easily technologically.

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  • Is the rise of technology as an enabler in your industry. Talk to us about this. How is it changing the platform?

    Traditionally, the moat for brokers has been their offline presence. The more sub-brokers a broker had, the more branches a broker had, more accounts he could open. Now thanks to this India stack, thanks to Aadhaar eKYC etc, that moat has got broken. Brokers who are technology first without really having as much physical presence could on-board as many customers as someone with a lot of offices could do. It started right from onboarding onwards. Secondly, newer brokers like us today have lesser legacy issues than say someone who has been around for 20 years. Anyone who has built a business will appreciate how important not having legacy is to build new age innovative products. If you have a legacy system, it is almost like a foundation. If the foundation of your building is not strong, you cannot do much with your building. So, for someone like us, the advantage is as we are newer to the industry and because we are very nimble as a business, we keep adapting and we keep changing our technologies. So, our products stay superior to someone who has been working on legacy tech.

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  • Is the rise of technology as an enabler in your industry. Talk to us about this. How is it changing the platform?

    Traditionally, the moat for brokers has been their offline presence. The more sub-brokers a broker had, the more branches a broker had, more accounts he could open. Now thanks to this India stack, thanks to Aadhaar eKYC etc, that moat has got broken. Brokers who are technology first without really having as much physical presence could on-board as many customers as someone with a lot of offices could do. It started right from onboarding onwards. Secondly, newer brokers like us today have lesser legacy issues than say someone who has been around for 20 years. Anyone who has built a business will appreciate how important not having a legacy is to build new-age innovative products. If you have a legacy system, it is almost like a foundation. If the foundation of your building is not strong you cannot do much with your building. So, for someone like us, the advantage is as we are newer to the industry and because we are very nimble as a business, we keep adapting and we keep changing our technologies. So, our products stay superior to someone who has been working on legacy tech.

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  • When it comes to the disruption in the broking industry, how did you manage to be ahead of the curve?

    Disruption right now is happening more on the pricing side. Everyone is catching up with us. But on the product side, there is still some catching up to do. Personally, I might have a vested interest in saying this but personally we are ahead of the competition in terms of the product and this business is not just about pricing. It is also about the product. That is how we are able to maintain the distance over the competition.

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  • Why did you not raise external money?

    After speaking to many VCs, I realized I know more about the industry than all the VCs. I don't know whether it will be good or bad in another 2-3 years. Now, with Rs 65 crore profits every year, it is a Series A cheque every year. External money does not make sense unless I want to put a Shahrukh Khan ad on TV. And it might make sense to put Shahrukh on TV only if there's going to be a bull run like it happened in 1997 when everyone wanted to play in the market.

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  • Considering that the active stock trading community is just 20 lakh people, how will you grow?

    The market I'm looking at is the vast majority who are not trading. I have to get them to trade without many risks. We are trying to create a product called Balance that will auto-invest 1030 per cent, depending on risk appetite, of your savings in the stock market. Rest will be fixed income-tax-free instruments like bonds. People don't know that many bonds are tax-free and risk-free, while fixed deposits are not tax-free. And in our platform, there is no human involved, it is all done by machine intelligence. What humans can do, machines can do better. And anyone who has a smartphone will be able to invest.

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  • What was the reaction of the bigger brokerages?

    When we stopped charging for regular trades, brokers called me and threatened me. The community is still offline. Some of them tried what we did, but it was cannibalizing their own business­ they have a fixed running cost and can't work at lower prices. They need to find other revenue sources to get the same revenue. My business grew with this pricing model. My initial customers were already online and were already online and were trading at home. Starting in Bengaluru helped.

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  • To achieve those numbers in such a short period, you must have done something really different. Was it your lower charges?

    When we started the business, we differentiated by being transparent. The business till then was opaque. So we started a blog, which was the first in the financial services sector. The blog, which puts out posts giving investment advice and explaining financial terms, is the most active financial blog in India, and a great stock market education programme.There's a Q&A forum and I still spend two hours every day responding to people online. A lot of people give us credit for lowering the prices in the industry (Zerodha charges a flat Rs 20 for futures & options and intra-day trade, and nothing for other trades that are longer-term, as against the industry norm of charging a percentage of the trade). But what's more important for the business is transparency. People keep coming back to us because of their blogs. We also focus on technology. Our user interface and experience is now among the best in the country.

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  • What's the volume of trade you do on the BSE and NSE?

    We have 1.2 lakh clients and 40-50 per cent of our clients are active (executing a trade once a quarter). We are add ing 8,000 to 10,000 accounts a month. We do a turnover of close to Rs 10,000 crore a day, which is 4-5 per cent of the exchanges' retail volumes.

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  • Tell us about your background and how you got into online broking?

    I am the only business person in my extended family. My mom is a veena teacher and dad was with Canara Bank. They regretted sending me to engineering college as I did not enjoy it. They stood by whatever I did and let me make those mistakes. I started trading when I was 17-18 years. In 2000-01, futures and options was introduced and I started trading online. In 2002, I went bust. I joined the call centre. I worked at night and traded during the day. It was an addiction. In 2005, I met an acquaintance in a gym who was impressed by my trading summary. He gave me a cheque for Rs 25 lakh, and the next day I quit my job. In 2006, Reliance Money started and I became a sub-broker for them so that it gave me single terminal access to my accounts. Reliance Money had 1,000 sub-brokers then, but we used to generate more revenue than the other 999 put together. In 2008, I was short on the market- which means you make money when the market falls. The market fell and I made serious money­ 800-900 per cent returns. I then took a break and I suggested to my younger brother Nikhil to take a shot at trading. And later, while he traded, I worked to build a completely online brokerage business. Zerodha went live in August 2010.

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