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Zerodha Co-founder and CEO Nithin Kamath on Thursday said that Rs 30,000 crore is a much more reasonable valuation for his stock brokerage firm, instead of the Rs 1 lakh to Rs 2 lakh crore estimates people are talking about.

In a post on X, he said it: “Might sound counterintuitive for me to say it, but most assumptions, I think, are way higher than reality... The quantum of profits is the luck of the draw and is based on market conditions.”

“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."

Kamath said that given the uncertainties in the markets, sustaining high revenue growth is not a given.

"We think that at the scale we are at, we can potentially grow by 10 to 15 percent in the long run, factoring in the drawdowns that are guaranteed," he posted.

"So if 10 to 15 percent 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 Rs 30,000 crores and not the Rs 1 lakh to Rs 2 lakh crores some folks online were guesstimating," Kamath explained.

The leading stock broker this week reported a revenue of Rs 6,875 crore and profit at Rs 2,907 crore for the financial year 2022-23 (FY23), representing a 38.5 per cent and 39 per cent growth in revenue and profit, respectively, as compared to the previous financial year.

In FY22, the company had reported a revenue of Rs 4,964 crore and a profit of Rs 2,094 crore.

In a blogpost, Kamath said that despite fierce competition from newer discount brokerage firms, the company will maintain onboarding and maintenance fees.

"Trading the markets is a serious business with serious risks involved. Collecting an account opening fees right at the start also, in a way, helps set this expectation with a potential customer, filtering out users who may not be serious about trading or investing with us," Kamath said.

This is the highest profit figure for a technology startup and bigger than its nearest competitor, discount broker Angel One, which reported a consolidated revenue of Rs 3,021 crore and a net profit of Rs 1,192 crore for FY23.