India’s biggest brokerage firm Zerodha on-line is arranging a buyback of shares from workers this year, valuing the firm at $2 billion, Founder and CEO Nithin Kamath mentioned on Twitter today. The buyback would worth the discount brokerage firm at double what it was valued at the time of the earlier buyback last year 2020. “Everyone holds ESOPs & continuously get new options too. We ran a buyback last year at $1 billion valuations & we will this year at $2 billion,” Nithin Kamath tweeted. He added that their business enterprise has dangers and therefore the “conservative valuations”.
The $2 billion valuation would aid Zerodha join an elite club of Indian startups that have reached such higher valuations. Oyo, Zomato, Swiggy, Cred, Paytm are some of the domestic startups that are valued at more than $2 billion dollars. “While our growth is exciting, we know that this isn’t sustainable. A broking business is an extremely high beta – highly correlated with the market conditions. Even if there was a mini bear market, our business could drop by 40% in a heartbeat,” Nithin Kamath mentioned.
Earlier last year, Zerodha had purchased back shares from early workers. Zerodha had spent Rs 60-65 crore on the ESPO buyback last year, purchasing back shares from some 700 workers of the corporation.
So far Zerodha has not raised funds from external sources. Nithin Kamath had earlier in April this year mentioned that it was not the proper time for Indian startups to raise funds. “While there is nothing wrong with chasing valuations, but without being profitable, it’s tough to ride out the downturns in the economy. So this tax arbitrage potentially could be potentially creating (sic) not so resilient businesses which isn’t good for our economy in long run,” he mentioned.
Nothin Kamath added that effortless availability of threat capital today can aid a business enterprise develop rapid. “But there is another reason why startups focus on growth & valuation rather than profits – Taxation.” Zerodha has seen powerful development amid a raging bull marketplace that began last year in April and retail participation grew in Indian stock markets.