At first glance, it certainly does appear very paradoxical. Zerodha, which is the biggest bootstrapped stockbroker in India, made a revenue of ₹10,034 crore and net profit of ₹5,496 crore for FY25, thus turning out to be one of the most profitable companies in the fintech sector in the country. Yet, Groww managed to generate revenues worth ₹4,056 crore and net profits worth ₹1,819 crore, while the valuation of the company has crossed ₹1.3 lakh crore, which is far more than twice the valuation of Zerodha. The case provides a very critical business lesson – that the valuation of any business entity does not depend on what they earn now but what they will earn in the future.
Author: Tavisha Kanodia | EQMint
The difference is in their business models and what investors expect from them. The founder of Zerodha is Nithin Kamath, and his business has managed to flourish without taking any external money. He has achieved success by emphasizing profitability, efficiency, and growth through organic means. The success of the company shows that an entrepreneur can control an entire industry by being a bootstrapped organization while staying profitable all the time. The founder of Groww is Lalit Keshre, and his company has chosen a venture capital model which is all about fast scaling. Along with stock brokering, the company has moved forward to mutual funds, IPO investment, digital wealth management, and so forth.
This trend can be observed all around the global start-up scene. Companies such as Amazon, Tesla, Uber, and Netflix had very high valuations even when they did not have profit levels commensurate with those numbers. This was due to the belief in the market opportunity that they would capture in the future. In a similar manner, the value of Groww takes into account its potential for becoming a financial services platform for millions of Indians in the coming years. On the other hand, Zerodha is another success story based on profitability and not fundraising.
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Disclaimer: This article is not an investment advice and is for educational purpose only.
