Zerodha, India’s largest discount brokerage firm, looks set to disrupt the mutual fund industry. Zerodha’s Founder and Chief Executive Office Nithin Kamath on Wednesday announced that the company has received in-principle approval from the capital markets regulator for their AMC (Mutual Fund) license. Zerodha had applied for the same in February of 2020. Zerodha is the country’s largest brokerage firm with over 15% of the market share, beating traditional and established brokerage firms such as ICICI Securities and HDFC Securities.
While announcing the news of Zerodha getting approval from capital markets regulator SEBI (Securities and Exchange Board of India) for AMC business, Nithin Kamath quoted his previous tweet on the matter clearly outlining the discount brokerage firm’s plans for the mutual fund industry. “To grow the capital market participation from the current 1.5 crores and address those who currently don’t invest (Millennials), we think mutual fund as a product needs to be reimagined,” Nithin Kamath had said in February last year.
Currently, Zerodha offers its users the option to invest in mutual funds directly through its Coin platform, which was launched in 2017. Coin is a free platform with nearly Rs 5,500 crore in assets under management (AUM), according to various reports. Through Coin, Zerodha offers investors the option to invest in direct mutual funds, eliminating the distributor commission.
Zerodha entered the stockbroking industry in 2010. The company has garnered the largest customer base, offering discounted brokerage services at Rs 20 per order. Zerodha’s attractive pricing strategy attracts more than 60 lakh clients to place orders on its platform. Zerodha claims to control more than 15% of all India trading volumes. With the mutual fund license in place, Nithin Kamath aims to increase investor participation in Indian markets.
“For all fintech startups focusing on investing (including Zerodha), this is the real market size – a subset of 5.78 crore. 1.5 crore already invest, so more than 25% of the target audience. We can’t look at 130 crore Indians and assume only ~1% penetration,” he had earlier said. Currently, around 44 mutual fund houses in India have over Rs 35 lakh crore worth of assets under management.