Zerodha’s Diversification Clock Is Ticking

Zerodha's core broking business is no longer expanding, as regulatory measures and changing investor behavior are dampening trading volume and cutting into brokerage profits. Brokerage revenue fell 10.4% from ₹3,066 cr in FY25 to ₹2,738 cr in FY26. Net transaction charges also dropped to zero due to SEBI's true-to-label norm. CEO Nithin Kamath indicated Zerodha's overall top line remained stagnant at ₹8,847 cr in FY26, compared to ₹8,847 cr the previous year.

Despite this revenue slowdown, Zerodha's bottom line has stayed strong, with profit increasing to ₹4,283 cr in FY26 from ₹4,231 cr in FY25.

The company's profits are buoyed by diversifying income sources beyond brokerage. Interest income on cash balances and other interest-generating assets reached ₹2,269 cr in FY26. Delayed payment charges and margin trading facilities (MTF) also contributed ₹448 cr to revenue. Zerodha's asset management business is generating more fee income, although it remains a small portion of overall revenue.

According to a report, Zerodha's business now generates nearly 40% of its revenue from these non-core sources in Q1 FY27. However, these non-brokerage streams are not large enough to replace the core business entirely, especially considering that rival Groww now boasts nearly twice the client base. Regulatory changes have further pressured Zerodha's traditional brokerage business, particularly by limiting derivatives and currency trading activity.

SEBI's derivatives clampdown and RBI's tighter rules on foreign currency futures and options (F&O) reduced trading volumes by 20-30% across exchanges and brokers.

Despite these challenges, Zerodha's diversification is evident. In FY26, the company saw its operating revenue rise from ₹2,609 cr in FY24 to ₹4,645 cr, a 78% increase. However, Zerodha still faces competition from Groww, which has gained 70,119 new active clients, bringing its total to 13.12 million and NSE market share to 28.88%. While Zerodha's MTF is a new revenue stream, it remains a small portion of the overall business, and its growth is constrained by regulatory pressure on F&O.