Zerodha now valued at $2 billion; Nithin Kamath mulls another ESPO buyback this year

India’s largest brokerage firm Zerodha online is planning a buyback of shares from employees this year, valuing the firm at $2 billion, Founder and CEO Nithin Kamath said on Twitter today. The buyback would value the discount brokerage firm at double what it was valued at the time of the previous 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 has risks and hence the “conservative valuations”.

The $2 billion valuation would help Zerodha join an elite club of Indian startups that have reached such high valuations. Oyo, Zomato, Swiggy, Cred, Paytm are some of the domestic startups that are valued at over $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 said.

Earlier last year, Zerodha had bought back shares from early employees. Zerodha had spent Rs 60-65 crore on the ESPO buyback last year, buying back shares from some 700 employees of the company.

So far Zerodha has not raised funds from external sources. Nithin Kamath had earlier in April this year said that it was not the right 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 said.

Nothin Kamath added that easy availability of risk capital today can help a business grow fast. “But there is another reason why startups focus on growth & valuation rather than profits – Taxation.” Zerodha has seen strong growth amid a raging bull market that started last year in April and retail participation grew in Indian stock markets.