Zerodha’s Nikhil Kamath lauds SEBI for protecting investors; says startup valuations may correct

Lauding the capital markets regulator Securities Exchange Control Board of India (SEBI), Nikhil Kamath, co-founder Zerodha today said that the regulatory body has worked towards protecting investor’s interest. Speaking at Express Idea Exchange, Nikhil Kamath said that SEBI has been ahead of the curve that has helped India steer clear of crises such as the recent Gamestop saga or even the 2008 banking crisis. Kamath, who is also the Chief Investment Officer of True Beacon, an Alternative Investment Fund also commended the Reserve Bank of India (RBI) for its role in protecting investors.

Shedding light on SEBI’s role, Nikhil Kamath said that the regulator keeps various tools at its disposal which have made it nearly impossible for activities such as insider trading in the leading companies. Although he did agree that the smaller companies still carry some risk on that front, he advised investors to stay away from small caps and penny stocks. Kamath’s comments came after investors in the United States saw a number of lesser-known penny stocks skyrocket during the last few quarters of the previous fiscal year.

Discussing the startup ecosystem in India and the rise of several unicorns in India, Kamath said that the valuations were too high to sustain. He believes a correction in such valuations could be in the offing. India recently saw a number of startups attain unicorn status, attracting funds from various global investors. Zerodha itself became a unicorn last year and Nikhil Kamath said even the valuation of his own firm does not seem justifiable to him. 

Further, diving into why Zerodha has not yet gone public, Nikhil, who started the company with his brother Nithin Kamath reiterated that they wish to stay independent as it allows them to take decisions on their own. He said that with VCs and other investors on board, the company would not be able to make independent decisions like they continue to do so today. Earlier Nithin Kamath had said that Zerodha is working to build a platform that benefits the retail investors which would be unlikely with other investors on board, who would rather look for profits than protecting retail investors.

Zerodha is the largest brokerage firm with a large number of retail traders using the platform. The discount brokerage model that was pioneered by the company has helped it grow rapidly in recent years and overtake traditional brokerages such as ICICI Securities and HDFC Securities.