Zerodha sees big gains in Margin Trading, hits Rs 3,000 crore in 6 months

Zerodha, a prominent discount brokerage, has seen its Margin Trading Facility (MTF) soar to approximately Rs 3,000 crore within just six months of its launch. This growth comes despite challenging market conditions akin to a bear market for nearly half of that period. The company's founder and CEO, Nithin Kamath, highlighted the facility's effectiveness in hedging revenue declines from the options business and transaction charge revenues. "Our MTF book has grown to Rs 3,000 crores within six months of launch. Half the time, we were in bear market-like conditions," Kamath stated.

Kamath also detailed improvements to Zerodha’s MTF feature on its Kite platform, which now allows for easy conversion of MTF positions to delivery. The trade limits have been increased to Rs 5 crore per stock and Rs 25 crore per account.

The MTF offering covers over 1,300 stocks with up to 5X leverage. Through Kite, users can place 'Good Till Triggered' (GTT) orders, which remain active until a specific price trigger is met, and 'After Market Orders' (AMO), which are executed the next trading day.

Zerodha's clients are reportedly experiencing a combined profit from their MTF positions, described as "good news" by Kamath. "The good news is that our clients are sitting on a combined profit on their MTF position," he noted, while expressing uncertainty over the future sustainability of this trend. This profitability has been significant in enabling Zerodha to maintain its brokerage rates and depository participant charges, thus preserving client economics amid industry-wide pricing stress.

The MTF facility has become a crucial component of Zerodha's diversified revenue strategy. "The revenue cushioning provided by MTF has helped the company to maintain brokerage rates and depository participant (DP) charges at pre-regulatory action levels," Kamath stated. This integration into the firm’s operations demonstrates how MTF has bolstered Zerodha's financial resilience in the face of a downturn in other revenue streams.

Looking forward, Kamath has projected a 10–20 per cent decline in the overall broking business this year, attributing it to decreased market activity. Despite this expected downturn, Zerodha is targeting Rs 10,000 crore in revenue by the financial year 2026. Currently, Zerodha maintains specific charges for online account opening and annual maintenance, ensuring no immediate change in its brokerage rates.

The continued growth and strategic significance of MTF underscore its role as a revenue stabiliser for Zerodha. The company’s proactive enhancements and strategic foresight in this domain reflect its commitment to maintaining competitive client economics and achieving long-term financial goals.