Zerodha’s diversification clock is ticking as its core trading revenue slows under tighter regulations and shifting client habits.
Revenue shift away from trading
Brokerage income fell 10.4%, dropping from ₹3,066 Cr in FY25 to ₹2,738 Cr in FY26. Net transaction charges, once a ₹400 Cr contributor, vanished after SEBI’s true‑to‑label norm took effect.
Despite the squeeze, profit rose modestly to ₹4,283 Cr in FY26 from ₹4,231 Cr a year earlier. The modest gain stems from non‑trading sources that now make up a sizable slice of gross revenue.
Interest earned on cash balances and other assets contributed ₹2,269 Cr. Delayed‑payment fees and margin‑trading activity added ₹448 Cr. Asset‑management fees, while still small, are climbing.
In the first quarter of FY27, the broker said almost 40% of total revenue came from these ancillary lines.
Regulatory pressure and client loss
New SEBI rules on derivatives and RBI limits on currency futures have cut activity across those segments. The firm reports a 20‑30% fall in futures‑and‑options turnover and a 90% plunge in INR currency contracts.
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Client numbers tell a similar story. In July, the rival platform added 70,119 active users, pushing its base to 13.12 million. The discount broker lost 38,725, leaving it with 6.76 million accounts.
The industry as a whole grew by only about 8,000 net active clients that month, highlighting the divergence.
Revenue mirrors the user gap. The competitor’s operating income rose from ₹2,609 Cr in FY24 to ₹4,645 Cr in FY26, a jump of roughly 78%. By contrast, the broker’s top line slipped from nearly ₹9,994 Cr to ₹8,847 Cr over the same period.
Research head Rahul Sharma notes the two firms target different segments: mass‑market equity and mutual funds versus active futures‑and‑options traders.
Margin trading facility as a new pillar
The margin‑trading product, launched in December 2024, is helping Zerodha build a new revenue stream, but it is not the only one trying to reduce its dependence on trading‑led revenue. Angel One has been moving aggressively in the same direction, with client funding, wealth management, asset management and distribution becoming a larger part of its business.
Company chief Nithin Kamath has cautioned against encouraging leveraged investing merely for revenue, a stance that may limit how aggressively the product can scale.
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The broker’s asset‑management arm, launched in 2023, is now being integrated into its trading platform, a step that mirrors the competitor’s recent wealth‑management push after acquiring Fisdom.
Comparing this to earlier fintech expansions, the shift resembles how early‑stage digital lenders added insurance products to smooth earnings when loan growth stalled. Those firms found that cross‑selling helped stabilize cash flow, but only after the new lines reached a critical mass.
While the startup’s AMC is growing faster than the rival’s assets under management, the lack of a personalized wealth‑management service keeps it anchored to self‑directed investors.
Profitability remains solid, and the brand still commands a strong market presence. Yet the economics of digital broking are evolving, and reliance on futures‑and‑options fees alone appears unsustainable.
Going forward, the discount broker will need to accelerate its non‑trading ventures or risk a further erosion of its core revenue base.
