Nithin Kamath, co-founder and CEO of Zerodha, India's largest stockbroker, has shed light on the company's decision to remain private instead of pursuing an Initial Public Offering (IPO). In response to a query on Reddit, Kamath provided insights into the company's journey and its customer-centric approach.

Zerodha's Humble Beginnings

Kamath revealed that Zerodha's journey to becoming India's leading stockbroker took 15 years. The company was bootstrapped with a modest initial investment of Rs 10 lakh. Of this amount:

• Rs 2.5 lakh was allocated for website development
• Rs 5 lakh was spent on office interiors

Prioritizing Customer Interests

The CEO emphasized that staying private allows Zerodha to maintain its focus on customer interests without the pressures that come with being a publicly-traded company. Kamath cited two examples of their customer-centric policies:

1. No-spam policy
2. No-tracking policy

He argued that such customer-friendly approaches would be challenging to maintain as a public company due to the constant scrutiny of quarterly results and pressure for continuous growth.

The Benefits of Remaining Private

Kamath explained that by avoiding an IPO, Zerodha can:

• Make decisions that prioritize long-term customer benefits over short-term profits
• Maintain its unique corporate culture and values
• Avoid the pressure of meeting quarterly growth expectations

The Secret to Zerodha's Success

While discussing the company's remarkable growth, Kamath attributed Zerodha's success to a combination of factors:

• Being in the right place at the right time
• Offering appropriate products
• Coinciding with India's overall economic growth

Serving a Massive Client Base

Despite choosing to remain private, Zerodha has managed to build an impressive client base of 1.5 crore customers. This achievement underscores the company's ability to grow and succeed without the need for public funding or the pressures of being a listed entity.

Conclusion

Nithin Kamath's explanation offers a glimpse into the strategic thinking behind Zerodha's decision to stay private. By prioritizing customer interests and maintaining control over its business practices, Zerodha continues to thrive in the competitive Indian stockbroking industry.

Nithin Kamath, CEO of Zerodha, one of India's largest retail brokers, has shared insights into his personal investment strategy, offering valuable lessons for both novice and experienced investors. Kamath's approach involves maintaining two separate demat accounts, each serving a distinct purpose in his investment journey.

The Two-Account Strategy

Kamath's investment method revolves around using two demat accounts:

1. Offline Account: Dedicated to long-term investments
2. Online Account: Used for active trading

This dual-account strategy is designed to create a deliberate friction in the investment process, particularly when it comes to selling long-term holdings.

Benefits of the Approach

1. Preventing Impulsive Selling

The offline account for long-term investments requires manual intervention for selling. Kamath explained that to sell stocks from this account, one must physically fill out delivery instruction slips and send them to brokers. This added step serves as a deterrent to impulsive selling decisions, encouraging investors to hold onto their long-term investments.

2. Better Returns on Long-Term Holdings

Reflecting on his investment journey, Kamath noted that his best returns came from stocks held for the longest periods in the secondary (offline) account. This observation underscores the potential benefits of a buy-and-hold strategy for long-term wealth creation.

3. Tax Advantages

The two-account approach offers significant tax benefits, particularly in the Indian context. Kamath pointed out that in India, the First In, First Out (FIFO) rule applies separately within each demat account. This separation simplifies tax calculations, making it easier for investors to manage their tax liabilities.

Zerodha's Response to the Strategy

Recognizing the value of this investment approach, Zerodha has taken steps to make it accessible to its clients. The company now offers its customers the option to open secondary demat accounts. This feature allows Zerodha users to separate their long-term and short-term holdings, mirroring the strategy employed by their CEO.

Implications for Investors

Kamath's revelation offers several key takeaways for investors:

1. Discipline in Investing: The strategy promotes a disciplined approach to long-term investing by creating barriers to impulsive selling.
2. Psychological Benefits: Separating trading activities from long-term investments can help investors maintain a clearer perspective on their financial goals.
3. Tax Efficiency: The approach can lead to more straightforward tax management, potentially resulting in tax savings.

By sharing his personal investment strategy, Nithin Kamath not only provides valuable insights but also demonstrates Zerodha's commitment to educating and empowering its users. This approach aligns with the growing trend of financial literacy and disciplined investing in the Indian market.