'Once listed, most companies are forced...': Why Zerodha's Nithin Kamath is steering clear of an IPO

Zerodha founder and CEO Nithin Kamath in a blog post revealed why his company has stayed away from the urge to go public despite the soaring valuations that an IPO could bring. 

"An IPO is not the end, but rather a new beginning. When retail investors enter the cap table, the company should be able to predict revenue to some extent. In the last 14 years, I have not once been correct in predicting revenue growth and dips," Kamath stated, underscoring the challenges of revenue predictability in the financial industry. 

Kamath said that Zerodha is prioritizing long-term sustainability over chasing inflated valuations in an unpredictable market environment.

He noted that while Zerodha's business may appear stable based on its financials, the reality is that it could change rapidly due to shifts in regulation or market conditions. “Our business, while it looks good based on financials, can change in a heartbeat due to a change in regulation or markets taking a turn for the worse.”

Kamath emphasized that the company is focused on improving revenue predictability before considering a public listing. “We need to do more regarding revenue predictability, and it is impossible to do it just as a brokerage business,” he added, signaling that Zerodha is diversifying its operations to mitigate risks and enhance long-term growth.

In line with this strategy, Zerodha has expanded its reach through Rainmatter, its investment arm, which has allocated ₹680 crore to over 120 startups across fintech, climate, health, and sports. The firm has also committed ₹1,000 crore to Rainmatter Foundation for climate action and livelihood initiatives. Additionally, Zerodha Capital, its lending arm, has built a loan portfolio of ₹300 crore, offering Loan-Against-Securities.

Kamath’s focus on long-term vision is evident as he questioned the need for excessive capital without a clear strategic goal. 

“Why take on the burden of expectation from investors when there is nothing strategic or material to gain for the business? Once listed, most companies are forced to shift their focus to growing quarter after quarter at all costs,” Kamath said, cautioning against the pressures of public markets.

Further diversifying, Zerodha is preparing to launch Margin Trade Funding (MTF) and expand its Loan-Against-Securities business. The company’s Fund House, a passive asset management joint venture with Smallcase, has already achieved ₹3,000 crore in AUM within a year.

Kamath reiterated that Zerodha’s decisions are rooted in customer-centricity rather than short-term revenue goals, ensuring that the company's future moves align with its core philosophy of long-term growth.