MUMBAI: Zerodha, India's largest broking firm by revenue, has significantly reduced its dependence on income from broking, with broking accounting for 44 per cent of its total revenue in the financial year 2025-26, down from 70 per cent in 2020-21.
The shift, revealed in a note by credit rating agency ICRA and reported by Moneycontrol, shows how the Bengaluru-based discount broker has diversified its business even as regulatory curbs on derivatives trading continue to reshape the economics of the entire broking industry.
Zerodha reported revenue of around Rs 8,500 crore and net profit of around Rs 4,300 crore in FY26, figures that make it one of the most profitable companies in India's financial services sector. Net profit rose by about 1.2 per cent to Rs 4,283 crore in the year ended March 2026, while revenue remained broadly unchanged from the Rs 8,847 crore reported a year earlier.
The flat topline, despite the diversification, reflects the scale of the disruption in the firm's core business: brokerage income fell by 10.7 per cent to Rs 2,738 crore during the year, and net transaction-charge income dropped to zero from Rs 400 crore after a regulatory change ended the rebates brokers received from stock exchanges.
The change in Zerodha's revenue mix is striking when compared with its listed rivals. In FY26, more than 70 per cent of Groww's revenue came from broking, while the share for Angel One was a little under 60 per cent. Zerodha's lower dependence on broking is therefore notable, but it does not mean the firm has escaped the pressures facing the industry.
ICRA, in its note, struck a cautious tone: "The strengths are partly offset by Zerodha's high dependence on the inherently volatile and cyclical capital market, with revenue largely driven by broking and float income, despite its diversification initiatives in allied businesses including margin trade funding, asset management and merchant banking."
Interest income from customer funds was another major contributor to Zerodha's revenue, accounting for 32 per cent of its FY26 topline. That share was more than four times Groww's share of interest income. Angel One also earned around 31 per cent of its revenue from interest income in FY26, although that figure included interest from loans, margin trade funding and customer float.
For Zerodha, interest income declined by about 4 per cent to Rs 2,269 crore in FY26, but it remained close in size to the firm's brokerage income, underlining how important the float on client funds has become to the discount broking model.
Margin trade funding, known as MTF, has emerged as an important growth driver for brokers in the new regulatory environment. MTF allows investors to buy shares by paying only part of the value upfront, with the broker funding the remainder, and it has grown rapidly as brokers look for revenue streams beyond derivatives trading.
Zerodha derived 8 per cent of its revenue from MTF in FY26, while Groww reported MTF contributing 10 per cent of its revenue during the September quarter. Zerodha launched its margin trade funding offering at the end of 2024, and the book has since grown to roughly Rs 9,000 crore, contributing around a tenth of revenue on a run-rate basis.
Despite the diversification, derivatives trading remains central to Zerodha's broking business. Within broking revenue, futures and options accounted for 85 per cent of the total in FY26, a far higher share than at Groww or Angel One, which have a more diversified broking mix with equity delivery and commodities also contributing significantly.
That concentration explains why regulatory changes to derivatives trading have hit Zerodha particularly hard, and why the firm's leadership has spoken openly about the impact on its business.
The regulatory shift began with the Securities and Exchange Board of India's efforts to curb speculative retail trading in derivatives. A SEBI circular dated October 1, 2024, allowed each exchange to offer derivatives contracts for only one of its benchmark indices with weekly expiry, and raised the minimum contract value to Rs 15 lakh, both with effect from November 20, 2024. The upfront collection of option premium followed on February 1, 2025.
The measures were designed to protect small investors, many of whom were losing money in high-risk derivatives trades, but they also removed a large volume of the trading activity that had powered the growth of discount brokers.
Zerodha's co-founder and chief executive Nithin Kamath flagged a hit of around 40 per cent in brokerage revenues in the June 2025 quarter compared with the same quarter a year earlier, a figure that illustrates the severity of the adjustment. The firm also lost nearly 10 lakh active clients over the course of the year, as some traders reduced their activity or moved elsewhere.
At the same time, Groww overtook Zerodha in September 2023 to become India's largest broker by number of active clients, and the gap has since widened: by July 2026, Groww had 1.31 crore active clients, nearly twice Zerodha's 67.6 lakh, and Zerodha's share of the National Stock Exchange's active clients had fallen to 14.88 per cent.
Yet the financial comparison tells a different story from the client-count comparison. In FY26, Zerodha earned around Rs 8,500 crore in revenue and Rs 4,283 crore in profit, while Groww reported revenue of about Rs 4,645 crore and profit of about Rs 2,083 crore. With roughly half the users, Zerodha earned about twice as much money, a reflection of its higher revenue per client, its large base of active traders, and its diversified income from interest and margin funding.
The contrast highlights a central question for the broking industry: whether scale in client numbers or profitability per client matters more in a market where trading volumes are increasingly regulated.
Zerodha's story is also distinctive because of how the firm was built. Founded as a discount brokerage platform, it grew without spending on advertising, relying instead on word of mouth, low pricing and free investor education through its Varsity platform. That approach earned it a loyal base of serious traders and investors, and it allowed the firm to remain bootstrapped, without outside investors demanding growth at any cost.
Analysts argue that this independence has helped Zerodha navigate the downturn: with no venture capital backers pressing for expansion, the firm has been able to absorb a fall in broking revenue while building new businesses in asset management, lending and merchant banking.
The broader broking industry faces a similar adjustment. Regulatory curbs on derivatives have changed the economics of a business that, for several years, rode a wave of retail participation fuelled by smartphones, low-cost trading apps and a bull market. Brokers are now competing harder on mutual funds, systematic investment plans, margin funding and wealth management, and the firms that can diversify fastest are likely to emerge strongest.
Zerodha's FY26 numbers suggest it is further along that path than its rivals in terms of revenue mix, even if its dependence on derivatives within broking remains a vulnerability.
Annual maintenance charges, a small but steady revenue stream, rose marginally to Rs 180 crore in FY26. Combined with interest income, margin funding and asset management, these streams give Zerodha a broader base than it had five years ago, when seven out of every ten rupees of revenue came from broking alone.
The direction of travel is clear, even if the destination is not yet reached: a broking firm that is gradually becoming a diversified financial services company, with trading as one leg among several rather than the whole business.
For investors, traders and the wider market, Zerodha's results offer a snapshot of an industry in transition. The era of explosive derivatives-driven growth has given way to a more sober period, in which profitability depends on diversification, risk management and the ability to serve clients across products.
Zerodha has so far managed that transition while remaining highly profitable, but ICRA's cautionary note serves as a reminder that the firm remains tied to the fortunes of the capital market. If trading volumes fall further, or if interest rates decline and float income shrinks, even a diversified broker will feel the pressure.
The next few years will show whether the shift from 70 per cent to 44 per cent was the beginning of a lasting transformation, or merely a pause in a business that still lives and dies by the market's mood.
(Reporting based on Moneycontrol and The Economic Times.)