Nithin Kamath Co-founder of India’s largest stock brokerage firm announced on Sunday that the firm’s profit more than doubled in the last financial year, FY-21 to 1000 crore.
According to regulatory filings, Zerodha’s profit for the financial year was Rs 442 crore, and revenue was Rs 1,000 crore.
As part of a series of tweets, Nithin explained that the firm’s PAT (profit after tax) for FY 2020-21 was about Rs 1,000 crore. And that the Rs 100 crore salaries of the founder brothers Nithin and Nikhil and Nithin’s wife Seema Patil was an enabling resolution and not an absolute figure.
He added that the reported figure isn’t the actual salary being drawn. This is an enabling resolution that allows them as working promoters to draw salaries up to the number in case of liquidity requirements. Didn’t anticipate that this would get this much attention.
According to the special resolution passed by Zerodha’s board, all three will get a basic salary of Rs 4.17 crore per month each, along with allowances, which add up to Rs 300 crore as salary per year.
Nithin said that while the actual salary will be lower, it will still be high compared to the norm. Promoters don’t take out profits through salaries as it is tax-inefficient, as one ends up almost paying 50% in taxes.
He told Business Standard on Friday that the firm wasn’t looking to go public. Because by doing so it means that either the firm wants funding or because it wants to give an exit to some of the investors. He said that they don’t have both the pressures.
In April, Nithin had said that Zerodha will not raise external funds now or in the future, because it is profitable and has zero debt. Moreover, it doesn’t spend on marketing and advertising.
He further explained on Friday in a series of tweets that companies that raise funds pay higher taxes.
Nithin is of the opinion that as a promoter/founder you pay almost 250% more as taxes if you were taking out money from the business as salary/dividends compared to say paying capital gains when selling your stake to an investor (fundraising route).
He has always said that booking is a high-risk business, and a change in regulations can also impact profitability.
He added on Sunday, “We believe that building sustainable businesses & paying taxes is a great step in contributing to society and the nation. We take great pride that we are giving back most of our success through @RainmatterOrg & that we are among the highest tax-paying new-age businesses.”
The Kamath brothers also run Rainmatter Foundation, an NGO supporting climate change action. To fight climate change, Zerodha said in January it would invest $100 million as grants and equity investments.
Image: (C) of Zerodha from Zerodha.com
Bhoi Smrutirekha Dharanidhar