The startup has passed a special resolution to pay annual salaries of Rs 100 crore each to founders Nithin and Nikhil Kamath, as well as to whole-time director Seema Patil, regulatory disclosures showed.
Zerodha has over 5 million active users and manages around 15% of all trading volume in the country.
As India’s only ‘bootstrapped unicorn,’ Zerodha’s founders are in a unique position — to encash on their success, they need to rely overly on salaries. Unicorns are startups with valuations of $1 billion or more, and bootstrapped ones do not have any external funding, such as private equity or venture capital.
“We are coming off a very successful and fruitful year. Unlike other startups, we have not diluted our stakes for a valuation premium,” Nithin Kamath, founder and chief executive of Zerodha, told ET. “We have no intention to sell our stakes and the only way to encash our success and get some liquidity is by increasing our salaries.”
The revised compensation structure would make the brothers, as well as Patil, who is Nithin Kamath’s wife, among the most highly paid top executives in India Inc. News portal
Entrackr was the first to report the development on Friday.
executive chairman and founder Kalanithi Maran and wife Kavery Kalanithi Maran had annual remuneration packages of Rs 88 crore each for FY20, as per regulatory disclosures. Others in the big earners club for FY20 include Pawan Munjal of Hero MotoCorp (Rs 85 crore), Murali Divi of Divi’s Labs (Rs 52 crore) and Rajiv Bajaj of Bajaj Auto (Rs 40 crore).
Reliance Industries chairman Mukesh Ambani’s annual salary has been capped at Rs 15 crore for several years now.
ETtech‘Inefficient Remuneration Structure’
The salaries of most startup founders and executives — including those of unicorns such as Paytm, Zomato and Flipkart — also do not exceed Rs 3-6 crore a year.
“Taking salaries is a very inefficient kind of remuneration structure for promoters, as there are huge tax liabilities – to the tune of 50%. In comparison, when a promoter encashes his/her stake, the tax outgo is much less…,” Kamath said.
We’re also giving back through @RainmatterOrg. We’ve committed $100 mil to grass-root organizations & startups wor… https://t.co/jOLlfkUVv7
— Nithin Kamath (@Nithin0dha) 1622195432000
Zerodha made profits of Rs 440 crore in FY20, while revenue grew 15% to Rs 1,093 crore.
Meanwhile, the brokerage is also set to announce an employee stock ownership plan (Esop) worth Rs 150-200 crore, valuing it at $2 billion, Kamath told ET.
The firm’s valuation has doubled since it launched a Rs
60 crore Esop scheme last year, even though it had not been fully subscribed as many employees did not want to sell their stakes.
“For me, it’s still a conservative valuation of our business. We want to give this option to our employees, as we do every August, as it coincides with our anniversary,” said Kamath.
Read:
India’s stock market most active right now since 2007: Zerodha CEO Nithin Kamath
Massive Traction
The company saw massive traction on its platform, Kite, in 2020, as millions of retail stock traders — drawn by a volatile securities market — opened their demat accounts with Zerodha. “In our business, if markets do well, we do well too,” Kamath said. “But the market is overvalued and we have to be prepared for when the bubble bursts.”
Zerodha wants to keep its business simple. “There is no point in over-spending, and we want to keep our operational costs low,” he said.
The Kamath brothers run an investment fund called True Beacon, founded in 2019. They have also launched a non-governmental organisation, Rainmatter Foundation, which supports climate change action. It has committed $100 million for grants and projects across India.
