Zerodha was a pioneer of the discount brokerage industry in India, but another, less often spoken- of feather in its cap was that it also set a unique blueprint for a startup to succeed in the country. The standard toolkit for a successful business was to raise venture funding and spend heavily on advertisements to build the brand. However, with only bootstrapped funds, a lean HR team, and no advertising expenditure, Zerodha delivered profits right from inception. Given its early start and clear focus on its purpose—‘eliminating barriers to investing and trading’—it created what INSEAD professors W.C. Kim and Renée Mauborgne call a ‘Blue Ocean’.
Zerodha introduced a revolutionary flat-fee model that attracted customers in large numbers, while its internet-first strategy—without multiple branches or relationship managers—allowed it to keep operational costs low. The simultaneous achievement of reduced costs and greater customer benefits, characteristics of a typical Blue Ocean, meant that Zerodha’s financial performance was unrivalled.
Also Read: Groww took the growth out of Zerodha. But can it really take it on?
However, as is often the case with Blue Oceans, new entrants, attracted by the profitability potential, replicated the business model, turning it into a ‘Red Ocean’ characterised by hypercompetition. This was easier in this case, as the discount brokerage model itself was not particularly unique, and competitors could easily emulate the value proposition by launching online platforms and charging a flat fee for transactions. Unlike Zerodha, however, some competitors were venture-capital-backed, allowing them to invest in HR recruitment and advertising to provide better service and create greater awareness.
As a result, many years later, Zerodha is no longer the market leader in terms of active clients. In May 2025, according to National Stock Exchange (NSE) data, it ranked second with 7.75 million active clients, trailing Groww’s 12.8 million by a significant margin. In fact, there is a greater probability of Zerodha slipping to third place than regaining the top position — Angel One ranks third with 7.44 million, a difference of only 4%.
Incidentally, both Groww and Angel One spend heavily on advertising, while Zerodha spends nothing, as has been its strategy.
Tightening regulations have further compounded Zerodha’s challenges. Over the past year, SEBI has introduced numerous measures, such as raising margin requirements for derivatives trading, increasing contract sizes, and rationalising weekly derivatives products, all aimed at strengthening investor protection. These measures have raised the entry barriers for derivatives trading, impacting overall investor participation in the derivatives market — a key revenue driver for Zerodha. While these decisions affect all discount brokers across the board, for Zerodha, they represent yet another challenge to overcome as it attempts to reclaim its former glory.
Groww, for example, offers both active and passive fund strategies through Groww Mutual Fund and has also launched its own brand, W, which provides PMS and AIF services to clients.
Zerodha, true to its philosophy, continues to operate differently, following a lean path to success. Yet, it now finds itself at a crossroads, forced to make a difficult strategic choice — one that involves trade-offs unlike the early days of 2010, when it could fire on multiple fronts and deliver on all fronts simultaneously.
If Zerodha follows its rivals in spending money, it might capture a larger market share, but profitability margins will decline. Conversely, continuing with its lean approach will safeguard profitability through stronger operating margins but at the cost of lower market share.
Zerodha thus stands at a defining moment — the path it chooses next will determine the future of this truly unique unicorn.
Avinash Ghalke is an Associate Professor of Finance and Accounting and the Deputy Programme Chairperson of the Post Graduate Programme in General Management at the S.P. Jain Institute of Management & Research (SPJIMR), Mumbai, and Rohit Prabhudesai is an Associate Professor of Strategy at the Goa Institute of Management.
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First Published: Nov 06, 2025, 18:44
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