Home / Companies / Company Results /  How Zoho and Zerodha made it without fund-raising

MUMBAI : Two bootstrapped companies in India’s startup ecosystem have stood out for adopting a less-travelled path to success and profitability, concentrating on bringing cash into the business rather than chasing valuations.

At a time, several new-age technology companies have raised billions of dollars at eye-watering valuations even as profits look distant, Zoho, one of India’s oldest software-as-a-service (SaaS) platforms, and Zerodha, India’s largest broking firm, reported robust earnings for 2020-21.

Both were profitable even in the previous financial year and have built on their success since then, their filings with the ministry of corporate affairs show. The two companies have not raised any funds from investors so far.

Zerodha reported a sharp rise in operating revenue as demand for online broking soared during the pandemic. Zerodha Broking Ltd’s operating revenue tripled to 2,729 crore for FY21 from 938.45 crore a year earlier. Net profit jumped over 160% to 1,122 crore.

Zoho Corp. Pvt. Ltd’s profit more than doubled to 1,918 crore for FY21 from 800.8 crore a year earlier. While its revenue from operations grew a little over 22% for the year to 5,230 crore, the company managed to cut expenses by more than 10% to 3,024.2 crore, lifting profit.

The strong earnings of both companies come at a time their new-age technology counterparts have been questioned over their path to profitability by public shareholders.

Companies such as Paytm, operated by One97 Communications Ltd; PB Fintech Ltd that runs Policybazaar; and Zomato Ltd, among others, which went public last year, have repeatedly reported quarterly losses. Shares of these companies have dropped 22-36% since 1 January. All three companies are trading below their initial public offer prices.

A.K. Prabhakar, head of research at IDBI Capital Markets, said companies like Paytm and Zomato reached a position where they need to burn cash to continue operations. “Paytm and Zomato addressed a need for a limited population. But now, they have to go deeper and add more customers, and for this, you need to burn a lot of cash. I don’t see these companies making a profit in at least five to six years, and I would stay away from these stocks and invest in companies I am more comfortable with," Prabhakar said.

Prabhakar said Zerodha and Zoho, on the other hand, were focused on their core businesses, and since they had not raised any capital from private markets, their primary aim was to become profitable.

“Zerodha’s business model is entirely different. He (Nithin Kamath) never went for PE funding. Everything is his cash or his family’s. So, his priority was to generate profits by focusing on the company’s core business. Moreover, I feel, broking was an old concept. He disrupted the market by building an asset-light business by going completely digital," he said.

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