Zerodha's profit showed minimal growth in FY26, with its core broking business facing significant revenue pressure. Meanwhile, Indian IT companies are reshaping deal structures to navigate evolving client demands influenced by AI and global economic factors.
- Zerodha's brokerage income fell 10.7% YoY, flat net profit at Rs 4,283 crore
- Margin trading facility growth offsets broking decline but raises risk concerns
- Indian IT firms favor bundled acquisition-service contracts amid AI shifts
What happened
Zerodha's financial performance in FY26 shows a plateau in both net profit and operating revenue, with net profit inching up from Rs 4,231 crore to Rs 4,283 crore year-on-year while revenue remained flat. The underlying cause is a 10.7% decrease in brokerage income, dropping to Rs 2,738 crore, compounded by a total loss of Rs 400 crore from transaction charges after exchanges removed rebates. However, the company has increased interest income from margin funding to Rs 2,269 crore, nearly matching its brokerage revenue.
The margin trading facility (MTF), launched in December 2024, has quickly grown its book to Rs 9,000 crore, contributing about 10% of Zerodha’s revenue. Despite this growth, founder Nithin Kamath expressed concerns about the risk as clients have borrowed Rs 6,000 crore, which represents roughly one-quarter of Zerodha’s net worth. This development highlights a growing reliance on margin lending as the core broking business slows.
Why it matters
Zerodha’s stagnating profit growth and contracting brokerage income indicate market pressures on traditional retail brokerage models in India, likely driven by intensifying competition, regulatory changes, or shifts in trader behavior. The replacement of rebate-driven transaction charges with flat fees eliminates a revenue stream that previously helped sustain earnings. The rise in interest income from margin lending reflects a strategic pivot but introduces heightened financial risk due to leveraged client positions.
On the broader IT sector front, firms like Tata Consultancy Services, HCLTech, Wipro, Tech Mahindra, and LTIMindtree are increasingly structuring deals combining asset acquisitions with long-term service contracts. This trend in India’s IT ecosystem responds to global supply chain realignments, particularly retrenchment in Europe due to China’s export dominance. Additionally, the transformative impact of artificial intelligence compels clients to reconsider and often divest captive operations, boosting demand for these bundled offerings.
What to watch next
Investors and market watchers should monitor Zerodha’s margin trading facility closely, evaluating its risk exposure as client borrowing escalates relative to the firm’s net worth. How Zerodha manages this leverage risk while exploring new revenue avenues will be critical to its sustainable profitability. Additionally, any regulatory changes around margin funding and transaction fees could materially impact the company’s business model going forward.
In the IT sector, continued deal activity combining acquisitions with service contracts will signal how entrenched this new model becomes amid AI adoption and global economic shifts. Watch for further major transactions, particularly from marquee firms like TCS and HCLTech, and observe how these deals affect competitiveness, operational efficiency, and client retention. Finally, the impact of reduced H-1B dependence and investments in US STEM talent development could reshape workforce strategies for Indian IT companies in the years ahead.