Why Zerodha Won’t Go For An IPO

Days after the closing of initial public offerings (IPOs) of digital start-ups, from PolicyBazaar, Paytm to Nykaa, and others, founder and CEO of online trading platform Zerodha Nithin Kamath tweeted that his company does not want to go for an IPO in this bull market.

In a Twitter thread posted on November 12, he said, “Why not IPO @zerodhaonline, when you can potentially get ridiculous valuations? Firstly, we think an IPO is the beginning & not the end. As soon as you have lakhs of conservative retail investors on your cap table, the obligations go up exponentially.”

He points out that in the current market, companies are already getting priced to perfection based on all the future growth potential and for a stock to do well, a company needs to outperform. He further added, “As CEO, I dread to think how you can outperform the already really high expectations that growth companies have today.”

He said that the craze for IPOs is scary as the market is volatile and it is not possible to predict what the Nifty Midcap index can do in three years.

Talking to Outlook Money last month on the stock markets, Kamath had said, “Right now, we are probably overvalued as a market and we are pricing the future almost to perfection. Markets can’t really continue to go up like this. So, people should be putting small amounts of money consistently in the market over a longer period of time, so even if there are drawdowns in the market, they get a better average.” Read full story at Outlook Money.

Stressing on the fact that Zerodha is not looking at chasing an IPO, he mentioned in the tweet, “We have never set revenue or growth targets, always believed that if we can do what is right for the customer & if goddess of luck smiles, the rest will happen. Our core team dreads moving away from that philosophy to be in a chase all the time, which it will be after an IPO.”