Exclusive: Zerodha Fund House in talks to raise up to $100 Mn

Stock broking space has turned hyper competitive in the past two years and the players in the space have been diversifying into more investment products. After Groww, launched its own mutual fund, stock broking major Zerodha and Smallcase created a joint venture – Zerodha Fund House – to float an asset management company or a mutual fund in 2023.

Now, Zerodha Fund House is eyeing external investment, said three sources aware of the details of the conversation. “They are in preliminary discussions with several investors to raise up to $100 million for the AMC business,” said one of the sources requesting anonymity.

For the uninitiated, this would be a first for the Zerodha Group to seek external fundraise ever. The Kamath brothers-owned stock-broking company has been bootstrapped since 2010.

“The talks are exploratory in nature and Zerodha Fund House may take months to finalize the deal,” said another source who also wished not to be named as this person isn’t authorized to speak to the media.

Caveat: The may or may not happen

Zerodha Fund House is managed by an entity named Zerodha Assets Management Private Limited. According to the data sourced from the startup data intelligence platform TheKredible, Zerodha Broking owns 70% of the share capital while the remaining stake belongs to Smallcase.

Zerodha Fund House launched its two index funds: Zerodha Nifty LargeMidcap 250 Index Fund and Zerodha ELSS Tax Saver Nifty Large MidCap 250 Index Fund with a portfolio of 250 Indian companies.

The company also launched its Liquid [with an asset under management (AUM) of Rs 311 crore] and Gold ETF with an AUM of Rs 35 crore.

According to sources, Zerodha got into the AMC business as it wants to assemble different pieces of wealth management along with its core stock broking business.

Queries sent to Zerodha Fund House and Smallcase on Monday didn’t elicit any response. We will update the story in case they respond.

The stock breaking space has been witnessing fierce competition with four major players: Zerodha, Groww, AngelOne and Upstox. Groww surpassed Zerodha in terms of users in October last year. Interestingly, all four players were profitable in the fiscal year ending March 2023.