Online brokerage firm Zerodha’s Nithin Kamath on Sunday said that he was surprised by the “by the unwanted noise” around the news of that he, his wife Seema Patil and co-founder and brother Nikhil Kamath will get a salary of ₹100 crore each every year. Nithin Kamath said in a series of tweets he did not expect that it would receive such attention.
“While the actual salary will be lower, it will still be high compared to the norm. Promoters don’t take out profits through salaries as it is tax-inefficient, you end up almost paying 50% in taxes. I had written about this before,” he said in another tweet.
The announcement that Zerodha founders Nithin Kamath, Nikhil Kamath and Seema Patil each shall now draw a salary of up to ₹100 crore each every year was made through a special resolution passed by the stock brokerage firm’s board. Kamath told Mint on Saturday that the salary reported is just the upper limit and could vary from the actual salaries they draw. “We have always drawn a certain portion of the profits and kept it away to mitigate any kind of company risks in the future,” he said.
On Sunday, Nithin Kamath pointed to the nature of broking saying it is “riskier because most revenue comes from active traders with leveraged positions that carry risk, one black swan event can cause the business large losses”. “Also due to changing regulations, any of which can potentially impact profitability significantly,” he added.
He said the need for taking out liquidity is required to ‘de-risk’ and said that the company has been doing it every year to support social causes and small businesses. Kamath also highlighted that the ‘de-risking’ is enabled for everyone in Zerodha through ESOP or employee stock ownership plan. Zerodha converted itself to a public limited company in 2019 and 6-6.5% of its employees have a stake in the company through ESOPs.
He also said Zerodha takes utmost pride in giving back to the community. “We believe that building sustainable businesses and paying taxes is a great step in contributing to society and the nation. We take great pride that we are giving back most of our success through @RainmatterOrg and that we are among the highest tax-paying new-age businesses,” he also said.
Nithin’s tweets were met with positive responses from Twitter users.