In a world of neat labels and professions, it is difficult to assign one to Nikhil Kamath. He is the co-founder of India’s largest brokerage, Zerodha. But he is also a hedge fund founder (True Beacon), a prop tech and private equity investor (Gruhas) and a podcaster and influencer (WTF). “I enjoy doing your job these days”, he tells this reporter with a chuckle. “I keep questioning people and after an intense four-hour podcast recording with my guests, I get to know a great deal about them,” he adds.
The lack of focus can be unsettling. In 2019, Nikhil Kamath stepped into the limelight with his first independent venture, True Beacon. Until then he had largely been known as Zerodha’s co-founder. However, Zerodha was increasingly being run by his elder brother Nithin. Nikhil Kamath was excited about deploying derivatives to cut down on risk. He was bringing a unique product to India, though common globally.
Five years on however, his portfolio of activities has multiplied and True Beacon is no longer centerstage. Kamath isn’t actively involved in its running, having delegated responsibility to a professional team. True Beacon’s flagship strategy is close to completing five years. It has delivered 16.6% CAGR since inception compared to 14% on the Nifty. However after fees and taxes, the 2.6% performance beat may be nullified. “People misunderstand True Beacon. It is more about risk reduction than beating the Nifty. It has allocation to tax-free bonds too. I’m very happy with 16.6%,” Kamath explains.
In 2021 Kamath launched Gruhas with Abhijeet Pai of the Puzzolana Group to make private equity investments into property-related tech companies. Come 2024 and the emphasis is on companies focusing on the energy transition with solar panels or EVs.
However, this too is no longer Nikhil Kamath’s animating force. That prize goes to WTF, a podcast that Kamath launched in early 2023. Kamath, who now has 676,000 Instagram followers, is excited about interviewing movers and shakers and deep diving into topics in his podcast. He also wants to give out ‘non-equity grants’ to promising young entrepreneurs below 25. The idea came from people reaching out to him on social media, pitching their ideas for an investment.
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One thing that has remained the same, however, is Kamath’s personal investing style – cautious on public equities in a bull market. Nikhil Kamath turned cautious in late 2020 and has remained so ever since. His roughly 40% allocation to equity means that performance lags the Nifty in a bull market. Kamath’s equity portfolio actually delivered 10% alpha, he says (alpha is outperformance against the benchmark) with some smart stock picks like BSE.
Despite this, Kamath’s return of around 25% in the past year is about 5% less than the Nifty’s. This is largely because of his significant allocation to debt and gold. In terms of vehicles, Kamath invests directly in stocks rather than mutual funds, except for a small allocation to Zerodha Mutual Fund. “I did not see last year’s mid and small cap rally coming,” Kamath acknowledges, adding that nobody can predict markets. However, he remains pessimistic. “Random people unconnected with the stock market are asking me stock questions these days. This is a sign of froth,” he said.
Instead of listed companies, Kamath is more bullish on private markets, meaning venture capital and private equity, which he feels offer a better risk-reward ratio. He says he dreams of investing in Indian companies that can ‘go global’ and build global brands. “A colonial mentality” has dominated our thinking for too long, according to Kamath. A recent private-equity pick was Subko Coffee. “I ordered their machine at home. The taste really is great. They have Indian flavours like podi as well,” he added. According to Kamath, his private-equity investments did better than the public ones last year. However, this is largely ‘paper money’ as Kamath himself acknowledges, caused by valuation increases rather than actual exits.
Kamath’s focus now seems to be on finding venture capital deals and driving the growth of his podcast, which features conversations around subjects he is interested in or companies he is investing in. For instance, he did an episode around the metaverse and gaming while he was evaluating Nazara Technologies for an investment.
He’s had a range of guests, from comedian Tanmay Bhatt to Oyo founder Ritesh Agarwal and venture capitalists such as Karthik Reddy of Blume Ventures. In its latest iteration, Kamath plans to focus more on one-on-one interviews rather than ‘group’ conversations. He’s also enthusiastic about funding entrepreneurs below 25 with ‘non equity’ grants – sums of money that he will give to young founders without taking equity stakes. This, he feels, will also help solidify and grow the WTF community. “We didn’t anticipate the growth from zero to one,” he says. “But it is now the one to hundred that has got us excited,” he added.
Kamath has achieved great success in his diverse endeavours, from building India’s largest brokerage to creating a viral podcast. He’s also been active in the venture capital space. But some of this comes at the cost of focus – it isn’t clear if Kamath remains the intense stockmarket trader he once was.