Upstox looks beyond broking as regulator tames retail mania
While growth remained almost flat in the previous financial year (FY25) ending March 2025, Upstox expects its profits to double in the ongoing (FY26) and subsequent (FY27) financial years, co-founder and CEO Ravi Kumar said in an interview.
India’s fourth-largest broker’s sharp improvement in clients’ profitability in FY26 is due to a tighter focus on high-value active investors, which has increased average revenue per active user (Arpu) and improved retention. “Our ARPU is up over 40% and we probably have one of the industry-leading retention rates among high-value investors at almost 90%.”
India’s online brokers have grappled with restrictions imposed by the Securities and Exchange Board of India (Sebi’) and the finance ministry against speculative trading in stocks and derivatives. Sebi has tightened risk norms in derivatives trading since 2024, increased margins, restricted expiries of weekly options, limited retail access to high-risk products and reformed broker incentives to reduce excessive loss rate. The pressure increased further after finance minister Nirmala Sitharaman increased the securities transaction tax (STT) on derivatives trading in the Union Budget 2026-27.
Kumar said the financial year ending March 2025 was a “pretty tough” year for the brokerage industry as regulatory changes added repeated “speed bumps” to growth. The company’s growth stagnated in FY25, with revenue rising around 9% year-on-year to around 9%. ₹1,208 crore, much slower than the Covid surge.
Upstox, like other online brokers, is losing trading volumes.
Kumar said Sebi “generally did the right thing by putting these speed bumps”. Structurally speaking, it helps in the long run.” And Upstox is now operating under the assumption that regulatory scrutiny of derivatives and active trading will intensify rather than reverse.
Focusing on high Arpu users in FY26 increased operating income and net profit. “Our EBITDA is up almost 120% over last year. Our PAT is running around 2.25 to 2.3 times last year and our PAT margins have actually expanded,” Kumar said. Profit remained at approximately the same level in FY25 ₹215 crore.
‘Controllers will be stricter’
Like many fintech companies in the last two years, Upstox aims to become a larger, full-fledged financial institution. In addition to core brokerage, it also explores revenue streams in insurance, asset management and lending.
According to Kumar, insurance is at an early stage without meaningful revenue contribution, but the company is investing aggressively in leadership, distribution and product to scale the business over the next 12-18 months.
Upstox has also applied for an asset management company (AMC) and non-bank financial services company (NBFC) license. Kumar said lending is a long-term option rather than an immediate growth tool. “It’s not something we’re in a huge rush to complete… but we think it makes sense to do it.”
The company is also banking on Sebi’s decision to allow algo trading for retail investors from April this year. “This is a very important milestone,” he said.
Upstox is investing in backend infrastructure for high-uptime, low-latency programmatic trading. “We’ve built new teams… some of our most outstanding people are moving towards this.”
Meanwhile, according to him, some other experiments began to bear fruit. “Our average daily turnover in commodities has more than doubled and our revenue has increased by almost 100%,” he said.
Similarly, the turnover of the margin trading facility more than doubled on an annual basis. Upstox’s systematic investment plan (SIP) platform volume grew by over 35% last year, he said.
Hedging bets
Upstox is not alone. Competitor Groww also noted in its latest earnings call that regulatory changes in derivatives and weak market conditions are starting to put pressure on the business.
India’s largest broker by client base said the market has not been that good in the past 12 to 18 months and new investor acquisition at the industry level has actually slowed down.
Market cycles, changes in retail investor behavior and the possibility of prolonged regulatory scrutiny extending to other brokerage areas are risk factors, Kotak Securities said in its January analyst report on Groww.
The broker said diversification has become central to its strategy, noting that “all new businesses are growing faster than existing businesses.”
Broker Dhan is also looking to expand into segments such as insurance as regulatory changes impact trading volumes, Mint reported in October.
No fundraising plans
Founded in 2009 by Kumar, Raghu Kumar and Shrinivas Viswanath as a proprietary trading company, Upstox branched out into retail brokerage in 2012. It offers tools built specifically for serious, high-frequency and options traders.
“Our starting point has always been the trader, because that’s where we come from,” Kumar said.
The value of the company, which raised approximately $220 million from investors such as Tiger Global Management and Kalaari Capital, was $3.5 billion in 2021.
In 2024, the brokerage bought back 5% from early angel investor Ratan Tata, earning a 10x return on its original investment in realized capital.
While the company plans to support new revenue streams, Kumar said “we do not need to raise any primary funds at this time.”
A public listing is on the cards, but Upstox has not announced a listing timeline. Staying private gives Upstox the flexibility to try new lines of business without short-term market pressure, Kumar said.
The company’s competitors are actively seeking external financing for growth. Groww raised a total of nearly $1 billion through an initial public offering (IPO) and an initial public offering that closed last year.
In October, stock trading platform Dhan raised $120 million in a round led by Hornbill Capital and MUFG Bank.
