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In 2009, when stock trading platform RKSV Securities (later rechristened Upstox) was launched, users needed to download a 30-page form, print it, fill it up, and courier it to the startup’s office. Investing was tedious, time-consuming and complex. 

However, India’s booming fintech industry—buoyed by a rapid increase in the number of first-time internet users and the adoption of Aadhaar—has seen a rise in digital investment tools in the past few years.

In fact, last month, the Mumbai-based online brokerage crossed 10 million users, surpassing rivals like Zerodha, Groww, Angel One, and Paytm Money. 

In November 2021, Upstox entered the unicorn club after it raised $25 million in a Series C round led by Tiger Global at a valuation of $3.5 billion. In comparison, Zerodha is valued at $2 billion and Groww at $3 billion.

“We surely didn’t expect this when we started Upstox… the industry is growing at such a tremendous pace,” Co-founder Shrini Viswanath tells YourStory. 

The startup’s growth has largely been fuelled by high returns in global stock markets, loose economic policy, and the pandemic in the last couple of years. 

Upstox, he adds, has been growing 2-3x every year for the last three. 

The origin story

Today, Upstox is a 550-member team, led by Shrini, Ravi Kumar, and Kavitha Subramanian, who joined the company as co-founder in 2016. 

In 2009, RKSV Securities was launched by Shrini, and brothers Ravi and Raghu Kumar. The three, who had just returned to India from the US, seeing how difficult it was for regular users to start trading or investing, decided to solve gaps in the process. 

They spent two years doing algorithmic trading and understanding the market. The idea was to “make this a lot easier for the masses,” says Shrini, so that anyone could interact with the financial markets.  

The startup launched its retail trading offering in 2012.

But opening a trading account back then took about two weeks. It was also a tedious process for firms like Upstox. Forms had to be sent to users who then filled all 30 pages and sent them back. In case a customer missed a small detail, the process would have to be repeated all over again. 

At the time, most discount brokerage firms—those that carry out buy and sell orders without any investment advice—had similar offerings, with one or two trading platforms. 

The differentiation was the price, which brought a lot of traders to Upstox. “The early adopters were usually people who traded and found the value proposition worthwhile,” says Shrini. 

Upstox charges zero brokerage on equity delivery trades and up to Rs 20 per order for intraday, future and options (F&O), commodities, and currencies.

Based on feedback from early users, the team began to experiment and launched its app in 2016.

The trading service became paperless. Users could just download the app, provide their basic details to complete the KYC (know your customer) process, and start investing in financial markets—stocks, derivatives, and mutual funds—in just a few clicks. 

This further distinguished Upstox (and other digital brokerages) from traditional players that still used technology as an afterthought at best. 

The fast-growing market

Over time, several factors helped online discount brokers further scale up their businesses. 

The biggest was Aadhaar. In 2016, Upstox launched an e-Aadhaar account opening, making it even easier for users to create accounts on its platform. In fact, of the 89.7 million-plus demat accounts in India (as of March 2022), 64.3 million were opened after March 2016, according to data from the Securities and Exchange Board of India. 

“It was a huge enabler in ensuring that the identity given by financial institutions, [user] verification, and everything became massively easier. So, that 30-page form slowly came down to 15, and then eventually, to what it is right now: zero,” says Shrini. 

Cheaper smartphones and internet, enabled by the “Jio revolution”, helped too. A Nielsen report in May 2022 revealed that as of December 2021, India had 646 million active internet users. 

Added to these are improvements in the digital payments landscape—rising adoption of UPI and digital wallets. This helped Upstox reduce the time it took to deposit the users’ money and invest it in the stock market—from two days earlier to just a few seconds. 

At present, 90-95 percent of all trades processed by the startup are done on mobile, Shrini says. 

“Even our most professional traders prefer trading on the go, and they want more and more features you can fit on the six-inch screen,” he adds.

There has also been a rise in casual investors in Upstox’s user base, that is, people who are investing for the longer term. In comparison, traders tend to go for short-term investments and hold shares for only a few months.

However, the market landscape and competition have certainly changed over time. With more and more fintech players entering the trading space, pricing isn’t the Unique Selling Proposition anymore. “It is all about the product,” says Shrini. 

For example, Upstox is in the process of adding features for traders like new ways to transact options as well as giving insights. For investors, it wants to make the app simpler, without a lot of technical jargon. 

In 2018, the startup set up e-Delivery Instruction Slip (e-DIS) facility so demat account holders could sell and transfer securities without submitting a ‘Power of Attorney’ to their stock broker. 

At the time, Upstox was one of the first companies to allow trading with e-DIS through One Time Password (OTPs) so investors didn’t feel stuck while transferring money. 

“That’s the norm today. No one would dare to send you a paper form,” says Shrini. “These small things we started doing added up to where we are today—a completely paperless experience and digital identity verification.”

Aggressive growth avenues

Of its 10 million customers, Upstox claims that about 80 percent are millennials and nearly 70 percent are first-time investors. 

More than 85 percent of its customers belong to Tier II and III cities with states like Maharashtra, Uttar Pradesh, Madhya Pradesh, Rajasthan, and Assam being its top markets. 

To date, the startup has raised over $54 million. Its investors include Tiger Global Management, Kalaari Capital, GVK Davix Technologies, and industrialist Ratan Tata.

Upstox has been spending aggressively to acquire users and accelerate its growth. It reported an advertising cost of Rs 37.15 crore in FY21, over 51 percent higher than the previous fiscal. 

In 2021, it partnered with the International Cricket Council (ICC), the Indian Premier League (IPL), and Tamil Nadu Premier League (TNPL), which also helped widen its customer base. 

While the startup hasn’t filed its financials for FY22 yet, its business promotion expenses in FY21 stood at Rs 113.47 crore, a 5x jump from FY20. Its revenue in FY21 nearly tripled to Rs 429.12 crore but its net loss widened 89 percent to Rs 71.68 crore. 

“We have a plan of getting profitable in the next two years. We can speed that up or we can slow that down. It’s just a matter of how much you also want us to scale up,” says Shrini. 

With other players in the market reaching profitability, he is optimistic about the revenue model and market. 

Road ahead

The goal now is to add 20-30 million users to the platform by FY23, and 100 million in the next 4-5 years, says the co-founder.

While this number aligns with Upstox’s recent growth, there is a lot to consider: rising inflation and interest rates and tightening of economic policies are bothering investors across the world. And financial markets are bearing the brunt. 

The S&P 500 index, which tracks the 500 large companies in the US, has fallen 14 percent in the last six months. On the other hand, NASDAQ has plunged 25 percent during the same time. 

In India, Sensex, which tracks the top 30 companies listed on the Bombay Stock Exchange (BSE), is down 13 percent since November 15. 

These statistics become even more important if you consider Upstox’s revenue model. It earns by charging a flat fee for each intraday order from its users. Shrini claims more than 50 percent of the platform’s 10 million users are active. 

“Psychologically, it is not easy (for users),” he acknowledges. However, he is still optimistic about user growth in the coming months.

“There’s always a market, whether it’s going up or down. What’s important is the volatility. And even if there’s a bear market happening, there’s always an opportunity for traders,” Shrini adds.

His strategy to counter these concerns is to educate users while giving them a variety of asset classes to make safer bets.