Nithin Kamath, co-founder of discount brokerage firm Zerodha on Sunday has clarified on reports regarding the company’s co-founders Nithin and Nikhil Kamath along with Nithin’s wife, Seema Patil drawing a ₹100 crore salary.

Nithin has clarified that the Board has passed an enabling resolution to allow working promoters to draw the amount in case of liquidity requirements. It is not the actual salary amount being drawn.

“We are a private company & no obligations to clarify, but we thought maybe we should, as there are folks who are misinterpreting this,” Nithin wrote on Twitter.

“Firstly the reported figure isn’t the actual salary being drawn. This is an enabling resolution that allows us as working promoters to draw salaries up to the number in case of liquidity requirements,” he wrote.

“Running a business is like trading, you can be up or down very easily. It is important to take liquidity out when you are “up” to de-risk,” he added.

He further explained that they had always done this, taking nearly 15 per cent of profits to de-risk.

“This also helps us in supporting our personal investments in small businesses & social causes,” he wrote.

Kamath further added that the firm was also planning a ₹200 crore buyback plan for employees.

“Broking 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 wrote.

“This de-risking is something that we are enabling for everyone on our team through our ESOP buyback. A portion of the profits allocated for the buyback every year. This year it is appoximately Rs 200 crores. Our PAT for FY 20/21 approximately Rs 1000 crores( similar to bank brokers),” he added.

He further clarified that though the actual salary will be lower, but still 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,” Nithin explained.

“We take great pride that we are giving back most of our success through the Rainmatter Foundation & that we are among the highest tax-paying new-age businesses,” he added.

Nithin will get every month a basic salary of ₹4.16 crore plus ₹2 crore as house rent allowance, ₹1.6 crore as ‘other perquisites’ and ₹41 lakh as ‘other allowances’. In addition, he will get a variable pay and a bonus, as decided by the board depending on the performance and policies of the company. Nikhil and Seema, too, get identical packages, as per previous reports.

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