@nithin I would appreciate if you can spare your thoughts is this debate of holding mutual fund in Demat format Vs SoA format.
Let me add a disclaimer before proceeding ahead:
This is not about Coin vs this or that. This is purely about MF in Demat Vs SoA. And my attempt to understand why does Zerodha offers mutual funds in Demat format when MF in Demat format has so many drawbacks as I have listed above which create unnecessary ‘Rodha’ for investors.
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Apart from the pointers listed above (request you to read them), earlier you have mentioned earlier that currently, Zerodha absorbs the DP charges by not passing it to investors so that we can get the service for free like the mutual fund platforms that offer MF in SoA format. To get into detail, Zerodha is losing Rs 5+ on each buy and sell order of Mutual funds.
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In the past whenever I had brought up a comparison between MF in Demat vs MF in SoA format, you had submitted an argument that those platforms are being run by deep-pocketed VC money and they are not profitable yet. Yes, you are absolutely true in saying that. But it doesn’t take the fact away that Zerodha Coin, the mutual fund vertical of Zerodha too is not profitable today, and is, in fact, losing in this battle as each mutual fund transaction incurs in DP charges and is adding to the cost and needless to say that as the number of mutual fund investors increases on Coin, the expenses for Zerodha (from the mutual fund vertical, Coin) also increases. I know you recover that loss from other businesses of Zerodha but citing that example would be comparing apples and oranges.
The truth is, both kinds of mutual fund platforms - offering MF in SoA, and Demat, both of them are losing money today.
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The other argument commonly encountered on this topic of mutual fund in Demat vs SoA - to be able to manage the portfolio at one single platform. In my above comment (I would request you to read my previous comment), I have already countered the argument that there are entities like MFU Online exist now, that act as a single-window for investors. So having mutual funds in Demat doesn’t provide anything that is exclusive.
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In the past you had also presented arguments in favour of holding MF in Demat that sooner or later regulatory would ask investors to hold mutual funds in Demat format, like how it asked investors to get their physical shares converted to Demat format.
In counter to this view, I would like to bring to your kind attention that despite that so many people still hold physical shares. It would be so until the time regulatory forces you, by making a statement that either move your paper shares to Demat or you lose that completely. Until that day arrives, people would be still holding physical/ paper share certificates. Coming to the mutual funds in SoA format, so the units are already held in electronic format, the buy and sell of units already happen in electronic format. Also, if you compare the universe of mutual fund held in SoA format to the segment of mutual fund held in Demat format, it’s a tiny part of the entire universe. Even if the regulatory some day asks us to compulsorily have mutual funds in Demat format when that day arrives, it would be a massive task and there would be processes set for the migration and timelines to be given. Whenever it happens, (if it happens at all), we’ll see, and we’ll be in that boat, and regulatory would draw a process for that to switch easily for the investors.
Thus, as I have mentioned earlier currently there is little to no benefit of having mutual funds in Demat format.
As a concluding remark, if I may ask, wouldn’t it be smarter for Zerodha to provide mutual funds in SoA format until that day arrives when regulatory asks everyone to switch to mutual fund in Demat format? Wouldn’t it be making more business sense for Zerodha to offer mutual funds in SoA to reduce the transaction costs + overcoming the demerits of mutual funds in Demat format?
I wouldn’t name another broker, but it is doing the same thing. Though share trading is done in demat account there, it offers mutual funds in SoA format. Thus it saves cost on each MF transaction and investors too get benefits of managing under a single window + features that are available for MF in SoA format. Best of both worlds.
I can’t read your mind. So I would request your comments on this. 
I would really appreciate hearing from you on this.
P.S. I would like to reiterate, this is not against Zerodha Coin or Coin vs this or that. This is only a discussion about MF in Demat vs SoA.