Zerodha, a prominent online brokerage firm in India, has secured approval from the Securities and Exchange Board of India (SEBI) to establish a merchant banking arm. This move allows Zerodha to enter the investment banking sector, offering services such as managing Initial Public Offerings (IPOs) and advising companies on equity fundraising and corporate advisory. The approval comes at a time when India's primary capital market is experiencing significant activity, with a robust pipeline of companies, including startups and new-age ventures, preparing to go public.
Zerodha's entry into merchant banking, through its subsidiary Zerodha Corporate Advisors, marks a strategic expansion beyond its traditional stockbroking operations. The company had filed its application for a Category-I merchant banking license in April. This diversification is consistent with Zerodha's broader strategy of expanding its financial services ecosystem, which has previously included forays into mutual funds (through Coin), asset management, lending, and startup investments (via Rainmatter).
The decision to enter merchant banking is also influenced by the growing interest from fintech and other financial services companies in the sector, despite SEBI having recently tightened regulations for merchant bankers. Zerodha's strong distribution capabilities and extensive investor network are seen as significant advantages in this competitive market, which is currently dominated by established players such as JM Financial, Kotak Mahindra Capital, Axis Capital, and ICICI Securities. Analysts believe there is substantial room for new entrants, especially those with strong investor relationships like Zerodha. The company had reported revenue from operations at ₹8,847 crore and a net profit of ₹4,237 crore in FY25.
