Zerodha has received approval from the Securities and Exchange Board of India (SEBI) to begin merchant banking operations, marking the brokerage’s entry into the investment banking business.
Its subsidiary, Zerodha Corporate Advisors, had applied for a Category-I Merchant Banking licence on 27 April and received SEBI’s registration dated 1 September.
What Does the Licence Allow Zerodha to Do?
The licence enables Zerodha to expand beyond its traditional broking business and participate in major capital-market and corporate finance activities, including:
- Managing Initial Public Offerings (IPOs)
- Managing Follow-on Public Offers (FPOs)
- Handling rights issues
- Providing issue-related and corporate finance services
- Undertaking underwriting and other capital-market activities permitted for Category-I merchant bankers
This brings Zerodha into competition with established Indian and international investment banks, particularly in managing public issues and advising companies on capital-market transactions. With Zerodha receiving its merchant banking registration, the number of registered merchant bankers in India has increased to 249.
Why Is Zerodha Expanding?
Zerodha’s move comes at a time when India’s primary capital market is attracting increasing interest from fintech and financial-services companies.
The licence is also part of Zerodha’s broader strategy to diversify beyond its core broking business. In recent years, the group has expanded into: Lending, Asset management, Broker-dealer services in GIFT City (aimed at facilitating overseas investments) and Investments in financial and technology businesses through its investment arm Rainmatter.
What Are Category-I Merchant Bankers?
Category-I merchant bankers are full-service capital-market intermediaries authorised to undertake a wide range of activities associated with public issues and corporate finance.
Their functions include:
- Managing IPOs and other public issues
- Acting as lead managers of IPOs
- Underwriting securities
- Providing services related to mergers and acquisitions
- Conducting or assisting with business valuations
- Providing other issue-related and corporate finance services