Zerodha seeks merchant banking licence to take on incumbents

Zerodha, India's largest discount broker, has applied to the Securities and Exchange Board of India for a Category-I merchant banking licence. The Bengaluru-based company filed the application in April. SEBI has not yet ruled on it.

“We have filed an application for the merchant banking (Category-I) licence with SEBI. We’ll be able to share more about our business plans once we receive the licence,” a Zerodha spokesperson told businessline.

A Category-I licence would let Zerodha manage initial public offerings, advise companies on equity fundraising, and offer corporate advisory services. The move comes as India's primary market revival gathers pace, with a pipeline of startups and new-age companies preparing to list over the next few years.

The application is the latest step in Zerodha's strategy of pushing beyond its core stockbroking business. The company has already expanded into mutual funds through Coin, asset management, lending, startup investments via Rainmatter, and international investing. Earlier this month, it introduced fixed deposits on the Coin platform, letting customers invest in FD schemes from partner banks and track holdings through a single interface.

Zerodha's entry into merchant banking would intensify competition in a segment currently dominated by JM Financial, Kotak Mahindra Capital, Axis Capital and ICICI Securities. The discount broker's history of undercutting established players on fees in retail broking raises the question of whether it will apply a similar approach to investment banking, though the company has not outlined pricing.

The diversification push comes alongside a moderation in Zerodha's financial performance. In FY25, revenue from operations stood at ₹8,847 crore and net profit at ₹4,237 crore. The company has not disclosed prior-year figures for comparison.

SEBI is yet to set a timeline for deciding on the licence. Zerodha said it would share more details once approval is granted.