Zerodha Gets SEBI Nod For Merchant Banking, To Focus On New-Age IPOs

Stockbroking firm Zerodha has received approval from SEBI to become a merchant banker via its wholly owned subsidiary, Zerodha Corporate Advisors Pvt Ltd. This comes several months after Zerodha applied for a Category I merchant banking license through this subsidiary. Mohit Mehra, a director at Zerodha Corporate Advisors, informed Inc42 that SEBI has granted the registration to Zerodha Corporate Advisors, and the company is preparing to commence operations within the next few months.

Initially, Zerodha Corporate Advisors plans to focus on equity IPOs, specifically for new-age businesses seeking capital from public markets. The company infused ₹55 Cr into the merchant banking business to meet the increased net worth requirement under revised regulations. Zerodha has set the merchant banking division apart from its trading operations to reinforce compliance measures.

The merchant banking venture is part of Zerodha's strategy to diversify beyond its core stockbroking business, which has been impacted by regulatory shifts and reduced trading activity. Zerodha's brokerage revenue declined by 10.4% to ₹2,738 Cr in FY26, compared to ₹3,066 Cr in FY25. Despite this, the company's net profit grew by 1.2% YoY to ₹4,283 Cr in FY26.

Zerodha's Merchant Trading Facility (MTF) business, which allows customers to borrow against their positions, contributed roughly 10% of the company's revenue in FY26. However, Zerodha's founder and CEO, Nithin Kamath, has cautioned customers against borrowing excessively for revenue growth, stressing the risks involved in leveraged investing.

The merchant banking approval is part of Zerodha's broader diversification efforts as the retail broking market becomes more competitive, with rival Groww gaining significant market share in recent months.