Zerodha gets Sebi nod for merchant banking licence, eyes IPO advisory foray

Brokerage firm Zerodha has secured approval from the Securities and Exchange Board of India (Sebi) for a merchant banking licence, marking its formal entry into investment banking as it seeks to build new business verticals beyond stock broking.

The Bengaluru-based company plans to commence operations within the next couple of months, with its initial focus set to be on equity capital markets, including initial public offerings (IPOs), follow-on issues and related advisory services.

“We've received the licence and will start operations over the next couple of months. We are growing our business into new verticals. Investment banking is a natural extension for us,” Mohit Mehra, Whole Time Director, Zerodha Corporate Advisors, told PTI.

Zerodha targets IPO, equity capital markets business

The merchant banking licence will enable Zerodha to advise companies on capital market transactions and fundraising through equity markets. The firm intends to begin with IPOs and follow-on offerings before potentially expanding its investment banking operations across other areas.

Mehra said the company plans to carry its established low-cost approach into the new business, while avoiding aggressive sales practices.

“We're starting with equity capital markets: IPOs, follow-on issues and related advisory. The intent is to bring the same low-cost, no-hard-selling approach from the broking side over to issuers and investors,” he said.

The move comes at a time when companies are increasingly turning to the primary markets to raise capital, creating opportunities for investment banks and merchant bankers to compete for mandates.

Kamath-led firm expands beyond broking

Founded by brothers Nithin Kamath and Nikhil Kamath, Zerodha has been steadily broadening its presence across financial services beyond its core brokerage business.

The company has built a large retail investor base through its technology-led and cost-conscious broking model. Its expansion into merchant banking represents a move into a more institutional and corporate-facing segment of the financial markets.

With the Sebi approval, Zerodha will now be able to participate directly in equity capital market transactions and provide advisory services to companies seeking to tap the stock markets.

Zerodha, founded in 2010 by brothers Nithin Kamath and Nikhil Kamath, is among India’s largest stockbrokers by active client base. The company disrupted the traditional brokerage market with a technology-led, discount broking model and has since expanded its presence across areas such as mutual funds, bonds and other investment products.. (With inputs from PTI)