India's leading discount brokerage Zerodha has applied to the Securities and Exchange Board of India (SEBI) for a Category I Merchant Banking Licence, signalling its planned expansion into the investment banking business.
According to SEBI's official records, the application was submitted on April 27 through Zerodha Corporate Advisors and remains under regulatory review as of May 31.
If approved, the licence will allow Zerodha to diversify beyond retail brokerage by offering merchant banking services, including the management of Initial Public Offerings (IPOs), Further Public Offerings (FPOs), rights issues, qualified institutional placements (QIPs) and other capital market transactions.
Zerodha Confirms Application
Responding to media queries, a Zerodha spokesperson confirmed the development.
"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."
The approval would mark Zerodha's formal entry into India's rapidly expanding investment banking sector.
Strong IPO Market Drives New Applications
Zerodha is among 13 financial firms currently awaiting approval to enter the merchant banking industry.
Other applicants reportedly include established domestic and international financial institutions such as Societe Generale Securities and InCred Capital, reflecting growing interest in India's active primary capital markets.
According to regulatory data, 246 merchant bankers are presently registered with SEBI. Capri Global was the latest entity to receive merchant banking approval from the regulator on June 5.
SEBI Strengthens Merchant Banking Regulations
The wave of licence applications comes as SEBI introduces significant reforms to the merchant banking regulatory framework.
The updated regulations strengthen:
- Capital adequacy requirements
- Corporate governance standards
- Compliance obligations
- Certification norms
- Operational risk management
- Investor protection measures
The regulator said the revised framework is intended to improve the financial resilience and governance standards of merchant banking institutions operating in India's capital markets.
New Compliance Norms Until 2028
Under the revised framework, SEBI has introduced:
- Higher minimum net worth requirements
- Liquid net worth norms
- Limits on underwriting exposure
Merchant bankers will now be permitted to undertake underwriting obligations only up to 20 times their verified liquid net worth, reducing systemic financial risk.
While the new rules apply immediately to new applicants, existing merchant bankers have been granted a transition period until January 2, 2028, to fully comply with the revised regulatory standards.
Industry Outlook
India's strong pipeline of IPOs and increased fundraising activity have made merchant banking one of the fastest-growing segments of the financial services industry.
Market participants believe that technology-driven brokerage firms entering investment banking could intensify competition by offering integrated capital market solutions spanning retail investing, institutional advisory and public issue management.
The approval of Zerodha's application will depend on SEBI's regulatory review and satisfaction of all licensing requirements.
Shunyatax Global Insight
The merchant banking industry is undergoing a significant transformation as stricter governance norms coincide with record capital market activity. As more fintech-driven firms seek regulatory approval, robust compliance, risk management and investor protection are expected to remain central to SEBI's oversight of India's evolving investment banking ecosystem.
Stay connected with Shunyatax Global for verified coverage of financial markets, SEBI regulations, fintech developments, corporate governance and economic policy.