Why Is Zerodha Entering Investment Banking? What It Means for India's Largest Broker

India's largest discount broking firms are increasingly looking beyond their traditional businesses, and Zerodha appears to be the latest to expand its footprint.

The Bengaluru-based brokerage has applied for a Category-I merchant banking licence from the Securities and Exchange Board of India (SEBI), signalling its intention to enter the investment banking segment, as per a report by the Business Standard.

If approved, the move would allow Zerodha to participate in activities such as managing initial public offerings (IPOs), underwriting issues, advising companies on corporate finance transactions, and handling mergers and acquisitions.

What Has Zerodha Applied For?

Zerodha Corporate Advisors Private Limited submitted its application to Sebi in April, and the proposal is currently under review.

"We have filed application for the merchant banking (category 1) licence with Sebi," Zerodha said in response to queries by BS.

The company has not disclosed further details about its proposed business strategy pending regulatory approval.

"We will be able to share more about our business plans once we receive the licence," it added.

Why Is Zerodha Diversifying?

Zerodha's move comes as stockbrokers face growing pressure on revenues following a series of regulatory changes introduced by Sebi. Measures such as the removal of client float income and tighter rules governing the derivatives market have affected earnings across the broking industry.

The impact is reflected in Zerodha's financial performance. The company's revenue from operations declined to ₹8,847 crore in FY25 from ₹9,993 crore in FY24, highlighting the challenges within its core broking business, as per BS.

Merchant banking could therefore provide a new revenue stream while reducing dependence on brokerage income.

Why Is the Timing Significant?

The application also coincides with expectations of a revival in India's IPO market. Companies have reportedly raised more than ₹19,800 crore through 20 IPOs until May this year.

Although issuance remains well below the 103 IPOs that collectively raised ₹1.76 trillion in 2025, market participants expect activity to improve in the coming months.

Zerodha is among several firms seeking merchant banking licences. Around 13 applications are currently awaiting Sebi's approval, including those from Haitong Securities India, Societe Generale Securities, InCred Capital Financial Services and Capri Global Capital Markets, as per BS.

What Does a Category-I Merchant Banker Do?

Category-I merchant bankers are full-service intermediaries that manage IPOs, act as lead managers, provide underwriting services, advise on mergers and acquisitions, and conduct business valuations.

They are also responsible for ensuring the accuracy of disclosures in offer documents and compliance with market regulations.

Merchant bankers must meet Sebi's prescribed net worth requirements and adhere to a defined code of conduct.

Zerodha's Expansion Beyond Broking

Over the past few years, Zerodha has steadily expanded into adjacent financial services.

The company has launched an asset management business, entered lending through Zerodha Capital, invested in start-ups via Rainmatter, and obtained registration with the International Financial Services Centres Authority (IFSCA) to facilitate overseas investing through GIFT City.

Its earlier attempt to secure a payments bank licence from the Reserve Bank of India, however, did not materialise.

As of April 2026, Zerodha remained India's second-largest broker by active clients after Groww, with nearly seven lakh active clients.

In the investment banking space, Zerodha will face competition from bank-supported giants like Kotak Mahindra Capital, ICICI Securities and Axis Capital, along with independent financial services firm JM Financial.