Zerodha has filed an application with the Securities and Exchange Board of India (SEBI) for a merchant banking licence. If approved, it would pave the way for the company to foray into the investment banking space.
The application was filed on April 27 by Zerodha Corporate Advisors, a subsidiary of the online stock broking platform, according to SEBI’s latest update as of May 31.
Besides Zerodha, a dozen other companies are awaiting regulatory approval to enter investment banking, including InCred Capital and Neo Wealth Management.
What Zerodha stands to gain from the merchant banker licence: If approved, the licence would allow Zerodha to diversify beyond its core stock broking business and offer merchant banking services. These include:
- Advising companies on fundraising, including via initial public offering (IPO) and issuance of debentures, for various purposes like mergers, acquisitions, and expansion.
- Providing underwriting, securities trading, and advisory services.
- Asset management, wealth management, and investment management for companies, high-net-worth individuals, and families.
Why this matters: SEBI has been tightening its grip on ballooning retail Futures & Options (F&O) trading to curb excessive speculation. Since October 2024, the Securities Transaction Tax (STT) on F&O has been hiked at least twice.
In September 2024, SEBI increased the maximum investment limit for Basic Service Demat Accounts (BSDAs) from Rs 2 lakh to Rs 10 lakh. This meant investors paid zero or reduced account maintenance charges while holding up to Rs 10 lakh in their demat accounts. For platforms like Zerodha, this meant lower fees and revenue.
Increasing regulatory scrutiny in the F&O segment dented Zerodha’s revenue and profits in FY25 and Q1 FY26, CEO Nithin Kamath said earlier.
The competition in the stock broking space has also intensified with the entry of new players like MobiKwik.
Furthermore, Zerodha has been seeing a decline in active clients. According to an Entrackr report, the platform lost about 37,000 active clients in May 2026, while its listed rival Groww added 27,600 active clients during the month.
These headwinds have prompted Zerodha to look for new revenue streams. Earlier this month, the company forayed into international equity investment after securing a Global Access Provider licence from IFSCA, the authority that runs the GIFT City in Gujarat. Other platforms which secured the licence alongside Zerodha include Angel One, Groww and Upstox
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