Zerodha, one of India’s largest brokering houses, has filed a formal application with the Securities and Exchange Board of India (SEBI) for a merchant banking license, marking the firm’s strategic foray into investment banking.
The application was submitted under the entity Zerodha Corporate Advisors on April 27 and remains under process, according to the market regulator’s official update as of May 31. If approved, the Category 1 merchant banking license will enable Zerodha to expand beyond its core retail brokerage operations and manage initial public offerings (IPOs), further public offerings (FPOs), rights issues, and other complex capital market deals.
Responding to queries, a spokesperson from Zerodha confirmed the development, stating, “We have filed an application for the merchant banking (Category 1) licence with SEBI. We’ll be able to share more about our business plans once we receive the licence“.
Primary Market Surge Attracts New Entrants
Zerodha is among 13 financial firms currently seeking to tap into India’s buoyant primary market. The regulatory pipeline includes applications from prominent international and domestic financial companies, with big-league names such as Societe Generale Securities and InCred Capital also seeking approval.
The influx of new applicants comes at a time when there are already 246 merchant bankers actively operating in the country. The most recent entity to successfully bag its merchant banking approval from the regulator was Capri Global on June 5.
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SEBI Tightens Industry Governance Framework
The rush for new licenses coincides with a significant tightening of the regulatory landscape. Earlier this year, SEBI notified comprehensive changes to the regulatory framework governing merchant bankers in India. The updated guidelines substantially raise capital adequacy, compliance, certification, and operational requirements for intermediaries.
According to the regulator, these structural changes aim to strengthen financial resilience, elevate corporate governance standards, and enhance investor protection across the broader merchant banking ecosystem.
Compliance Phased Out Until 2028
As part of the overhauled framework, the market regulator has introduced revised net worth and strict new liquid net worth requirements for merchant banking institutions. Furthermore, SEBI has capped total underwriting obligations at 20 times a merchant banker’s verified liquid net worth to limit systemic risk.
While the new mandates apply strictly to incoming players, SEBI has confirmed that these rules will be implemented in a phased manner for existing entities. Operating merchant banks have been given until January 2, 2028, to bring their financial structures into full compliance with the new standards.
