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Zerodha Enters Merchant Banking Amid Pressure On Brokerage
Zerodha is best known as an online stockbroker for individual investors.
It now wants another part of the stock-market business: helping companies sell shares to the public.
Its new subsidiary has received approval to advise on IPOs and other fundraising deals.
Zerodha says it will try to keep this service low-cost and simple.
Its large group of retail investors may help companies reach more individual buyers.
However, big investment banks already have strong relationships with institutions and company leaders.
Zerodha will need to prove that it can manage complicated IPOs successfully.
The new business may bring in extra money, but it is expected to grow slowly.
For now, it is mainly a way to diversify beyond brokerage.
Zerodha Corporate Advisors received Securities and Exchange Board of India approval on September 1 to operate as a Category-I merchant banker.
The subsidiary plans to initially advise on IPOs and follow-on issues, with operations expected to begin within the next couple of months.
Zerodha aims to bring its low-cost, no-hard-selling approach to merchant banking, but must build relationships with issuers and institutional investors.
The company’s large retail investor base and technology-focused brand could help with consumer and new-age company IPOs, although it lacks an investment-banking track record.
Brokerage revenue reportedly fell from ₹3,066 crore in FY25 to ₹2,738 crore in FY26, making merchant banking a long-term diversification effort rather than an immediate replacement.
- Who
- Zerodha Corporate Advisors, a Zerodha subsidiary led by the broader Zerodha group, is entering merchant banking.
- What
- It received approval to operate as a Category-I merchant banker and plans to advise on IPOs, follow-on issues and other capital-market transactions.
- Where
- The business will operate in India’s capital markets.
- When
- Approval was granted on September 1, with operations expected to begin within the next couple of months.
- Why
- Zerodha is seeking diversification as its brokerage business faces lower retail derivatives activity and regulatory changes.
Potential Advantages
Execution Challenges
Retail distribution
Potential Advantages
Zerodha’s large retail investor base could help companies with awareness, investor education and retail participation in selected IPOs.
Execution Challenges
Retail investors are only one part of an IPO; institutional investors, mutual funds, insurers, alternative investment funds, foreign investors and anchor investors can strongly affect demand and pricing.
Technology and startup expertise
Potential Advantages
Zerodha’s technology-first identity and familiarity with startups could help it connect with founders of technology and consumer internet companies.
Execution Challenges
Issuers also seek regulatory experience, senior judgment, sector knowledge, institutional relationships and confidence in execution during difficult markets.
Low-cost model
Potential Advantages
A low-cost, no-hard-selling approach could attract companies seeking an alternative to established investment banks, particularly in the mid-market and startup segments.
Execution Challenges
Lower fees alone may not overcome gaps in relationships or execution experience, and merchant banking revenue is uneven because it depends on individual transactions.
Key facts
- Regulatory approval
- Securities and Exchange Board of India approved Zerodha Corporate Advisors as a Category-I merchant banker on September 1.
- Initial focus
- Equity-capital-markets work, including IPOs and follow-on issues.
- Expected launch
- Merchant-banking operations are expected to start within the next couple of months.
- Brokerage revenue
- Reported brokerage revenue declined from ₹3,066 crore in FY25 to ₹2,738 crore in FY26.
- Overall revenue
- Zerodha was reported to have closed FY26 with close to ₹8,800 crore in revenue.
- Projected contribution
- Analyst Avinash Gorakshakar expects merchant banking to contribute a low single-digit percentage of overall revenue over the next three to five years.
- Recent IPO activity
- RentoMojo set a ₹384–₹404 per-share IPO price band, while ESDS Software Solution listed at ₹757, a 76.5% premium over its ₹429 IPO price.
Quotes
Deepank Bhandari
Founder of S45, an AI-native investment bank
“Merchant banking can certainly become a meaningful new vertical for Zerodha, although I would not look at it as a direct substitute for brokerage revenues over the next three to five years.”
inc42.com
“I would therefore see it as diversification and a long-term adjacency rather than an immediate counterweight to broking.”
inc42.com
Sources
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