Zerodha’s subsidiary, Zerodha Corporate Advisors, has received regulatory approval from SEBI to enter the merchant banking business. This shift allows the firm to manage IPOs and corporate fundraising, marking a strategic attempt to diversify its revenue as its core retail brokerage business navigates recent financial pressures and increased regulation.
Zerodha has moved closer to entering the investment banking space, with the Securities and Exchange Board of India (SEBI) granting clearance to its subsidiary, Zerodha Corporate Advisors Pvt Ltd. The application, which was initially filed in April 2026, paves the way for the company to manage initial public offerings, follow-on public offers, and other corporate fundraising activities. While this approval is a significant milestone, the company must now complete the formal registration process to begin operations.
This expansion represents a major strategic shift for the firm, which has historically focused on its role as a retail trading platform. By entering the merchant banking sector, Zerodha aims to build a new revenue stream, moving beyond its traditional brokerage model. This transition comes at a time when the firm is facing financial headwinds. In its financial results for the 2025 fiscal year, the company reported a revenue decline to Rs 8,500 crore, while net profit fell by 23.6% to Rs 4,200 crore. Diversifying into corporate advisory and capital market services is a move to offset the pressure on its core business, which has also been affected by recent regulatory changes in the futures and options trading space.
To successfully establish this new business line, Zerodha must meet strict regulatory standards. SEBI has updated its framework for merchant bankers, imposing higher financial strength requirements. Category I entities are now required to maintain a net worth of at least Rs 50 crore, along with strict rules regarding liquid assets and underwriting obligations. As a new entrant, Zerodha will need to demonstrate that it can maintain a robust balance sheet and adhere to these stringent capital mandates before it can officially start managing capital market deals.
The company will also face intense competition in the primary market. The space is currently dominated by established investment banks like Kotak Mahindra Capital and JM Financial, which have deep-rooted relationships with large corporate issuers. Succeeding in this sector will require Zerodha to not only navigate complex regulatory compliance but also build a team capable of competing with these traditional players for IPO mandates and advisory contracts.
The most important monitorable for the business will be the completion of its formal registration with SEBI and how effectively it can integrate its existing retail investor base with new corporate clients. Investors and market observers will track whether the company can successfully navigate the higher capital and compliance requirements while establishing its footing in the competitive investment banking landscape.