Broking platform Zerodha wants to add another business to its growing financial services portfolio: investment banking. The company’s application to the Securities and Exchange Board of India (Sebi) for a merchant banking licence, filed on 27 April, is currently under review.
The licence would allow Zerodha to advise companies on fundraising, public issues and other capital market transactions, opening a new revenue stream beyond broking. But can a discount broker carve out a niche in a business dominated by established investment banks? And why is it making the move now? Mint explains.
How do investment banking and stock broking differ?
While both operate in the capital markets, they serve different customers. A stockbroker helps retail and institutional investors buy and sell shares on the stock exchange, earning brokerage or transaction fees. Investment banks, on the other hand, work primarily with companies. They advise businesses on raising capital through initial public offerings (IPOs), follow-on public offers (FPOs), rights issues, qualified institutional placements (QIPs) and private placements. They also advise on mergers and acquisitions (M&A), buybacks, delistings, open offers and other strategic corporate transactions. While a broker helps investors access the market, an investment banker helps companies raise capital, execute deals and navigate regulatory processes.
What’s in it for Zerodha?
While Zerodha hasn’t disclosed its plans, the move could open up a new, higher-margin revenue stream. This also comes at a time when the economics of the broking business are under pressure due to regulatory changes affecting derivatives trading, client float income and transaction charges, said Deepank Bhandari, co-founder of investment banking platform S45. Merchant banking would give Zerodha access to a fee-based business spanning IPOs, fundraising, and other corporate finance mandates. Unlike broking, where revenues depend on trading activity, investment banking fees are linked to the size and complexity of transactions, making it a potentially more lucrative business. Zerodha also enters with a strong brand, deep relationships across the capital markets ecosystem and a technology-first approach that could help it build an advisory business.
Does the strategy make sense?
Industry experts believe Zerodha starts with one major advantage: its vast retail investor base. With about 16 million clients, the company has deep relationships with investors as well as founders, startups and companies that use its platform. That's a distribution advantage that few investment banks have. The upside is real, said Sidharth Sogani Jain, founder, chief executive officer and fund manager at Blue Aster Capital and Crebaco Global, noting that IPO management fees alone run into tens of crores per deal. If you are already the broker of record for retail investors in that same IPO, you are essentially owning both sides of the transaction.
Why is the timing favourable?
Zerodha’s move also comes at a time when India’s primary market remains active despite bouts of volatility. After a record 2025, when 103 companies raised nearly ₹1.76 trillion through mainboard IPOs, the pipeline continues to be robust. As of May this year, 236 companies were in various stages of the IPO process, according to an Equirus Capital report, with firms across sectors, from consumer brands and fintech to manufacturing and logistics, preparing to tap the public markets. Recent and upcoming public issues include companies such as Turtlemint Fintech, Hexagon Nutrition, CMR Green Technologies and Pristine Logistics, while several marquee names such as Zepto, PhonePe, Reliance Jio, NSE and Tata Play are widely expected to tap the markets over the next few years.
What would be the challenge?
Despite its strengths, breaking into investment banking will not be easy. Unlike broking, where technology and pricing can be key differentiators, investment banking is largely a relationship-driven business. Winning mandates often depends on years of trust built with promoters, chief financial officers, private equity funds and institutional investors. Experts note that Zerodha will also be entering a highly competitive market, competing with established merchant bankers such as Kotak, JM Financial, Axis Capital, ICICI Securities, IIFL Capital, Nuvama and SBI Capital Markets. The SME IPO market, too, is crowded with specialist firms that have built deep expertise over the years.