Online brokerage firm Zerodha's affiliate, Zerodha Corporate Advisors Pvt has received approval from the Securities and Exchange Board of India to operate as a merchant banker, according to the regulator's website.
The market regulator issued the registration on September 1, SEBI's website showed.
With the latest development, Zerodha now has a regulatory licence to participate on the capital raising side of the market, expanding its role beyond serving investors who buy and sell securities.
Zerodha had filed for a merchant banking licence with the SEBI on April 27. Confirming the move, a Zerodha spokesperson told NDTV Profit earlier, “We have filed an application for the merchant banking (Category 1) licence with SEBI.”
What Does Merchant Banking Licence Mean For Zerodha?
Through the merchant banking license, Zerodha Corporate will be allowed to advise and manage public offerings and other equity capital market transactions. A Category 1 merchant banker licence will give the company the access to broader capital market services. This includes managing initial public offerings, follow-on offers, and other fundraising transactions. The firm will also be able to act as a book-running lead manager, file draft red herring prospectuses, conduct due diligence, manage pricing and coordinate investor roadshows. At present, India has 249 Sebi-registered merchant bankers, according to the regulator's website.
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Notably, Zerodha Corporate can only advise and manage public offerings, including IPO-related transactions through the licence. The approval does not mean the company is launching an IPO or can automatically underwrite every type of transaction.
Apart from IPO management, merchant banker licence will allow Zerodha Corporate to play a key role in corporate finance advisory. They can advise on mergers and acquisitions, open offers, buybacks and structured capital raising transactions.
The company can charge fees for the business, with firms earning from IPO mandates, deal advisory and retainers, often running into tens to hundreds of crores for large transactions.
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