Introduction
In India’s dynamic financial sector, merchant bankers are key players, guiding startups and businesses through IPOs, valuations and corporate restructuring.
Obtaining a merchant banker license in India from SEBI is essential for firms to offer these services legally. This guide explores the licensing process, eligibility, benefits and roles of merchant bankers, with practical merchant banker examples for startups.
Whether you’re a professional seeking a license or an entrepreneur needing banking services, understanding this process is crucial for success.
What is a Merchant Banker?
A merchant banker is a SEBI-registered financial institution or professional managing issue-related activities, such as:
- Issue Management: Handling IPOs, rights issues or bond issuances.
- Corporate Advisory: Advising on M&As, divestitures and restructuring.
- Valuations: Assessing fair market value for startups or FDI compliance.
- Loan Syndication: Arranging financing for large projects.
Merchant bankers bridge companies and investors, ensuring regulatory compliance and strategic growth. In India, they operate under the SEBI (Merchant Bankers) Regulations, 1992.
Example: ICICI Securities, a Category I merchant banker, manages SME IPOs and valuations for startups.
What is a Merchant Banker License?
A merchant banker license is a SEBI-issued permit allowing firms to perform merchant banking activities, such as:
- Underwriting IPOs and securities issuances.
- Providing advisory for M&As and startup fundraising.
- Managing valuations for tax or FEMA compliance.
The license ensures compliance with SEBI’s regulatory framework, enabling firms to serve startups, SMEs and corporates.
Categories of Merchant Bankers
Under SEBI (Merchant Bankers) Regulations, 1992 (amended), merchant bankers are classified into two categories:
| Category | Net Worth | Permitted Activities |
| Category I | ₹50 crore | Issue management, underwriting, advisory, portfolio management |
| Category II | ₹10 crore | Advisory, consulting, limited IPO management (excluding mainboard equity issues) |
Note: Only Category I merchant bankers can manage SME IPOs or large-scale issues.
Benefits of Becoming a Merchant Banker
- High Earnings: Fees from IPOs (2–5% of issue size) and advisory services offer lucrative income.
- Diverse Roles: Exposure to IPOs, M&As, valuations and loan syndication.
- Client Networks: Build relationships with startups, SMEs and institutional investors.
- Career Growth: Opportunities to lead high-profile deals (e.g., at Kotak Mahindra Capital).
- Startup Impact: Support entrepreneurs with valuations and fundraising, driving India’s startup ecosystem.
Role of Merchant Bankers for Startups
Merchant bankers are vital for startups, offering:
- Valuation: Provide SEBI-compliant valuations for FDI, tax (Rule 11UA) or equity issuances.
- Fundraising: Facilitate angel capital, venture capital or private equity deals.
- IPO Management: Guide SMEs through NSE Emerge or BSE SME IPOs.
- Project Oversight: Assist with feasibility studies, regulatory approvals and financial planning.
Case Study: A fintech startup engaged Novam Legal to connect with a Category I merchant banker (e.g., Axis Capital), securing a ₹10 crore private equity deal through a SEBI-compliant valuation.
Eligibility for a Merchant Banker License
To obtain a SEBI merchant banker license, applicants must meet:
- Entity Type: Public/private limited company or LLP under the Companies Act.
- Net Worth: ₹50 crore (Category I) or ₹10 crore (Category II).
- Personnel: At least two employees with NISM-Series-IX certification and 5+ years of merchant banking experience.
- Infrastructure: Adequate office space, equipment and systems for operations.
- Compliance: Clean record with no SEBI violations or financial misconduct.
Documents Required
- Memorandum and Articles of Association (MOA & AOA).
- Financial statements (last 3 years).
- Directors’ qualifications (e.g., MBA, CA, CFA).
- Organizational structure and principal banker’s report.
- Compliance declarations from two directors.
- Business activity record (e.g., issue management, advisory).
- Form A application with ₹50,000 non-refundable fee.
Application Process
- Prepare Documents: Compile required documents and ensure compliance with SEBI criteria.
- Submit Form A: File the application via SEBI’s e-portal with a ₹50,000 fee.
- SEBI Scrutiny: SEBI reviews the application for financial standing, compliance and infrastructure (3–6 months).
- Pay License Fee: Upon approval, pay ₹20 lakh for a 5-year license.
- Renewal: Pay ₹9 lakh every 3 years to maintain the license.
- NISM Certification: Ensure two employees hold NISM-Series-IX certification.
Challenges: SEBI’s rigorous scrutiny, high net worth requirements and compliance costs can delay licensing.
Permitted Activities
- Issue Management: Manage IPOs, rights issues and bond issuances.
- Corporate Advisory: Guide M&As, restructuring and expansion strategies.
- Underwriting: Guarantee subscription for IPOs or securities.
- Loan Syndication: Arrange financing for startups or large projects.
- Valuations: Provide SEBI-compliant valuations for startups and SMEs.
Market Size and Opportunities
In India, the merchant banking sector is growing, driven by SME IPOs and startup funding. As of 2025, over 200 SEBI-registered merchant bankers operate, with Category I firms like SBI Capital Markets leading SME IPOs.
Globally, the merchant banking market was valued at $42.1 billion in 2022, projected to reach $232.2 billion by 2032 (18.9% CAGR), per Allied Market Research. India’s share is rising due to startup growth and SEBI’s push for SME listings.
Regulatory Framework
- SEBI: Primary regulator under the Merchant Bankers Regulations, 1992, overseeing licensing and compliance.
- RBI: Regulates merchant banking units of banks under the Banking Regulation Act, 1949 and FEMA for cross-border deals.
- Fintech Tools: Digital platforms (e.g., SEBI e-portal, AI compliance tools) streamline licensing and operations.
Conclusion
A merchant banker license in India empowers firms to guide startups and SMEs through IPOs, valuations and fundraising, driving financial growth.
Despite challenges like high net worth requirements, the rewards include lucrative fees and diverse opportunities. Partnering with an online legal platform simplifies the licensing process and connects businesses with trusted merchant bankers.
Ready to apply for a merchant banker license or need banking services? Contact Novam Legal for expert guidance for SEBI-compliant solutions.
Frequently Asked Questions
Q1. What is a merchant banker license in India?
Ans1. A SEBI-issued permit allowing firms to manage IPOs, underwriting, valuations and advisory services for startups and corporates.
Q2. How to get a merchant banker license in India?
Ans2. Apply via SEBI’s Form A, meet ₹50 crore net worth (Category I), employ NISM-certified staff and pay ₹50,000 application and ₹20 lakh license fees.
Q3. Who regulates merchant banking in India?
Ans3. SEBI regulates merchant banking under the Merchant Bankers Regulations, 1992, with RBI overseeing bank-affiliated units under FEMA and Banking Regulation Act.
Q4. What are the eligibility criteria for a merchant banker license?
Ans4. Applicants need a company/LLP structure, ₹50 crore (Category I) or ₹10 crore (Category II) net worth, two NISM-Series-IX certified employees and adequate infrastructure.
Q5. How long does it take to get a merchant banker license?
Ans5. The process takes 3–6 months, depending on SEBI’s scrutiny and application accuracy.
Q6. What services do merchant bankers offer startups?
Ans6. They provide valuations, fundraising (angel, VC, PE), IPO management and advisory for M&As and restructuring.
Q7. What are some merchant banker examples in India?
Ans7. ICICI Securities, Kotak Mahindra Capital, Axis Capital and SBI Capital Markets are leading Category I merchant bankers managing SME IPOs and valuations.
Q8. What is the minimum capital requirement for a merchant banker license?
Ans8. ₹50 crore for Category I and ₹10 crore for Category II, per SEBI regulations.
Q9. What documents are required for a merchant banker license?
Ans9. MOA & AOA, financial statements, director qualifications, compliance declarations and business activity records.
Q10. How do merchant bankers help startups raise funds?
Ans10. They facilitate angel, venture capital or private equity funding and manage SME IPOs, ensuring SEBI compliance.
Q11. What are the fees for a merchant banker license?
Ans11. ₹50,000 for application, ₹20 lakh for initial license (5 years) and ₹9 lakh for renewal every 3 years.
Q12. How does fintech support merchant banking?
Ans12. Tools like SEBI’s e-portal and AI compliance platforms streamline licensing, valuations and IPO management.
