Recently, the Unnati Foundation became the first entity to list on the social stock exchanges (SSE).
About Social Stock Exchange
- It functions as a separate segment within the existing stock exchange and help social enterprises raise funds from the public through its mechanism.
- It would serve as a medium for enterprises to seek finance for their social initiatives, acquire visibility and provide increased transparency about fund mobilisation and utilisation.
- Retail investors can only invest in securities offered by for-profit social enterprises (SEs) under the main Board.
- In all other cases, only institutional investors and non-institutional investors can invest in securities issued by SEs.
Who is eligible?
- Any social enterprise, Non-Profit Organisation (NOPs) or For-Profit Social Enterprises (FPEs), that establishes its primacy of social intent can get registered or listed on the Social Stock Exchange segment.
- As per the SEBI’s regulation, the enterprises must be serving to:
- eradicate either hunger, poverty, malnutrition and inequality;
- promoting education, employability, equality, empowerment of women and LGBTQIA+ communities; working towards environmental sustainability;
- protection of national heritage and art or bridging the digital divide, among other things.
Different mechanism available for fundraising
- For Non-Profit Organisation
- It can raise money either through issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement or public issue, or donations from mutual funds.
- The SEBI board recently approved halving the minimum issue size of ZCZPs by NPOs on SSEs to Rs 50 lakh from Rs 1 crore.
- The minimum application size will be reduced to 10,000 from 2 lakh rupees to enable wider participation.
- For-Profit Social Enterprises (FPEs)
- It can raise money through issue of equity shares (on main board, SME platform or innovators growth platform of the stock exchange).
- Issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.
- For-Profit Enterprises (FPEs) need not register with social stock exchanges before it raises funds through SSE.
Q1) What are Zero Coupon Zero Principal (ZCZP) Instruments?
These are financial instruments that do not pay periodic interest, but are issued at a discount to their face value and mature at par.With its zero-coupon, zero-principal structure, it resembles a debt security like a bond. With ZCZP instrument, when an entity issues these securities and raises money, it is not a loan but a donation.