Social Stock Exchange

Context:

The National Stock Exchange has received a green light from the capital markets regulator to launch its Social Stock Exchange. 
About Social Stock Exchange (SSE): 

• SSE is a segment of the existing Stock Exchange to provide an alternative fund-raising instrument. 
• The concept of SSE gained momentum during the pandemic, highlighting the need for social capital for enterprises and voluntary organisations that are working for social welfare.
• Benefits:
  • It can help social enterprises raise funds from the public through the stock exchange mechanism. 
  • Investors will get Section 80G benefits which allow all investments in securities/instruments of NPOs listed on SSE to be tax deductible, and corporates to deduct CSR expenditure from their taxable income, among other things. 
  • Investment by companies will be considered as part of their Corporate Social Responsibility (CSR) initiatives.

Social Enterprise:

• Social Stock Exchange identifies social enterprises as the ones engaged in creating positive impact in the society. 
• These are the following two forms of social enterprises:
  • Not-for-profit organisation
  • For profit social enterprise

Eligibility:

• Any non-profit organisation (NPO) or for-profit social enterprise (FPSEs) that establishes the primacy of social intent would be recognised as a social enterprise (SE), which will make it eligible to be registered or listed on the SSE.

How do NPOs raise money?

• NPOs can raise money either through issuance of Zero Coupon Zero Principal (ZCZP) Instruments from private placement or public issue, or donations from mutual funds.
  • ZCZP bonds differ from conventional bonds in the sense that it entails zero coupon and no principal payment at maturity. 
  • The latter provisions a fixed interest (or repayment) on the funds raised through varied contractual agreement, whereas ZCZP would not provision any such return, instead promising a social return.

How do FPOs raise money?

• For-Profit Enterprises (FPEs) need not register with social stock exchanges before it raises funds through SSE. 
  • However, it must comply with all provisions of the ICDR Regulations when raising through the SSE. 
• It can raise money through issue of equity shares (on main board, SME platform or innovators growth platform of the stock exchange) or issuing equity shares to an Alternative Investment Fund including Social Impact Fund or issue of debt instruments.

News Source: The Hindu

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