According to a press release issued, the NSE has received approval from the capital markets regulator to launch its Social Stock Exchange.
In December of last year, the Securities and Exchange Board of India (Sebi) gave the National Stock Exchange (NSE) initial approval to establish the exchange.
The Union Budget 2019-20 first proposed the creation of a social stock exchange to make it easier for charitable trusts and non-profit organizations (NPOs) to access the capital market for funding.
NPOs and even for-profit social enterprises (FPE) will need to register on the exchange and raise money through public offerings or private placements using instruments like zero coupon zero principal (ZCZP).
“Registration on the Social Stock Exchange segment is the first step in on boarding for eligible non-profits. “The NSE stated in a statement that after registration, non-profit organizations (NPOs) can begin the process of mobilizing funds by issuing instruments such as Zero Coupon Zero Principal (ZCZP) through a public issue or private placement.”
It stated, “We have been conducting various events to bring awareness, and we have been supporting social enterprises currently at various stages of on boarding on the exchange.”
Currently, the minimum size for an issue is one crore rupees, and the minimum size for a subscription application is two million rupees. Philanthropy would include supporting such causes.
Due to the growing demand for affordable capital for social enterprises during the pandemic, the concept of a social stock exchange gained traction.
A working group established by the Sebi provided the Social Stock Exchange with a framework. To be eligible for listing on the exchange, businesses will need to be involved in 16 broad areas of social activity that have been defined by the working group.
The social stock exchange does not allow infrastructure companies, trade associations, political and religious organizations, or corporate foundations to list.