NSE gets final approval to launch Social Stock Exchange
The Securities and Exchange Board of India (SEBI) gave its final approval to the National Stock Exchange (NSE) to launch its Social Stock Exchanges (SSE). The approval from the market regulator will allow the NSE to launch the new platform and sign up and list relevant entities.
In December, Sebi gave an in-principal nod to the NSE for setting up the social stock exchange.
“The Social Stock Exchange segment will provide new avenue for social enterprises to finance social initiatives, provide them visibility and bring in increased transparency in fund mobilisation and utilisation by social enterprises,” NSE said in a release.
Social Stock Exchanges can be viewed as a fundraising platform for social enterprises. The process of listing on these exchanges is similar to that of an initial public offering (IPO). However, instead of shares, the investors receive Zero Coupon Zero Principal (ZCZP) instruments. The ZCZP instruments don’t offer any yield, unlike shares in an IPO.
The idea of an SSE was first proposed in the Union Budget 2019-2020 by finance minister Nirmala Sitharaman. This platform is helpful for entities that are involved in social or charitable activities. Having access to such an exchange will allow these entities to tap into the broader market and raise more funds. Non-profit organizations as well as for-profit organizations will need to register on the SSE in order to raise funds for social initiatives.
The NSE has been conducting various events and sessions to help social enterprises onboard the exchange. The minimum issue size is Rs 1 crore while the minimum subscription size is Rs 2 lakhs. These subscriptions will be considered philanthropic in nature.
A working group of SEBI came up with a framework for social enterprises. This framework highlights 16 broad areas in which the social enterprise needs to be involved to qualify for listing on the exchange. SSE will be a separate segment under the existing stock exchanges.
It is to be noted that corporate and trade associations, infrastructure companies, political and religious groups are not eligible to get listed on the Social Stock Exchange.
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