“I slept and dreamt that life was joy, I awoke and saw that life was service, I acted and behold, service was joy” Rabindranath Tagore.
The inception of the Social Stock Exchange (SSE) fulfils the purpose of promoting social enterprises who are committed to serve the deprived classes.
Since its inception in India, SSE has seen encouraging progress with 65 non-profit organisations (NPOs) registered and 8 NPOs listed on the NSE SSE platform. These eight listed NPOs have successfully mobilised funds exceeding Rs 11 crore, contributing significantly to areas such as education, healthcare, women empowerment, and environmental sustainability.
Eligibility Criteria
SSE enables investors to subscribe to zero-coupon, zero-principal (ZCZP) bonds of non-profit organisations (NPOs). The ZCZP is backed by robust standards of social impact and financial reporting.
Monu Luhaniwal, Manager (Finance), Save The Children said, “Formerly the minimum amount to be raised by NPOs was Rs 1 crore, which was reduced to Rs 50 lakh by Securities and Exchange Board of India (Sebi), because there was a clause that if the issue fails to get at least 75 per cent subscription the whole amount has to be refunded and the issue will be deemed failed.”
Luhaniwal who is also seeking to get its NGO listed on NSE highlighted that compared to BSE, NSE has certain additional requirements like board resolution and an agreement with NSE, for which the process is nowhere mentioned.
She reiterated that raising funds in the public market would legitimise the funding process. There are donors who do not rely on other instruments, while SSE will ensure that their donations are getting utilised for the said cause. Besides, the government wants to reduce fund raising from the Foreign Contribution Regulation Act (FCRA) route to increase self-reliance.
SSE In Service
In India, there are comparatively few social companies operating under a corporate framework. Their plan to list on the SSE will probably result in increased reporting and operational structure.
Saurabh Bajpai, Deputy manager, Sidbi believed, “SSE ensures transparency through the social audit system. Additionally, NPOs on SSE also enable sector wise donation.”
Amit Bhatia, said that “NPOs on SSE follow the concept of double materiality through financial reporting for credibility and impact materiality through impact score card and annual impact report (AIR) to Sebi which shall be audited.”
SSE Survival
Established in Brazil in 2003, seven countries including Portugal, South Africa, Jamaica, United Kingdom (UK), Canada and Singapore have established SSE in their respective countries. However, SSE has been only able to survive in Canada, Jamaica and Singapore.
“The SSE in other countries was initiated by NGOs themselves, whereas in India, the government is playing the pivotal role. Hence the government's push to bring social enterprises on a regulated platform and the vision outlined by the Finance Minister during her 2019 budget speech while introducing the concept of SSE will certainly ensure its success in India,” said Ashish Chauhan, CEO, National Stock Exchange (NSE).
He also added that awareness drives by exchanges, regulators, government and other stakeholders will further promote the SSE. Besides, the listed NPOs peers’ experience and success will boost the aspiration of existing NPOs. He also suggested the cross selling of NPOs on brokerage apps during orders placed by investors for market products can promote NPOs.
NPOs Optimism
Rakesh Gupta Founder, Routes2roots and Sakar Halder, Founder, Mukti who have raised Rs 1 crore and Rs 1.7 crore respectively highlighted that capital and credibility was the main purpose to list on SSE. They also reiterated their optimism that NPOs will raise around Rs 500 crore by the end of 2025.
Chauhan agreed on such optimism and said NPOs are already raising money outside of SSE, so the target to Rs 500 crore till next year is pragmatic, it just the SSE will provide credibility, returns reporting and transparency to the donors.
Notably, apart from reporting returns, monetary returns are not anticipated from NPOs since the social impact remains their top priority.
SSE Regulations And Recommendation
Market regulator, Sebi has taken various steps to regulate social enterprises by requiring them to publish their ‘Impact Score Card’ annually. The impact score card must include details on the extent of the target social segment served, the intensity of impact on the median individual, and dimensions of income, social equity, and diversity.
R Balasubramaniam, Chairman SSE Advisory Committee said, “Tax benefits under 80G will be likely to be incorporated while investing in SSE instruments. Further, we have also recommended to Sebi that a portion of corporate social responsibility (CSR) should be reserved for investing in NPOs listed on SSE. “
