Unnati Becomes the First Entity to List on the Social Stock Exchange | 20 Dec 2023

Source: BS

Why in News?

Recently, SGBS Unnati Foundation (SUF) became the first entity to list on the social stock exchanges (SSE). The Unnati program of the foundation provides vocational training for the underprivileged and unemployed youth in the age group of 18 to 25 years.

• SUF, a not-for-profit organization (NPO), was incorporated in 2011.
• A Not-for-Profit organization after registering with Social Stock Exchange may raise funds on SSE through issuance of Zero Coupon Zero Principal Instruments.

What is the Social Stock Exchange (SSEs)?

• The idea of the Social stock exchanges (SSEs) as a platform for listing social enterprise, voluntary and welfare organizations so that they can raise capital was mooted in the Union Budget 2019-20.
  • Social enterprise can be defined as a non-loss; non-dividend paying company created and designed to address a social problem.
• It works under the market regulator Security and Exchange Board of India (SEBI).
  • The aim of the initiative is to help social and voluntary organizations which work for social causes to raise capital as equity or debt or a unit of mutual fund.
• It provides new and cheaper sources of financing for social welfare projects, while showcasing India’s independence from foreign aid .
• SEBI had permitted social enterprises registered on SSEs to raise funds through Zero Coupon Zero Principal Bonds (ZCZP).

What is the Zero Coupon Zero Principal (ZCZP)?

• About:
  • The ZCZP bonds do not give any interest, and investors will not get any money back on the maturity of the bond.
  • The ZCZP bonds issued by non-profit organisations are listed on the SSE. They are not available for trading in the secondary market, but they can be transferred to legal heirs since they are issued in dematerialised form.
  • Similar ZCZP instruments issued by for-profit organisations can be listed on main board or SME platform of exchanges and are available for trading in secondary market.
• Benefits:
  • ZCZP is akin to a donation made to a charity. There is greater transparency about the objective of the social enterprise. The end use of the funds can also be monitored since the enterprises have to disclose details of money utilised and balance amount remaining to exchanges.
  • The listing provides visibility to the social enterprises and helps them to approach the public at regular intervals if they can show good outcomes.