Non-profit companies eye bigger fund raise through social exchange | News on Markets

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Organisations working in the social sector are eyeing bigger fund raises through the social stock exchange (SSE)—a platform introduced by domestic bourses that went live six months ago.


The two new filings by Swades Foundation and Manjari Foundation will be a litmus test of whether the platform can be used for a relatively large fund raise. Swades and Manjari aim to raise Rs 10 crore and Rs 7 crore, respectively. Till now, nine non-profit organisations have raised funds only in the range of Rs 1 crore to Rs 2 crore.


Nearly 60 non-profit organisations (NPOs) have registered with the National Stock Exchange (NSE) and BSE to raise funds through this new route for education, employment, skill and social development, medical research, and sustainability.


The SSE allows fund raises through zero-coupon zero-principal bonds for which the NPOs have to file draft documents similar to those for initial public offers (IPOs) specifying the objects of the issue, capital structure, among others.


“Our learning from the initial phase has been that the SSE mechanism is per se working for the first time globally. In the next phase, we need to test other aspects like broad discovery of offer documents. While publishing the document on an exchange platform should help, stock brokers managing millions of folios can massively help augment this social message via pop-ups to investors during the subscription period,” said Amit Chandra, co-founder, A.T.E. Chandra Foundation and chairperson of Bain Capital India Advisors.


Chandra’s foundation and stock brokers such as Zerodha have also been key contributors to the initial listings on the SSE.


“This can be via a mandate, costing them nothing, which comes from the market regulator or a voluntary social effort on their own part,” added Chandra.


In a bid to allow wider participation, the Securities and Exchange Board of India (Sebi) had reduced the minimum application size from the initial Rs 200,000 to Rs 10,000.


To bring transparency and accountability, the market regulator has directed already listed NPOs to submit their annual impact report by October 31.


The market regulator has also made recommendations to the government to amend corporate social responsibility (CSR) rules in the Companies Act, 2013, to include donations made by companies through social stock exchanges (SSEs) under the CSR mandate, as per whole-time member Kamlesh Varshney.


“Inclusion of CSR will be a good move but is frankly not a must-have. Its main benefit will be to get NGOs to encourage others to participate via signalling,” added Chandra.

First Published: Jul 05 2024 | 7:22 PM IST

Source: Latest News