SEBI

What’s up with India’s Social Stock Exchange while Market Boom?

The social stock exchange has significantly appeared in India’s equity market to operate as a separate segment. Non-profit organizations involved in social projects are registered to raise funds on the social stock exchange. India witnessed its first-ever listing on the Social Stock Exchange in December 2023.

 The blog below further enumerates the current state of India’s social stock exchange amidst the boom in the financial market.

Understand the Concept of the Social Stock Exchange

India’s Social Stock Exchange is a separate segment that allows investments in social enterprises and non-profit organizations. Finance Minister Nirmala Sitharaman first introduced the idea of a social stock exchange in the Union Budget of FY 2019-20. Different types of social enterprises, including NPOs or Social enterprises, are free to apply for a social stock exchange license to make continuous disclosure of their social impact.

The social stock exchange, which mainly aims to provide access to a broader investor base, is adapting to the current financial climate amidst an ongoing market boom. It also boosts funding opportunities for NPOs, creating an accountable, efficient, and transparent funding mechanism in India.

Why We Need a Social Stock Exchange?

The need for a social stock exchange is continuously growing among non-profit organizations. The following are the reasons for the exposure of a new financial frontier in the form of a social stock exchange:

• To address social and environmental changes like poverty and climate change;
• To effectively address financial resources;
• To enhance transparency and accountability of fund investments;
• To provide investment opportunities for investors;
• To make use of innovative ideas for expanding market reach;
• To bridge the gap b/w the traditional financial market and other social sectors;
• To facilitate collaboration among private and public sector enterprises.

How Can One Invest in Social Stock Exchange?

Investors can issue zero-coupon zero principles (ZCZP) instruments for making minimum initial disclosure under section 292 k (1) of the ICDR Regulations.

Every investor is required to mandatorily hold a Demat account in any of the depositories where the ZCZP instrument will be reflected. Further, any investment made by way of cheque or demand draft shall be attached to the application form submitted for the issuance of the ZCZP instrument.

Recent Developments in India’s SSE Amidst Market Boom

The following are the recent developments observed in India’s social stock exchange while market boom:

1. Boom in Market Enthusiasm

A boom in market enthusiasm for social investing has been observed, with a surge in investors’ interest. The booming market has notably impacted the rise in the number of social and non-profit enterprises listed on a social stock exchange. 

2. Development in Investor Education

The changing trend in India’s stock exchange has led to the development of investor education, which potentially impacts their investments.

3. Strategic Collaborations

The boom in the market framework has led to a strategic collaboration or partnership with various financial institutions providing co-investment opportunities.

4. Digital Innovation and Analytics

The developments in the market framework have led to the innovation of user-friendly digital platforms, which in turn have led to the listing, trading, and reporting of social enterprises and investors on the social stock exchange.

5. Regulatory Developments

The boom in the market led to further developments in the regulatory framework of SEBI which outlines the functioning, reporting, and other requirements of the social stock exchange.

6. Bridge the Financing Gap

The boom in the market has started bridging the gap by providing alternate fund-raising instruments to non-profit and non-governmental organizations that raise funds from the public through the stock exchange mechanism.

7. Platform for Engagement of NGOs

The latest market developments are paving the way for active participation by NGOs and social enterprises focused on collaborative initiatives such as healthcare, education, and livelihood generation.

8. Tax Incentives

The Securities Exchange Board of India suggested that the government allow tax benefits to companies making investments in zero-coupon zero-principal bonds issued by NPOs listed on the social stock exchange.

Conclusion

The social stock exchange is experiencing a unique and novel growth mechanism amidst the market boom. The ongoing efforts in the current market conditions attract more listings, investors’ interest, enhanced awareness, strategic partnerships, and supportive tech-enabled developments. Further, the social stock exchange is an innovative platform that facilitates funding for social enterprises and non-profit organizations amidst the significant developments after the market boom.

Looking to empower your social enterprise with a Social Stock Exchange License? Visit Enterslice today at www.enterslice.com and be a part of the change.   

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