Internal Audit

Why Register on the BSE Social Stock Exchange?

BSE Social Stock Exchange

BSE Social Stock Exchange registration offers various advantages for both investors and issuers. It provides investors with a unique opportunity to support and invest in companies that have social impact and sustainability. By investing in this, investors can align their financial goals with their values and contribute to positive social and environmental change.

For issuers, registration on the SSE opens access to a dedicated platform to facilitate fundraising for social enterprises and organizations. Moreover, being listed on the BSE Social Stock Exchange can enhance the issuer’s reputation and credibility.

Registration on the BSE SSE provides issuers access to a network. It fosters collaboration and knowledge within the social impact sector, leading to potential partnerships and opportunities for scaling up social initiatives.

Overview of the Bombay Stock Exchange

The Bombay Stock Exchange is one of Asia’s oldest and most important stock exchanges. Established in 1875, it has played an essential role in shaping India’s financial framework. It evolved from a native stock exchange under a banyan tree to a technologically advanced marketplace.

BSE’s operation is its benchmark index. The BSE Sensex30 is the largest and most actively traded stock on the exchange. It also serves as a barometer of the Indian stock market’s performance. Besides equity, the BSE offers a diverse range of financial products and services, including derivatives, currencies, commodities, mutual funds, and debt instruments.

Its trading platform has transformed from traditional methods to intronic trading to enhance the efficiency and accessibility of market participation after the NSE. The SSE is the segment in the BSE that raises capital through an initial public offering or listing of debt securities to contribute to social and environmental development. Also, with its healthy regulatory framework, SEBI ensures market integrity, investor protection and adherence to the best practices.

History of the BSE Social Stock Exchange

The Bombay Stock Exchange received approval from the SEBI to launch the social stock exchange in June 2021. This approval marked an important milestone in India’s efforts to promote impact investing and support organizations focused on social welfare and environmental sustainability. Raintree Foundation was registered in the BSE Social Stock Exchange for climate resilience.

The inception of the SSE can be traced back to when the Finance Minister of India, in the Union Budget 2019-20, proposed an option for the social stock exchange which aimed to create a system that would enable the social enterprise, non-profit organization and other entities focused on social welfare to raise capital through the capital market.

The history of the BSE Social Stock Exchange is marked by a progressive journey towards fostering significant impact investing and promoting sustainable development in India. The concept of SSE emerged as a response to the growing recognition of the need for innovative financing mechanisms to address social and environmental challenges.

India’s largest SSE platform is the BSE social stock exchange, which claims a listing of over 250 companies and continues to expand steadily. BSE StAR Mutual Fund is India’s largest online mutual fund platform, processing over 27 Lac transactions monthly and continuously adding almost 2 Lac SIPs monthly. Another important component of BSE’s offering is the BSE Bond, a transparent and efficient electronic book mechanism for privately placed debt securities.

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SEBI’s Approval for SSE as Separate Segment on BSE

SEBI has given its final approval to introduce the SSE as a distinct segment on BSE. Below are the main aspects of the Social Stock Exchange:

  • The SSE is a new concept that aims to serve both the private and non-profit sectors by facilitating increased capital flow. The finance minister proposed the idea during the 2019-20 Budget.
  • In July 2020, SEBI issued regulations for the SSE to offer social enterprises an additional avenue for fundraising for social and environmental development.
  • NPOs listed on the SSE must submit a utilization statement of funds to the SSE within 45 days from the end of each quarter, as mandated by the SEBI’s rules.
  • SEBI has mandated that social enterprises raising funds through the SSE disclose an annual impact report within 90 days from the end of the financial year.
  • Eligible social enterprises must demonstrate a primary focus on social intent and impact.
  • The eligible social activities include a range of areas, such as eradicating hunger, poverty, and inequality, promoting healthcare and education, and supporting gender equality.
  • Certain entities like corporate foundations, political and religious organizations or infrastructure and housing companies, except affordable housing, are not eligible to be classified as a social enterprise.
  • SEBI has outlined specific minimum requirements for NPOs, including registration as a charitable trust for at least three years, annual expenditure of at least Rs 50 lac in the past financial year, and funding of at least Rs 10 lac in the same period.
  • NPOs fund funds through the issuance of zero coupon and zero principal instruments.

Functions of BSE Social Stock Exchange in the Stock Market

The following function of the BSE Social Stock Exchange in the stock market is briefly described below:

1. Facilitating Social Impact Investing

The primary role of the BSE SSE is to provide a dedicated platform for social enterprises, non-profit organizations, and other impact-focused entities to raise capital from investors who prioritize social and environmental objectives over financial returns.

2. Promote Financial Inclusion

The BSE Social Stock Exchange is essential in promoting financial inclusion by providing a platform for various entities, including social enterprises and NPOs, to access capital markets.

3. Diving Awareness and Education

Another important role of the BSE SSE is to drive awareness and education about impact investing and sustainable finance. Through various programs and educational initiatives, the SSE raises awareness among investors, issuers and other stakeholders about social and environmental development.

4. Innovation

By providing a platform for impact-oriented organizations to raise capital, the BSE SSE catalyzes innovation and collaboration in the social sector. The exchange serves as a hub for networking, knowledge sharing, etc., among stakeholders and investors. 

SEBI Proposes Reduction in Issue & Application Sizes for SSE

The SEBI has proposed a significant reduction in the minimum issue and application size for NPOs on the Social Stock Exchange to facilitate fundraising. SEBI suggest cutting the minimum issue size from Rs 1 crore to Rs 50 Lac and the minimum application size from Rs 2 Lac to Rs 10,000. The National Stock Exchange and the Bombay Stock Exchange established SSE segments, with 31 NPOs registered in this segment as of August 2023. SEBI presents recommendations from the Social Stock Exchange Advisory Committee and the exchanges to streamline the fundraising process for NPOs through SSEs.

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Step-by-Step Guide to Register NPOs in the BSE SSE

The step-by-step guide to registering an NPO with the BSE SSE is stated below:

1. Eligibility Criteria to Follow

Organizations registering on the BSE SSE need to adhere to SEBI’s eligibility criteria for listing, emphasizing both the social impact objectives of NPOs and financial sustainability for FPEs.

2. Engage a Social Auditor

The organizations ensure transparency by appointing a social auditor to perform the social audit. The auditor will conduct a detailed social audit, verify and evaluate the NPO’s social impact activities, and guide the organization through the BSE Social Stock Exchange registration process.

3. Collect Required Documents

The BSE Social Stock Exchange registration requires the documents and relevant information about the NPO’s social activities, legal framework and practices to complete registration requirements.

4. Submit Registration Application

The organization must compile all the necessary documents and submit the registration application accurately, including all the required information during BSE SSE registration.

5. Application Evaluation

The BSE Social Stock Exchange thoroughly evaluates the registration application, assessing the organization’s eligibility, social objectives, financial sustainability, governance and overall social impact.

6. BSE Social Srock Exchange Listing

Upon successfully completing the registration process, the authority of the SSE grants permission to list on the Bombay Stock Exchange, enabling nationwide electronic investment opportunities for investors.

Advantages of Registering with BSE Social Stock Exchange

After obtaining a social stock exchange license, the BSE Social stock exchange offers various advantages for social enterprises and organizations aiming to create a positive social and environmental impact. Below are the key advantages are outlined:

1. Fund Raising

Listing entities on the BSE SSE provides social enterprises access to a diverse pool of investors keen on contributing to social and environmental development while seeking financial returns, offering advanced trading and investment opportunities from various investors by rewarding high-performing projects.

2. Enhance Confidence

Being listed on the BSE Social Stock Exchange signifies a commitment to rigorous disclosure and reporting standards, fostering confidence and trust among investors. It also provides social enterprises with access to a broad spectrum of investors and donors by offering enhanced transparency into the impact generated by their contribution.

3. Transparent Reporting

Entities listed on the BSE Social Stock Exchange are required to measure and report their social and environmental impact accurately, which encourages continuous improvement and attracts investor funding.

4. Contribution to Sustainable Development

Registration with the BSE SSE aligns social enterprises with sustainable development goals, providing a platform to advance initiatives that promote social and environmental development.

Key Comparison of BSE Social Stock Exchange and NSE Social Stock Exchange

The BSE Social Stock Exchange and NSE Social Stock Exchange aim to promote social impact and support socially responsible enterprises. The key comparison between the BSE SSE and the NSE SSE are:

1. Formation

  • The BSE Social Stock Exchange is a segment of the Bombay Stock Exchange, and the BSE is Asia’s oldest stock exchange platform.
  • The NSE Social Stock Exchange is a segment of the National Stock Exchange, one of India’s leading stock exchange platforms.
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2. Criteria of Listing

  • The BSE Social Stock Exchange has its own set of listing criteria, emphasizing social impact objectives and financial sustainability.
  • NSE Social Stock Exchange also has specific listing criteria, emphasizing social impact and financial viability.

3. Benchmark Index

  • The BSE Social Stock Exchange has the Sensex30, where the stocks of the top 30 companies are used to determine the index.
  • The NSE Social Stock Exchange has Nifty, which consists of 50 chosen stocks from the top 50 companies used to determine the index.

4. Base of Investors

  • The BSE Social Stock Exchange offers investors access primarily related to the Bombay Stock Exchange, which will attract more investors from all over Asia.
  • The NSE Social Stock Exchange offers investors access primarily related to the National Stock Exchange, which will attract investors from India.

Conclusion

The BSE Social Stock Exchange is an important platform for promoting social impact investing and sustainable development in India through its innovative approach and healthy regulatory framework. The BSE SSE facilitates fundraising for social enterprises and fosters accountability within impact investing on a bigger platform.

FAQ’s

  1. Which entity will be identified as a for-profit social enterprise in the SSE?

    A for-profit social enterprise needs to fulfil the following criteria to be considered a social enterprise: It must be a company under the Companies Act 2013 operating for profit and not registered under section 8 of the Companies Act.

  2. How many ways are there through which NPOs can raise funds in SSE?

    The following ways are the issuance of zero coupons and zero principal instruments, a donation through a mutual fund, a development impact bond, and any other means that SEBI states in the future.

  3. Is it mandatory for NPOs to register in the social stock exchange?

    Yes, it is mandatory to register in the social stock exchange.

  4. Is registering for a for-profit social enterprise to raise funds in SSE compulsory?

    No, a for-profit company doesn't need to register on SSE.

  5. What evidence is required to state that the NPOs have operated for three years?

    The company of incorporation and financial audit report for three years must state that the NPO is in operation.

  6. How will NPOs apply for registration in the BSE Social stock exchange?

    NPOs seeking to register on the BSE Social Stock Exchange can formally apply to its letterhead requesting registration with the required documents.

  7. Who can list their companies on the social stock exchange?

    The social enterprises and organizations working for social and economic development can list their entity in SSE.

  8. When will the BSE Social Stock Exchange receive approval from SEBI to launch SSE?

    The Bombay Stock Exchange received approval from the SEBI to launch the social stock exchange in June 2021.

  9. Who is eligible to list in SSE?

    The SEBI has issued 17 areas to become eligible for SSE.

  10. What is the minimum limit for issuing ZCZP?

    The minimum limit of issuing ZCZP is reduced to Rs 50 Lac from Rs 1 Crore.

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