• Sat. Jun 22nd, 2024

SEBI Implements 50% Reduction: Minimum Issue Size on Social Stock Exchanges Slashed to Rs 50 Lakh

ByNishat Manzar

Nov 25, 2023

On November 25, the Securities and Exchange Board of India (SEBI) announced a significant modification to the minimum issue size applicable to non-profit organisations (NPOs) participating in the Social Stock Exchange (SSE). Subsequent to the Board meeting, SEBI issued a press statement detailing the adjustment, revealing that the minimum issue size for public issuance of zero-coupon zero principal instruments (ZCZP) by NPOs on SSE has been halved, now standing at Rs 50 lakh, down from the previous Rs 1 crore.

This decision, as outlined in the press statement, reflects SEBI’s proactive approach to stimulate fundraising activities for not-for-profit organisations on the SSE. The revised minimum issue size aims to facilitate and encourage increased participation by NPOs in capital markets, aligning with the broader goal of fostering a more robust financial ecosystem for social impact initiatives.

The regulatory authority has implemented a revision in the minimum application size for public issuances via Zero Coupon Convertible Preference (ZCZP) by organizations on the Stock Exchange (SSE). The adjusted minimum application size is now set at Rs 10,000, a notable reduction from the previous threshold of Rs 2 lakh. This modification aims to facilitate broader participation among subscribers, specifically catering to retail investors.

Sebi’s Strategic Shift: From “Social Auditor” to “Social Impact Assessor” for Enhanced Confidence in Organizations

Sebi has undertaken a strategic change in terminology, substituting “social auditor” with “social impact assessor.” This alteration is aimed at instilling confidence in organizations while projecting a positive orientation towards the social sector.

In its consultation paper released on August 29, the market regulator highlighted the nascent stage of the exchange and the potential challenges faced by Non-Profit Organizations (NPOs) in securing Rs 1 crore from a limited pool of investors. The paper emphasized the lack of awareness among investors regarding the framework, posing difficulties for NPOs in garnering support for their fundraising initiatives.

Recognizing the impediments faced by NPOs, Sebi has announced a reduction in the minimum application size for such entities, decreasing it from Rs 2 lakh to Rs 10,000. This adjustment aims to facilitate a more inclusive participation of a broader spectrum of investors who wish to subscribe to Zero Coupon Zero Principal Instruments offered by multiple NPOs. The previous minimum application size of Rs 2 lakh was deemed prohibitive for individuals engaged in regular philanthropic contributions.