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Welcome to Help Your NGOs webinar on the social Stock Exchange. I am Winnie, director at Healthcare NGO, and I will be moderating today's session.
Now, in today's webinar, we will be covering how the social Stock Exchange can be leveraged to, you know, raise funds for NGOs and social enterprises, why are different funding structures and instruments, but before we get into that, I would like to browse you through Help Your NGOs latest offering to help NGOs in fundraising.
Now, most of you already know that Help Your NGO is a one-stop, you know, shop for all individuals and companies to support vetted Indian NGOs.
Um, since 2000, we have been helping donors make informed donation decisions by giving them access to analyzed information on 700 NGOs across India, covering 13 causes and all of the 17 UN SDGs. In fact, uh, in recent years, we have launched elegant tech-driven solutions to support NGO growth, and today I will be covering one of our solutions in detail.
Via our donor community, we have supported NGO programs across rural and urban India, covering diverse causes like education, menstrual hygiene management, you know, livelihood, sanitation, and many more. Mentioned here are some of our corporate partners and clients.
At Help Your NGO, we strongly believe that our technology solutions can help non-profits scale and amplify their impact.
So, while we continue offering CSR consultancy and NGO duration sorry, due diligence services, our efforts are now focused on scaling our tech solution, which is Hingo. Uh, now, based on our years of experience and, you know, interactions with NGOs, we realize that one of the biggest challenges non-profits face is raising funds to support their programs, and you know, this is exactly the problem that Hingo addresses.
Now, what is Hingo? Hingo is actually a one-click solution for individuals to seamlessly support vetted Indian NGOs. Our aim is uh to build an endowment for NGOs and support them over a long period of time. So, a one-time donation via hangout supports the selected NGO partners over 10 years.
But why build an endowment for uh NGOs, you may ask. Now, globally, university endowments and foundations invest their corpus for long-term capital appreciation, and you know, typically the capital distributions from them tend to fund nearly 50 percent of their annual operating budgets. Here, we've taken the example of Howard University's endowment. Now, imagine if NGOs could rely on a similar pool of capital to support their operations.
Our pioneering or SAS product Ingo uses low-cost technology to build an endowment and create a steady stream of money flows for NGOs, thereby giving them the visibility on their annual inflows and allowing much better planning of their programs.
So, how does Lingo work? Several individuals like you donate via hangout and contribute to the Hingo endowment. Help Your NGO invests uh the donations, and every year 10 of the fund is redeemed and dispersed to the NGO partners. So, assuming one donates 10 lakh rupees today via Hingo, it could result in a total payout of 17 lakh rupees to the NDO partners over 10 years. So, if you think of it, the Hingo endowment could effectively or, you know, exist in perpetuity assuming the 10 ROI under 10 Redemption annually.
Um, now, why should you partner for Ingo? It's simple: more funding opportunities for your organization. Money inflows over several years, complete transparency. Help Your NGO provides end-to-end services, and it is a low-cost plug-in launch solution.
So, while our work has been covered by various publications over the years, I am happy to share that the Times of India and the Economic Times recently covered how Hingu can, you know, help NGOs in scaling and companies in amplifying their CSR projects.
The systematic giving plan SGP received the award for the best social impact initiative at the India Wealth Awards. SDP is a product which is specifically designed for mutual fund investors. Over the years, we have hosted a series of webinars covering diverse topics with renowned entrepreneurs, Ronnie Screwvala, and Moandra Spy Actor and UNSDG Advocate, Diya Mirza Sabi Director, Amarjeet Singh, Ziya Modi, and many more. So, you can check our YouTube channel to view the webinar recordings.
Thank you so much for patiently listening. We will be sharing relevant links in the chat box. Now, without further ado, let's move on to the topic for today's webinar, which is decoding the social Stock Exchange. I'd like to welcome a guest speaker, Mr. Heman Gupta.
Hey, hi, hey, month, welcome. Uh, let me quickly introduce you to the attendees, although you need no introduction. Uh, well, with over three decades of experience, a month is the head of the social Stock Exchange at DLC and also the managing director at BRTSIF, the technology incubator at BSA. He is spearheading BSE Tech incubator called Zone Startups India and is actively leading several accelerator programs for a month. We are extremely delighted to have you uh with us today. You know, you've been a part of the working committee and the technical group for the SSC. So, having you explain the SSC framework, the thought process behind it, and you know, all of the processes associated with it is uh it's ideal for all of us. So, over to you. Thank you, thank you, Vinny, for your kind words.
So, the way we learn kind of architect this session is that I'll take about half an hour perhaps to go over the presentation I have which gives a background about the social Stock Exchange, a little bit of history, and then from an NGO perspective, how does the whole thing work? And then we'll answer some question and answer questions that the audience may have. And I have found, so I've done about 25 sessions so far in the last four or five months, and I found the Q&A session the most interesting part of the proceedings. So, without further ado, let me uh share the slides. So, uh, as most of you know by now, uh, the journey of the Indian social Stock Exchange started in July 2019 when the Honorable Finance Minister made an announcement in a budget speech uh announcing a funding platform, fundraising platform under the regulatory Ambit of SEBI or Security then Exchange Board of India for both for-profit enterprises and not-for-profit enterprises so that they can realize their social welfare objectives.
And shortly thereafter, service sprung into action, and they first did some pre-consultations, which I was fortunate enough to be a part of, and then formed a working committee uh in September 2019. We submitted our report in June 2020, and shortly thereafter, a technical group was formed which kind of dealt one level deeper into the workings of the social Stock Exchange and came out to the report in May 21. And finally, in July 2022, uh the regulations started rolling out and resulted in this first social Stock Exchange in India being set up.
One more piece of context I should give that um there are several other countries that have had various types of social stock exchanges, and uh there were lessons that we learned from the experiences that the other countries had that we tried to implement as a part of what we were creating in India. So, in a way, some of the stuff that we're doing in India is actually path breaking in the sense that it's not been attempted before.
So, uh, what I'll go over some of the highlights of what the the two committees uh proposed. So, the first one which was constituted in September 2019 under the chairmanship of them a senior member from the Tata trust data group, and essentially it boiled down to three key recommendations, and these three key recommendations are important because they laid the foundation or what was to become the Indian social Stock Exchange.
First, they said that SSC has to be a segment under the existing Stock Exchange, BSC and NFC, and the reason why that is important is that in a way, the social Stock Exchange actually inherits the regulatory and governance framework and the reporting Frameworks uh which these stock exchanges already have, which have been time tested, which has proven to be actually some of the best in the world. So, rather than creating a separate Stock Exchange, the social Stock Exchange, okay, this segment uh under BSC and Nscn for those who are familiar with the way uh at least at a high level as Stock Exchange operates even before the social Stock Exchange.
The stock exchanges already had three segments: the main board, which is what most of us are familiar with and the Sensex and the Nifty are a part of that, an SME segment which caters to fundraising by small and medium enterprises in a startup segment. So, this effectively was the fourth segment that got added.
The second thing that the working committee recommended was setting up a capacity building funding, and again, why is this important? This is important because for not-for-profit enterprises and for the donor community that would actually participate in the fundraising, this entire experience of the social Stock Exchange as well as the capital markets uh was something completely new, and therefore it was important that we constituted a resource that would build awareness, build knowledge, and build capabilities to actually participate in the social Stock Exchange. Again, remember if this is both from a from an NGO perspective as well as a investor or donor perspective, right? The third key thing that the working committee recommended was introduction of a zero coupon zero principle instrument.
Uh and again, why this is important is that the NGOs or NPOs as they called in the SSC parlors raise monies through donations and grants, and the stock exchanges do not have a method of bringing donations and grants onto the stock exchange. So, therefore, a new kind of instrument was introduced for zero coupon zero principle instrument or ZCZP, uh which uh it seems a complicated name, but actually uh if I uh explain it, zero coupon means coupon stands by interest, so no interest will be earned by the person putting in the money, and zero principle means that the person who's putting in money will not get the principle back, which means no interest income and you will not get your principal right. In other words, it's a donation order.
Then, the technical group was formed under the chairmanship of Sriraj Bharwala, ex-chairman of NABARD, and this technical group actually adopted all three recommendations and a host of other recommendations by the working committee uh but and came out with four key uh additional aspects to the three above from the working committee. The first B that the first step any Enterprise for profit or not for profit has to undergo is establishing the Primacy of social intent, which means that their purpose for existence as an Enterprise is a social impact. Right? The second was that uh there would be disclosures that they would have to undertake. Now, being on the stock exchange obviously means that any company, any Enterprise has to a periodic disclosures, but we also added impact related disclosures because the reason for existence or the Enterprise on the social Stock Exchange was in fact the third, and this was also very important uh was the formalization of the role of a social auditor to validate the outcome or the impact. Why the reason why this was important is that for a person who's putting in money into any zero coupon zero principle instrument or any other instrument on the stock exchange, it was important for them to understand what was happening with their money. And it was important for them to understand it from a third party, a neutral third party that could validate what is happening on the ground, and therefore the introduction of a social auditor or a social Assessor. And last, the last item is more for you know from a fund perspective, from a collaboration perspective, there's an existing a fund called social Venture fund under SEBI guidelines. We recommended some changes to that to make it more friendly, right? And as a part of both the working committee and the technical group, we had several sessions with NGOs, with the impact invest, with people who had vast amount of experience, the Social Development sector in the Indian Social Development.
So, what uh what this resulted in all of this good work that was done is a series of regulations and notifications that started coming out on the 15th of July, and the last one so far is the one dated October 13th, and I'll not go through each of these items, but essentially they laid the framework for establishing the social Stock Exchange at the BSC in NSC. As a part of the process, BSC applied for approval to open the segment called the social Stock Exchange last year, and we were granted by the approval for the same uh in the last week of December of 2022. And I'm very happy to announce that already in the last three months, we have registered uh 10 NGOs, and I'll get into a little more detail about what is registration in the next few slides.
Okay, uh, so broadly, why what is the why should uh issuer or a fundraiser come to the platform, and why should an investor or a donor come to the platform? From a fundraising perspective, one, remember what a stock exchange does? The stock exchange actually is a platform that's accessible anywhere across the country, and it has participants from all every town, every city in this country, right? And therefore, any organization getting registered and looking to raise funds on the social Stock Exchange automatically gets visibility and access to that vast pool of bundles. Also, the impactful work that is being done by the fundraiser also gets a national platform, and from a cost perspective, compared to some of the other channels that exist, this is a relatively low cost Channel. And on the flip side, from an investor perspective, again, an investor sitting in any corner of the country can access social Enterprises anywhere uh in India. It can review the work that they're doing before making decisions on putting in their money and will also get transparency into what's happening with their funds uh throughout the lives of the project.
So, what does it boil down to from a implementation perspective or you as an NGO or any social Enterprise wanted to come out Stock Exchange? What this means is that remember what I told you? The first thing you have to do is establish privacy of social intent. In other words, prove that you're a social Enterprise, prove that social impact Social Development is what you live for. Once you establish that, and I'll cover the criteria for that in the next slide, once you've established that, then with depending on whether you're not for profit organization or NPO or a for-profit Enterprise or an FPE, the parts diverge or a FPE or a for-profit Enterprise. They actually go into the regular Stock Exchange system where other commercial for-profit Enterprises list and raise funds. So, remember I spoke about the main board, the SME segment, and the startup segment. They would, depending on their nature, their size, they would go to their respective segments and raise funds to the regular means of equity debt to mutual funds or other such means. Uh, if you are an npu or an NGO uh which most of us are are today on this call then you would first undergo a registration step where you would uh sorry where you would actually do a kind of a cave IC or a registration on the stock exchange uh and then subsequently it was raised funds. The fundraise would be through the remember that 0.0 principal instrument I spoke about it would be through that why did we break this process uh simply because an NGO typically raises program money right or funding at a program or a project level um and uh the uh the um whereas what piece so what we did is you come to the social Stock Exchange register once and then you can raise fund as many times as you want as with as many programs as we want yeah right so now let's get into a little more detail around establishing the Primacy of social intent um sorry about that um so coming back to where I was so the first step remember was establishing Primacy of social intent this box here so there's a three-stage filter uh for establishing that the first is that you have to be working in one of 15 areas that were defined in the regulations and the 15 areas are as follows you can see them on your screen I'm not going to go over them one by one but essentially they cover schedule seven they cover STD they covered iOS priority areas uh plus we've added a few like if you look at number 15 uh 14 which is a digital divide in the internet so some of the newer areas that have cropped up on account of uh rollout of Information Technology Etc okay so first step you have to be working in one of these 15 areas second is that at least two-thirds of your work has to be in one or more of those 15 areas which means that a bulk of your activity has to be centered around these 15 areas so it's not that you've done a project in one of those areas and you qualify the social Enterprise the third is that for now at least 13.
Organizations with political or religious affiliations, corporate foundations, professional or trade bodies, and infrastructure and housing companies (except those in affordable modification) have been kept outside the ambit of the social Stock Exchange. The preference would also be given to enterprises that target underserved populations.
This is the first step, and it is important for all of us to understand that you have to pass through this three-stage filter in order to be listed on the social Stock Exchange. Now, let's say you've passed through this three-stage process. What happens next?
If you're an NGO, the eligibility criteria are similar to the ones followed either through Section 135 or by most corporates or funding bodies. For an NGO, you must first be a society, trust, or a Section 8 company. You must have a track record of three years and valid 12A and 80G registrations.
In addition to these four criteria, with which most of us are familiar, there's also a size criterion that has been added. This has changed; it used to be an average of the last three years, but now it has become for the last financial year. You must have a minimum of 50 lakhs of annual spending and must have raised a minimum of 10 lakhs. The reason why these criteria were put in place is that there are certain governance, reporting, and disclosure requirements that will be placed on an entity that gets registered on the SSC. The organization coming on board has to have the capability of meeting those compliance requirements, either the resources to meet them and undertake the requisite fundraising. That's the idea behind the size limits.
So, now let's say you meet all these requirements. What happens next? To get onto the BSE social Stock Exchange, you would click on or log on to a portal which is bscsocials.bseindia.com. You would register your interest, and someone from BSE would come back to you with details of what is called the listing portal. This is the standard portal through which all enterprises wanting to come onto BSE submit their details. You will log in and upload all the documents. One of the things that BSE will also do when they provide the login details is provide a checklist of all the documents.
The checklist of the documents would basically focus on your constitution documents, income tax returns, and financial statements of your organization, registration certificates, these size requirements, as well as documentation which establishes the areas you work in, and a certificate from a CA certifying that at least 67% of your work is in these areas and that you are not one of the excluded organizations. So, essentially, the registration documents that you would submit would be these documents.
The BSE listing operations team would, in turn, review the documentation and come back to you if any clarifications or anything is missing. Upon successful completion, the registration will be granted. As I mentioned earlier, we have already reached double digits in terms of registration, so over 10 NGOs have been registered, and there are, if I remember correctly, about seven more in the pipeline that should get done either later this week or early next week.
Now, let's say you registered successfully and are now looking to fundraise. I've covered the zero coupon zero principle instrument, but if you go back to that slide I had, there are a variety of instruments you can respond to. Focusing on the zero coupon zero principle instrument because that's a kind of donation or a grant with which most of us are familiar.
So, first things first, you must have a valid registration in order to raise funds. If you have a valid registration and a project for which you want to raise funds, you can drop an email to [email address removed]. We'll respond with what is called an offer document template, or for those of you familiar with stock exchange lingo, a draft red herring prospectus. It is actually nothing more than a proposal document that you would make for any donor, which lays out the objectives, the timelines, the budgets, the expected outcomes, dependencies, etc.
You would again use the listing portal through which you registered to submit this documentation. The Exchange would review it, and once the documentation has been certified, investors can start investing in zero coupon zero principle instruments. Here, I'd like to add two clarifications because this often comes up in the seminars that we organize. One is that the stock exchange, if you think about it, doesn't actually do fundraising; it is a matchmaking platform that brings buyers and sellers together.
So, any entity wanting to come onto the social Stock Exchange will actually have to do fundraising before they come onto the social Stock Exchange. The second is that usually, if you are familiar with IPOs, they are open for three to five days only, and there's a variety of reasons behind that. In fact, that window has been getting shorter. One question that I am often asked in these seminars is how will the NGO be able to raise funds within three to five days for a program?
The answer to that lies in what I said before, which is that the fundraising is done before you come onto the stock exchange. So, as an example, if a company is doing an IPO, then typically they would actually line up most of the 80 to 90 percent of their fundraising before they come and list on the stock exchange, and a little small part actually gets committed during the three to five day window. Similarly, any social enterprise wanting to come onto the social Stock Exchange will actually have to do most of the fundraising before they get listed.
Some of the key characteristics of a zero coupon zero principle instrument are: the minimum issue size of one crore (and that's the current limit; I am anticipating that to get lower as we mature and stabilize; remember this is what I like to call as SSC 1.0; based on the inputs that we're getting, we are actually evolving and becoming more and more mature; as we mature, some of these things will change, but the current minimum size is one crore), a minimum subscription amount of two lakhs. Anything that gets traded on the stock exchange, whether it's equity, debt, or anything else, has to be in what is called a dematerialized form, and the minimum issue subscription is 75%. Once the project is over and all the objectives of the program have been met, the instrument will automatically terminate, and obviously, no money is flowing back to the investor because it's a donation.
So, that's broadly registration and listing using a zero coupon zero principle instrument. Next up, a brief look into what kind of disclosures are to be made. Again, it depends on what you're doing on the social Stock Exchange. For example, are you registered only? Have you raised funds? Or are you a for-profit enterprise that is raising funds? Remember, registration is not something that a for-profit enterprise does because it directly goes to fundraising. NPOs do registration because they can come and do fundraising multiple times, whereas an IPO happens typically only once.
At the time of registration, there are certain disclosures, and I will not go through them item by item frankly. I hope Help Your NGO will share some of this information with you, and we'll be happy to take any questions even later on. There are also annual and quarterly disclosures. One important part is the event-based disclosure, which is often a subject of questions. If there is an event in your organization or in the project that you raised funds for that will have a material outcome on either the functioning of the organization or the outcome of the project, you have to, within seven days of the event, come to the Stock Exchange and declare it.
So, it could be legal cases filed against you, COVID-19 or any other outbreak, or any other issue that is happening. Let's say you're working in a geographical area and there is a political event due to which you are unable to carry out your activity, you'll need to come onto the social Stock Exchange and declare it within seven days of the event. Okay? And then there's an annual impact report.
So, that's broadly on the basics of the social Stock Exchange. The last slide that I had is to do with social Auditors because again, this is something new that got introduced in the regulations. The idea behind these social auditors is not financial reporting; it's an audit of the social impact, the social outcome that you're creating. This is a person that needs to get certified by something known as NISM (National Institute of Securities Markets), which has created a special 11-module course focusing only on social assessment, impact assessment, and outcome assessment. There is a certification exam at the end, and there are already several individuals who have qualified as social auditors.
Social audits will be performed obviously by reputed firms and institutions. Very importantly, because social Auditors will have a key role to play in the ecosystem, there is an SRO or a self-regulatory organization that has been set up for the social Auditors. Currently, there is one under the Chartered Accountants Institute, and I think one more that's been formed under the Company Secretaries Education Institute.
The role of these self-regulatory organizations includes empanelment, registration, setting standards, establishing a code of conduct, and handling violations, including suspension and cancellation. So, it's kind of a regulation of the operations of the social auditors. There are also standards that have been defined. ICAI has published the standards. I think the Management Institute and the Company Secretaries Institute also have common market standards.
I am actually hopeful that rather than having multiple standards, we will eventually converge onto a common set of standards that all these institutes can agree upon. Hopefully, that will happen soon.
So, that's broadly a high-level peek into the world of the social Stock Exchange. Vinita, back to you, I guess, for questions and any comments. Thank you, thank you so much, Hemant, for taking us through that insightful presentation. There are so many questions pouring in for the Q&A. Initially, we had budgeted for 30 minutes, but now we have over 45 minutes, so I think that's great. The Q&A session is going to be the last leg of this webinar. Before I take questions from the attendees, Hemant, I had one question for you. Yes?
You know, I believe the SSC could be a game-changer for the Indian social impact space. However, like you mentioned, it has not succeeded in many countries throughout the world. So, what are we doing differently to ensure that it's a success in India?
Sure, it's a great question, Vinita. I'll go back to the committee slide and point out what we did differently. The first is that none of the social stock exchanges in other countries created this construct of a zero coupon zero principle instrument, which allows donations and grants to come onto the platform. Point number one. Point number two is that none of them created a capacity building fund and an enabling mechanism to transition enterprises onto the stock exchange. For an NGO that is used to a certain way of fundraising, this is a completely new world, and it's important that they are provided with enough resources and enough ability to take advantage of this. The capacity building fund was the second thing that was not added to the armory in any other country. The third is the formalization of the role of a social auditor. The first two, if you think about it, are more from an NGO perspective, but the role of the social auditor is equally important from both an NGO and an investor perspective because this is a third party that is giving comfort to an investor on the social Stock Exchange that what was supposed to happen to my money is actually happening to it, the impact that was supposed to be created is getting created.
Therefore, I can trust this system; I can place reliance on the system, just like I can place reliance on the financial auditors that ensure that companies on the stock exchange are reporting accurate numbers. These are the three things I would say that we are doing differently.
Got it. Thank you so much, Hemant. Your second point was around the capacity building fund, right? I've gotten a question on the capacity building fund. So, what exactly is it, and what will the funds be used for? Also, what is the current corpus of the fund?
Okay. The status, I'll start with the easy part. The status of the fund is that it has been set up. It has been set up as a fund under NABARD. NABARD has several such objective-driven funds, including one for financial literacy, so they've set it up under NABARD. The participants in the fund so far are NABARD, BSE, and NSE. The recommended size of the fund is 100 crores, and that obviously will not happen on day one; it will grow as the requirements come in. Like I mentioned earlier, the objective behind the capacity building fund is to work with two sets of communities at least.
One is the NGOs, to build capacity for them to register on the social stock exchange and for them to list on the social Stock Exchange. The second is to work with investors or donors to educate them about the workings of the social Stock Exchange and why it makes sense for them to put in money or funding through the social Stock Exchange. So, those are the two broad objectives. However, the idea behind the capacity building fund is to enable the social Stock Exchange. If tomorrow there's a third objective that gets added to these two, then I think NABARD will be more than open to adding that. The idea is to use this money and make the social Stock Exchange, like you said, a game-changer.
Got it. Thanks, Hemant. The next question is, what are the next steps once an NGO is listed on the SSC, and what is to be done to increase the chances of funding?
So, I believe as soon as an NGO is listed, I think there's a time limit within which, if it's a ZCZP instrument, then it has to be subscribed within a certain time limit, and all of that, right? Yes, so I'm actually trying to say that the question can have several interpretations, and I was trying to figure out which interpretation to take. But essentially, once you get listed, one interpretation is that once you get listed, you've done fundraising because that's when you get listed and your completed fundraising is announced. Then you have to submit the annual reports, the quarterly reports, and you have to get your project audited by social auditors. Right? All of that stuff you have to do.
The second answer to that question is that if you're happy with your listing experience, you come to the social Stock Exchange and do more fundraising. As far as increasing the chances of getting funds through the social Stock Exchange, I would say two or three things. One is that obviously, the capacity building fund is going to get used to build awareness about the social Stock Exchange. As a part of the capacity building fund, we obviously try and promote the first few listings that happen so that they get maximum exposure and the maximum number of investors. The second is that the proof of the pudding is always in the eating, so if you have done similar projects in the past, as a part of your submissions to the social Stock Exchange regarding these ZCZPs, please do submit independent reports that validate the outcomes and the impact your past projects have created so that people have faith that you will be able to carry on the good work in the future. The third is that remember, the fundraising has to happen before, not after, you get listed. The stock exchange will not do fundraising.
Right? Therefore, you should ideally do most of your fundraising before you come onto the social Stock Exchange and get your ZCZP listed. So, use your existing network. We will also promote the social Stock Exchange through the capacity building fund since we will be targeting new kinds of investors, including high net worth individuals and philanthropists. Obviously, we will be sharing communication about your listings through those channels, and we will try and help out as much as possible, at least initially. So, those are some of the things that we can together do, and some of the things you can do either.
Right, so Hemant, will SSC be assisting with fundraising? No, no, SSC Stock.
Exchange is a neutral platform; it does not uh favor any fundraise. So, for example, if I come, if I'm a company that's coming to the sort of Stock Exchange today's funds or do an IPO as it's called, stock exchange per se doesn't do any promotion, anything, right? Because then there is, there can be allegations, your favoritism, and money, all right. Okay.
Um, next question, Hemant, is what will be the role of intermediaries, and do they also have to be independent? It's a great question. Okay. Um, we uh, so I'll take the last part first. Unlike the SME segment and all the main, where there is the concept of a merchant Banker who has to be empowered with city, as of now, the social Stock Exchange does not have the equivalent of a merchant Banker that needs to be independent.
Having said that, obviously, fundraising is not something that will happen on by itself. There will have to be resources deployed to talk to investors and donors, to publicize the fundraise. And whether that's done through an intermediary or a third party, or it's done by internal resources of the energy, somebody has to play that role, right? But so, therefore, whether it's an intability that does it or the enjoy itself to its own network that does it, at least initially, that fundraising will have to be done by somebody. Like it is done even in an IPO or any other establishment that happened on the stock exchange. Uh, and uh, to my mind, uh, over time, uh, because I think there is a thriving donation ecosystem in this country, over time, we should have, maybe fundraising should be easier on the social Stock Exchange. But I think the role of an intermediary or somebody doing fundraising will always exist.
There is a second in kind of intermediary that also can exist. So, it may not just be a fundraising goal. Uh, the second kind of, so if you look at a merchant Banker on the Capital Market side, right, they actually play multiple roles. One, of course, is a fundraising goal, but they also played the role of a compliance agent or a documentation expert. So, registration and listing, all of these have documentation requirements, right, which need to be followed. Uh, fortunately, the good news is that it on the social Stock Exchange side, these documentation requirements are relatively simple and straightforward, and the organization along with a chartered accountant should be able to fulfill all of them to my mind, which is what these 10 ngos have done, right? They've not used the third party or emergent Banker to file for registration that they have done it themselves in partnership with CAs. But there is the scope of a third party or an internally playing the role of more compliance or a documentation agent, which I think is a little less likely, but it is possible that an NGO may feel that they are not comfortable doing this themselves, and they want to hire an expert today, right.
Got it. Um, as an NGO human, what pointers should be ticked to increase chances of funding? So, I think the first part is getting the registration done, but between the registration and the listing process, what should they do, right? I think uh, I think I tried to answer this in the earlier question also, but from our side, uh, one is that as a stock exchange, we don't have a role, right? But there is a capacity building funding that is the uh used to build uh build awareness, but also help at least the electric few listings to get an adequate level of funding. And uh we've definitely went through the capacity building trying to try and help out wherever possible. Um, and we are doing publicity about the social Stock Exchange. We are holding seminars like I'm doing this for with ngos. I'm doing similar seminars with investors. Um, so therefore, as in as we build a network of investors, we'll obviously share with them some others that see that field that are coming to the platform. Uh, but eventually, uh, like I said earlier, either an intermediary or internal resources will be helpful in terms of doing the fundraise.
Thanks, Hemant. I think this is an interesting question. So, will companies and individuals be offered any incentives to donate or invest via the SSC? Um, so there are three things because they probably crop up later. I might as well get them head on right now. So, one is uh that as some of you may have heard uh this whole APG business is going away. And therefore, the atg ability is not available on the social Stock Exchange as of now. Uh, CSR funds also cannot be routed through this Mission Stock Exchange. And therefore, the idea is to actually use a social Stock Exchange to open new channels of funding uh through family offices, through high net worth individuals to foundations, right? And third is no fcra funds are obviously allowed through the social stockings. I think that most people would have resumed even the level of scrutiny that's going on around at CRA. So, therefore, as of now, um apart from the fact that an investor can get access to uh Social Development work that is happening across the country uh without incurring too much expense, and the fact that they get complete visibility and transparency into what's happening with their money, the impact of the outcomes that are getting generated, there is uh and the fact that they in on in one place they can actually get a menu of options available for them to put in their donations. And apart from the fact that there's minimum cost associated with doing this whole thing and there are no other any centers, but I'm hoping these four should be incentive enough because people.
Okay, so um there are a lot of questions around the fee structure. So, one thing is, you know, uh what is the one-time fee, and secondly, what are the annual fees for both ngos and social Enterprises? Um, so uh the social Enterprises actually there is an existing fee structure that's there. So, remember, a social Enterprise actually goes to the years, the regular Stock Exchange. So, they follow the normal fee structure uh and that is that is subject to change, etc. So, it's better to refer to the stock exchange website and get that speed. On the NGO side, there is a 5000 rupees fee for registration. Uh, the listing fee and the annual fees, I think, around 25 to 30,000. Uh, it's not much more than that, it's in that range, uh 25 to 30,000. So, both from an annual renewal point of view and from the security, let's see that previously important. Okay, thanks, Hemant.
Um, how long does it take for an NGO to get registered on the SSC after all the documents have been submitted? So, uh these 10 ngos that I spoke about that have been registered, I've taken anything from four days to three weeks to complete the process from when they registered their interest on the total to be granted the registration certificate. The difference of four days versus three weeks primarily has hinged upon uh how well you are prepared from a documentation viewpoint. Okay, now let me uh let me spend a little bit of time on this question if it's okay with you any. Yes, of course, but it's an important one. So, if you think, if you break the documentation down into the two parts, right? The first part being establishing Primacy of social intent, and the second part being the eligibility criteria. If you look at the eligibility criteria, this is stuff that you can do very simply, and you will probably be doing this for any donor, right? You have your documentation proving you're a society, trust, a Section 8 company, you have your income tax record for three years, and your final audited Financial, you have these certificates, etc. And using your audited financials, it's very easy to establish that you have a minimum 50 lakh and a minimum 10 lakh, right? Where things get a little more tricky is on the establishing privacy of social intent, right? And here again, the first and the third are easy, right? You obviously know which areas you work in, right, and you obviously know whether you're in or out of these four. The tricky part is the middle one where at a program or a project level, your ca actually has to look at the numbers and add them up and ensure that 67 percent of your Revenue expenses or beneficiary, remember, it's not all three, any one of the three is in one or more of these areas. Now, the good news here is that it doesn't have to be 67 in each and every one of those areas. Obviously, it is collectively it has to be done. So, what I found is that the comp ngos that had a more engaged relationship with their started accountant, and the chartered accountant was aware of what was happening in the projects and programs and was aware of, you know, the accounting related at a program level, not just at the NGO level, they had an easier time uh complying, submitting the certificate. And the ones that perhaps had their Chartered Accountants being less engaged at a program level had took longer to give these thirds. Okay.
Is there any certification through NISM to understand the SSC in depth? So, you mentioned that it's there for the social auditors. I think that's the part. Well, I think they can attend the webinar, whoever wants to do it. So, that's one. And uh as the capacity building fund rolls out, there will of course be a structured calendar that will get produced for workshops. Yeah, got it. Okay. Thanks. Okay. Um, the next question has too many parts to it, so I'm going to break it down for you. Is though of a document for that sees that the instrument also to be certified by a social auditor? Yeah.
No, no, I don't think so. It's a good question because I think some of these things you still plan to work out said we're still trying to work out some of these things. But I'm trying to think of the content. I would assume that if you want to add any social impact data related to what you've done in the past in your past programs, that will definitely have to be certified by a social auditor. But a forward-looking document which says what are you planning to do for which you're doing a fundraise, I don't see why that needs to be certified by a special article. They will not add any value. Okay, so currently there is no such show. Yeah. Okay. And at what point in time of the listing, funding, or its utilization does the certification buy or the social auditor have to be done? Part of the annual impact report. If I go to the disclosure slide, right? So, the annual impact report, this is the one that has the uh social auditor uh right report also. Okay, so this impact report, hey month, this has to be done annually. Yeah. Because that's going to be difficult, right? So, is this the same reporting or you know, the program reporting that the non-profits are typically used to doing to their, you know, CSR companies or or how is this impact report any different from, you know, their quarterly or say six monthly reports that they share with their donors?
Um, that's a tough one to answer really because every company has their own formats. Uh, what I would recommend is that and perhaps you can help that actually the regulation already has the template of this annual impact performance. Either as a follow-up to this webinar, we can circulate that template to the participants so they'll be aware of what the content is. Definitely. But one part of it is that a certification by the social audit is saying that if in your offer document you had said that this is what you would do uh in that financial year, then have you done that or not, right? Thanks, Simon.
You said 10 ngos have registered so far and seven are in the pipeline. Have any of them listed? No, no. Drinking for the non-profits. I think I was really nice. Yeah, we had the seven guy there was but at that point there was seven. We had all of them come up to the stage and do a building, you know, that was very nice. It was actually very well received. Uh, but there are several of them who have come forward with ideas on how they want to go about doing the listing, but it's not yet happened. Nobody interested. Okay, and no social Enterprises so far. These are all ngos, right? So, there are several in the pipeline uh who have expressed interest. Uh, and uh so far actually, we've been focusing on the not-for-profit side. Okay, not really uh tackling those yet, but yeah, that would be the logic to the next step. Got it.
Um, human, how is SSC different from the CSR exchange of the company's corporate Ministry? That's the one that got launched on June 7th last year. They took saman and read. Yes, exactly. Um, so two or three things. Okay. Uh, one is that, and I'll be very honest, I've not really looked at the CSR Exchange in video. But one is obviously the most obvious answer to that question is that CSR exchange focuses on CSR. The social Stock Exchange as of now actually doesn't focus on CSR at all, but as an NCS response also get allowed on the csre on the social stock if she it will include all kinds of fundrais, right? That's one. Second is that the CSR exchange is usually a one-to-one um relationship, right? So, one project, one donor. Uh, whereas the social Stock Exchange is meant to be one to many, one project, many donor. It can also be one to one, but it it should be one is too many also, right? And the third is that um the uh from a fundraising perspective uh I guess it's a duplication of the first one, but it allows the social Stock Exchange allows anybody to contribute. Uh, and equally importantly, the fund flow is through the stock exchange, right? The CSR exchange MCA Siesta exchange to that extent is more of an information, right? Totally right. There's no fund flow happening. The fund flow happens outside the offline, correct? Right. Whereas here everything is integrated in one place. So, you show an interest, you're given the money, you get the units credited to your demand account, you know, all of that happens, right?
Um, so let's see, zp instrument has to be subscribed within what timeline? A month? So, um the uh so uh there is a period what is called usually called in the stock exchange balances issue open period. Open period is essentially when a company's the stock exchange says you can start putting in money into this particular issue and it says stop, right? For a IPO kind of Activity three to five days uh getting more and more to three days and five days. So, whereas for a um for other kinds of issues like dead issues, it can be after two weeks. Uh, in case of social stock exchange for zczp, we have recommended that it be up to three weeks. Um, and within possible extension of another three weeks. Uh, Sebi has not yet expected that recommendation. But again, I would like to reiterate what I mentioned towards the beginning of this. Get your fundraising done before you come and get it listed, right? You cannot even into three weeks. I doubt if any of your project is fully funded in three weeks, right? It will be very lucky or you're doing a project on behalf of a of a donor and the donor said I'll give you money, you do this for me, right? Any open project where you're looking for donors, I doubt whether you'll be able to close it in three weeks. So, it's important that you line up your funders before you come to the stock exchange, at least most of it, 80, 90.
So, there was a lot of questions around that actually. So, if the fundraising activity has to be done before a non-profit is listed on the stock exchange, then what is the role of the stock exchange? And you know, if there are no tax incentives or any incentives per se are being offered to the investors and donors, then why would they go via the stock exchange? They would directly approach the organization and fund. Sure, I think, but they should, I mean, that there's no compulsion to come via the special Stock Exchange. The social Stock Exchange does three things. Um, as I mentioned on the slide, one, it allows you, it increases your reach dramatically, right? So, you can actually tap into New Pools of funders, which if you had to do it offline, imagine having Resource Partners in every state in this country, like imagine the expense involved in just building that relationship. Uh, second is that uh then you gain uh National visibility uh you gain you can't get a platform where you can showcase your impact through the nation, right? Um, third is that all of this you can do at a very minimal cost, right? Your registration charge is 5000 rupees, your listing charges 25 to 30,000 rupees uh at a very minimal cost. And the third is that you actually can use the social audit function to even for your other donors to show them that your meeting standards that have been set or the Social Development sector by this country. So, there are, if you have an existing pipeline or donors uh and you're happy with them, there is no reason for you to come on to the social studies. If you're looking for new Avenue group funding, if you're looking for a platform that will allow you to showcase the impact you're creating and do all of that at a very minimal cost, then it makes it. Thanks, thanks anyone.
Um, do these ngos need to upload the
Donor details are in the form 10 BD.
No, the stock exchange doesn't have any such requirements, but that's, I think, more of a tax requirement, right?
Yeah, yeah, so none of the sorry. Just to be clear, we are not replacing any of the existing compliances that, and uh, in terms of the zero coupon zero principle instrument, if only 40% of say, basically lesser than 75% of the total, uh, you know, amount is raised, then can uh, can the non-profit start the project with whatever is raised, or how does it work?
Complicated question for instant one. So, this the theoretical, the straightforward answer to your question is no. Okay, uh, you have said that you want one crore, right, to start the project. Uh, the assumption is that you have to have at least 75 lakhs, otherwise you'll not be able to start the project. Okay, uh, and maybe that 75 number will change over time as they get feedback. Maybe it'll be some 85, maybe it'll become 65, whatever, right? About the current assumption is you need at least three quarters of the punch to start the project.
Uh, however, uh, what happens uh, with the stock exchanges, that over subscription is possible, right? So, you can actually do it the other way around. I'm not suggesting you do this, but if you anticipate that you'll get lesser fundles, but let's say you are anticipate you'll get 40 only and you can start the project with 40 because it's equally importantly that the project can be started with 40, which itself I find a little surprising, but let's assume that you can start the project with 40 of the funds, then my suggestion would be that you list at 50 of the project cost, right?
So that uh, 40 will give you 80 investors online and you allow the the issue to get oversubscribed, which means more investors can suggest. So, let's say if in the project cost was 20 crores, you came on the stock exchange with 10 crores, but you allowed over subscription, which means that even you cannot go up to 20 crores, right, when you're covered from both sides. They start the project with 40 points, but you can also take in all the way up to 20 close.
Yeah, thanks a month human. Could you go back to your slide on which has that flow chart? So, there are some questions around svf and Sif, so if you could just elaborate on that. Sure, you know that's like a whole topic in itself.
Um, so I think as well as we have in the assigned for the easy ones. Okay, so uh, think think of a mutual fund, right? What is a mutual fund? A mutual fund is a pool of money where you and I put in as the investor, the subscribers to the mutual funding. We put in money into this pool and there is a fund manager, right, who is taking this money and they have the strategy to which they invest that money. So, it could be a small Cap Fund, it could be a technology fund. So, depending on their strategy, they're choosing companies and putting money into those companies on your behalf and what you get in return are what are called units of the fund, right? So, let's say the fund has a face value of 10 rupees per unit and you put in one lakh rupees, then you will get 10,000 units in the front, right?
Now as the mutual fund grows power comes down, the value of the one lakh my rupees you put in it goes up or goes down. Okay, and at the end you can either sell the mutual fund or some mutual funds of what are called closed ended funds, at some point they will mature or terminate and you'll get back the value of your 1 lakh rupees when it terminates, right?
The social impact or social Venture fund, which actually is synonymous, are versions of that structure, that mutual fund structure. So, just like in a mutual fund you will, so when you subscribe to your mutual fund, there is actually an offer document. It will give what are the objective, what are the risks, what are the expense ratios, but in the past performance of the fund manager, etc. right? So, a social Venture fund, think of it like a simplified version of a mutual fund, right? Just like in a mutual fund, people can put in money into this pool, right, and just like in a mutual fund, there is a offer document which specifies what is going to happen with that money.
Okay, so we are going to use that money to invest into certain sectors, right? So, we will invest that money into education related programs that are happening in the Northeast. Okay, where it gets a little trickier is that a social impact fund or a social Venture fund can either make investments or make donations. In fact, that's one of the changes that we had asked. Therefore, not only can that's why it's called a social impact fund, so change the name from a social Venture fund to a social impact point, you can either make any make investments into for-profit companies that are working in education in the Northeast or you can make donations to nprs that are working in educational depending on what you've declared your object to be, if you off the document or you can do both.
Okay.
Um, so therefore it's uh, and it'll it usually reserves what a closed ended or a with a maturity, right, and at the end if you if the fund had an objective of making Investments and giving you back you back a financial return, you will get back whatever your money is worth at the end. If the objective of the fund was to make donations, then obviously you will not get any money back. Uh, you can also have a hybrid fund which does both, which says I will do Investments where required, I'll make donations where required, where in which case you will at the end you will get whatever part of your money that got invested. So, let's say you put in one lakh rupees, 50,000 got invested, 50,000 got given away information. If you're 50,000 rupees that you had put in 10 years ago is today worth five lakh rupees, you'll get back the five lakh rupees and the 50,000 that was supposed to go into donation border donation.
Okay.
Now, uh, so that's broadly the concept of a social venture or social impact point. The interesting thing is that because you now have the capacity of this fund to give donations, a group of NGOs can come together and create a social impact, right? So, let's say you guys are all working on uh, Village Development. Yeah, oh yeah, sure, right, any any com common, right? You have you have adopted ten Villages and somebody is working on water, somebody's working in education, somebody's working on health. You guys can all come together and for that blog for that District or whatever that 10 Villages are called, together you can flow to a social impact fund, right? Raise common funds and then your offer document will say so much money will go into this part, so much money, etc. Then you have a social auditor there to validate what's right. So, that's the social impact.
Thanks. I hope that answers um uh, some of those questions related to svf and sis.
Um, one question here is are you allowed to donate to a non-profit's corpus via the SSC?
So, uh, yeah uh, so as of now there are no restrictions. Um, the uh, the NGO can come with a zc zp with the with the objective of donation to the corpus or it can come with an objective of 50 whatever, you know, it can come with an objective. It says half the money I'm gonna go to my couple's have the money else like this as of now they're noticed it. Okay, and uh, since we're on this slide a month, the mutual fund funding structure is also an option for the NGOs, right?
So, I think so technically a mutual fund structure is a for-profit structure, which is why the social impact fund structure was created. In the sense you already have a funding structure for NGOs, which is live with Quantum mutual fund, but that is specifically for NGOs. I thought that you know, when I was reading the technical groups report, I thought that the mutual fund funding structure is something that was being discussed for the npos. You and I talk about that because I'd like to know more about this fund that you're talking about, maybe offline. Sure, definitely.
Um, in fact we've covered. Okay, this is uh, interesting. So, to what extent uh, can investors be involved in the operations of the organizations they are supporting? But I don't think that's a stock exchange question, right? Yeah, and I don't think they can be involved, right? One, I mean think of it as an investor in any company for that. Yeah.
It's a then do you do you do you have any donor that's involved in the operation of your project?
Um, that we don't change. We have not changed anything on that.
Okay.
Um, do these organizations need to engage RTA Merchant Bankers depositories for maintenance of the investors data and units of investment?
Yes, and uh, well so there is a dmat account, like if you go to this let's see that live, right? If you should only be in a demand form. So, therefore, obviously there's a depository involved.
Um, but an RTA which is meant for record keeping of customer data, given that the minimum subscription amount is 2 lakhs, I would assume that on an average maybe you'll get 20 30 donors to an issue. You may not need an RTA. Uh, RTAs typically employed when you have thousands of investors and you need to keep track of their records and make sure they're getting statements into them, etc. etc. Uh, but yeah, sure, I mean if you want to engage in RTA, but I don't think you anticipated that people will engage but demand we might. So, depository definitely.
Thanks so much.
Um, do all social Auditors mandatory have to be Chartered Accountants?
Not at all. You have to pass that certification. That certification doesn't say anything about chartered.
Okay.
Um, yeah, I think we're almost done. There are a lot of questions like I was saying earlier about the role of the SSC, but that we've already addressed. Timelines, commercials, I mean the fee structure everything has been power.
Yeah, okay. Uh, let's take this as the last question. In case there is a dividend, so in case the value of the instrument increases uh, do the non-profits have to credit the funds to the investors?
Right.
Not sure how with the value increase. Are you talking about? I don't know maybe I think I think uh, they're referring to the Sif svf for you know, structure where where we took the example of the mutual fund because in case the nav increases, then does the value that the investor receives at the end of the project increase?
So, just so that I'm clear, I'm answering this question. First is that a zero coupon zero principle or any of the instruments that are in jio can raise money through are all donations or grants and therefore there is no question of the value going up at any point or any money getting returned. Um, unlikely uh, however some on the for-profit side or maybe in the hybrid structure where some of the money is going to a not-for-profit and some of the money is going to a for-profit, not for profit do you want to raise a bond issue where you want to pay interest maybe for your Corpus uh, then of course whatever is the current value of the money and maturity you will pay and whatever you've mentioned in your offer document saying you'll pay dividend or you pay interest or whatever you'll have to comply with whatever you have mentioned as a part of the issued of Oxford.
Thanks everyone. Thanks for answering that last question.
Um, okay, sorry there's one more question important. We have sometimes I'm just going to take this as the last question. Uh, can an NGO use the grant for capital investment or to purchase Machinery? So, basically for Capital assets.
Yeah, so basically the non-profit is called okay.
All right. Yes, thanks. Thanks Simon for answering that last question with this. I'd like to conclude the webinar and in case we haven't been able to answer your questions, kindly send us an email on info at uh, and we'll answer them in our upcoming blogs on the SSC.
Yeah, yeah.
So, this is the URL for the portal Benny if you can also put this up in your blog. Sure, definitely. And uh, humans on behalf of February NGO, I would like to express my sincere gratitude for you know, taking the time to speak with us today. Um, your experience expertise and insights were you know, incredibly valuable. I'm so glad we got to do like a 45 minute long you know, q a. I think we've answered most of the questions um, and we hope to have you uh, you know, with us very soon.
Yeah, absolutely no, it was a pleasure and an honor and and I loved some of the questions that got asked and I also learned in each of these sessions just uh, just as I hope you guys are returning and I will be back whenever you want to. I love taking these sessions. Thank you. So, also thank you to all the attendees for you know, being such a wonderful audience. Uh, we will be posting the video of this webinar on our YouTube channel. So, you know uh, feel free to share it in your network. Hopefully this should be done by end of this week.
Thanks. Thanks everyone. Have a great evening. Bye. Thank you.
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