Social Stock Exchange: formula sheet

Key formulas

Nature of the SSE

SSE = a separate segment of a recognised stock exchange (not a new exchange)

Set up by an exchange with SEBI approval. Always say 'segment' in your answer.

Who can participate

Eligible participants = Non-profit organisations (NPOs) + For-profit social enterprises (FPEs)

Both must be identified as social enterprises, with social impact as their primary goal, on eligible activities.

Legal basis

SEBI (ICDR) Regulations, 2018 – chapter on Social Stock Exchange

Also supported by SEBI circulars and exchange-level rules. Do not quote regulation numbers unless sure.

Core pillars

Identification → Registration → Fundraising → Disclosure and impact reporting → Social audit

A handy sequence to structure any descriptive answer.

Eligibility test

Eligible social enterprise = (NPO or FPE) + primary focus on eligible activities + not in the ineligible list

Apply the three parts in this order and state a conclusion on each.

Two types of social enterprise

Social enterprise = NPO (registered charitable trust / society / Section 8 company, registered with or identified by the SSE) OR for-profit social enterprise (FPE)

The NPO does not distribute surplus. The FPE may, but must prove social intent.

FPE social-intent test

FPE: primary goal is social impact + serves underserved groups or regions + the prescribed threshold of revenue, expenditure or customer base is linked to eligible activities and target groups

Quote the exact threshold from the SEBI ICDR Regulations as currently in force. The test is about the pattern of the business, not a one-off project.

Ineligible entities

Corporate foundations; political or religious organisations or activities; professional or trade associations; infrastructure companies; housing companies (except affordable housing)

Check this list before you conclude that an entity qualifies.

ZCZP bond

Coupon = 0; Principal repayment = 0

Issued only by an NPO registered on the SSE. It can be placed privately. A public issue is possible only if the NPO also meets the ICDR eligibility conditions for a public issue. The investor gets no financial return. The return is social impact. ZCZP is one of the NPO's routes, not the only one.

Who raises what

NPO: ZCZP bonds on the SSE; donations (through the SSE or outside it); funds from social impact funds | FPE: equity, debt; social venture/impact funds may invest

Use this split to start any answer. An NPO cannot issue equity shares or mutual fund units.

Entry condition

Entity not in an excluded category + registration/identification as social enterprise on SSE → then SSE fundraising (ZCZP issue, listing) is possible

No registration, no SSE fundraising. Registration alone does not make a public issue possible, because the ICDR eligibility conditions for a public issue must also be met. An NPO can still receive ordinary donations without SSE registration.

Excluded entities

Not eligible as a social enterprise: corporate foundations; political or religious organisations; professional or trade associations; infrastructure and housing companies (except affordable housing); any entity not eligible under the ICDR

Check this before the activity or 67% test. A company with a social activity can still be ineligible if it falls in one of these categories.

FPE eligibility test

Primary social intent: meet at least one of the criteria specified by SEBI. One criterion: at least 67% of revenue, expenditure or customer base attributable to eligible activities for underserved or less privileged populations or regions

The 67% criterion is only one of the alternative routes. The FPE may meet another criterion in SEBI's list instead. It must also carry on an eligible activity from SEBI's list, not be an excluded entity, and meet the disclosure and impact-reporting conditions.

Public issue rule

Public issue of ZCZP: NPO must meet the ICDR eligibility conditions for a public issue + minimum issue size + minimum application size

SEBI has revised these amounts and conditions. Quote the figures from your latest study material and say they are as per ICDR. Do not say registration on the SSE alone is enough.

Post-listing duty

Annual impact report + social audit by a social auditor

Raising funds and reporting impact go together. Mention both.

Disclosure chain on the SSE

Social intent → registration/listing → fund-use reporting → annual impact report → verification → continuing disclosure

Use this as a skeleton for any descriptive answer.

Annual impact report coverage

Strategic intent + target group + activities + outputs + outcomes + fund use

The report must show results, not only spending.

Social audit trigger

Funds raised through SSE in a year ≥ threshold → social audit by a registered social audit firm

SEBI's framework sets the threshold at ₹50 lakh; confirm the current figure before the exam.

Output vs outcome

Output = what was delivered; Outcome = change in beneficiaries' lives

Impact assessment focuses on outcome.

Quick revision

• The SSE is a separate segment of a recognised stock exchange, not a separate exchange.
• SEBI regulates the SSE framework.
• Two types of entity can take part: not-for-profit organisations and for-profit social enterprises.
• Eligibility depends on social intent, the kind of activity and the target population served.
• Certain bodies, such as political and religious organisations, are not eligible.
• A not-for-profit organisation must register with the SSE before it can raise funds there.
• Not-for-profit organisations can raise funds through instruments such as zero coupon zero principal bonds and through donations.
• For-profit social enterprises can use equity and debt routes available on the main platform, subject to the conditions for them.
• Registered entities must make periodic disclosures, including an annual impact report.
• Social impact is verified by social auditors who follow the prescribed social audit standards.
• Intermediaries and the exchange support registration, listing and monitoring, and SEBI supervises them.
• In answers, always give provision, analysis of facts and a conclusion.

Common mistakes

• Calling the SSE a separate stock exchange Fix: Write that it is a separate segment of an existing recognised stock exchange, such as BSE or NSE.
• Saying only NGOs can use the SSE Fix: State that both non-profit organisations and eligible for-profit social enterprises can participate.
• Treating any charity as eligible. Fix: Eligibility needs the right entity type and a listed eligible activity, and the entity must not be in the excluded list.
• Saying a for-profit company can never join the SSE. Fix: SEBI allows FPEs that prove primary social intent and focus on eligible activities and target groups.
• Saying a ZCZP bond pays interest or returns principal. Fix: Remember zero coupon and zero principal. The investor gets no money back and no interest. The benefit is the impact the NPO achieves.
• Letting an NPO issue equity shares or mutual fund units. Fix: An NPO has no shareholders. Give it ZCZP bonds on the SSE, donations or social impact fund support. Equity is for FPEs. Funds can reach an NPO through social impact funds or mutual fund scheme donations, but the NPO does not issue units.
• Treating the annual impact report as a financial statement. Fix: Say it reports social results: target group, activities, outputs and outcomes. It sits beside the financial statements.
• Confusing social audit with social impact assessment. Fix: Audit verifies reliability and compliance of reported data. Impact assessment measures the change achieved.

Exam tips

• Always use the phrase 'segment of a recognised stock exchange' in your first two lines.
• Structure long answers as background, objectives, participants, process and safeguards. Examiners reward a visible structure.
• In case-based questions, test eligibility first, then discuss the fundraising and reporting steps.
• Keep regulation numbers and dates out of your answer unless you are certain. Name the Act or regulation instead.
• Link the concept to the later topics, such as eligible activities, fundraising and social auditors, in one line if marks allow.
• Write the entity type, the activity and the exclusion check as three separate points. It makes the structure easy to mark.
• Always explain the NPO and FPE difference in one line. Examiners often ask for it directly.
• If asked to list eligible activities, give the themes you are sure of with a short example each, rather than guessing at exact wording.