SEBI's decision to lower ZCZP bond investment opens funding doors for NPOs: Rohit Nayyar

Rohit Nayyar, CFO Wadhwani Foundation, stated that reducing the minimum application size for zero coupon zero principal (ZCZP) bonds from 2 lakhs to 10,000 is a significant move. The CFO said that this adjustment will make the fundraising platform more accessible to a wider range of investors, increasing the chances for Non-Profit Organizations (NPOs) to secure the necessary funding.

" Earlier minimum cap of 2 lakhs restricted access to only high-income individuals, limiting investor participation, the reduction in the minimum application size to 10,000 will enable NPOs to reach a much broader pool of investors and increase the chances of securing the funding required," Nayyar told ETCFO.

For Non-Profit Organizations, ZCZP bonds serve as a unique fundraising tool. When an NPO issues ZCZP bonds, it essentially seeks financial support in the form of donations from investors. Investors purchase these bonds at a discounted rate, and the NPO receives the funds upfront. As the bonds do not involve periodic interest payments, the NPO doesn't have an ongoing obligation to pay interest to the investors.

Few days ago, the Securities and Exchange Board of India (SEBI), the regulatory authority for the Social Stock Exchange, made a notable adjustment by reducing the minimum application size for the public issuance of ZCZP bonds by NPOs on SSE. The minimum application size has been lowered from Rs 2 lakh to a more inclusive Rs 10,000.


SEBI has also reduced the minimum issue size to Rs 50 lakh from Rs 1 crore in case of public issuance of ZCZP.

Commenting on decisions made by SEBI, Nayyar said, "As the country's Social Stock Exchange ecosystem is currently evolving, Non-Profit Organizations (NPOs) require more support than corporates listing on traditional bourses. The recent positive and progressive steps taken by the SEBI Board signal a crucial impetus for fundraising by NPOs, acknowledging the need for strategic guidance in this dynamic landscape."

The CFO highlighted that making Social Stock Exchanges thrive is a challenging and time consuming endeavor. Currently, out of the seven SSEs worldwide, only three, Canada, Singapore, and Jamaica are operational. Success in this domain requires imperative collaboration among various stakeholders, including government, investors, and regulators. The CFO stressed the need for partnerships, collaboration, and co-investment to ensure the sustained success of Social Stock Exchanges.

Nayyar, also stressed that aligning NPOs' social impact assessments with the new format was challenging. The recent amendment, allowing disclosure of past reports with key parameters, is seen as a significant benefit, easing the process and expediting NPOs' listing on the Social Stock Exchange.

The CFO highlighted two other key amendments by SEBI. First, relaxing the 80G certificate requirement expands eligibility for NPOs, especially beneficial for government-established educational institutions. Other , renaming "Social Auditor" to "Social Impact Assessor" reflects a positive shift, addressing NPOs' concerns and enhancing investor confidence.