Mumbai, India: In a landmark decision, the Securities and Exchange Board of India (SEBI) has recently revised its guidelines to significantly ease the fundraising process for small not-for-profit organizations (NPOs) and non-governmental organizations (NGOs). This move, announced on Saturday, marks a major shift in the regulatory landscape, particularly for entities operating within the social sector. Here’s an in-depth look at the key aspects of this development:
Halving of Minimum Fundraising Size
One of the most notable changes is the reduction in the minimum fundraising size for NPOs and NGOs, which has been halved from Rs 1 crore to Rs 50 lakh. This significant reduction is anticipated to simplify the fundraising process for smaller organizations, enabling them to more effectively harness the potential of Social Stock Exchanges (SSEs).
Facilitating Retail Investor Participation
SEBI has also introduced measures to lower the entry barriers for retail investor participation. The minimum application size for public issuance of Zero Coupon Zero Principal Instruments (ZCZP) by NPOs on SSEs has been reduced from ₹2 lakh to a more inclusive ₹10,000. This strategic move is expected to widen the investor base and foster a more inclusive environment for NPO fundraising activities.
Expanding Real Estate Investment Trust Opportunities
In addition to supporting small NGOs, SEBI’s reforms include allowing small and medium real estate investment trusts (SM REITs), with a minimum asset value of Rs 50 crore, to access public markets for fundraising. Previously, this opportunity was limited to entities with an asset value of at least Rs 500 crore, thus opening new avenues for smaller players in the real estate sector.
Commitment to Transparency and Accountability
SEBI’s board has approved a comprehensive regulatory framework for index providers. This initiative is designed to enhance transparency and accountability in the governance and administration of financial benchmarks within the securities market. The move is anticipated to contribute to a more robust and reliable financial ecosystem.
Forward-Looking Approach to Stock Market Settlements
In a visionary step, SEBI aims to transition the Indian stock market to a T+0 settlement cycle by March 2024. This change will enable the buyer of a stock to receive the shares in their demat account on the same day the trade is executed, marking a significant advancement in trading efficiency.
SEBI’s Stance on IPO Market and Delisting Regulations
Despite concerns over the clustering of Initial Public Offerings (IPOs), SEBI has decided against intervening in the primary offer market. The regulator believes that merchant bankers and the market system are adequately equipped to handle multiple IPOs within a short span. Additionally, SEBI chairperson Madhabi Puri Buch has emphasized the need for more comprehensive data before altering rules related to the delisting of companies, ensuring that any regulatory changes are well-informed and considerate of market dynamics.
Conclusion
SEBI’s latest reforms are set to catalyze a new era in the Indian financial landscape, particularly benefiting smaller entities in the non-profit and real estate sectors. By reducing entry barriers and enhancing market efficiency and transparency, these changes are expected to have a profound impact on the financial capabilities of smaller organizations, aligning with broader sustainability goals and promoting socially impactful fundraising practices in India.