Unnati ZCZP Bonds

Why in news?

Social stock exchange sees 1^st listing with Unnati Foundation 1st entity in December 2023.

A separate segment of the existing Stock Exchange that can help social enterprise’s to raise funds from public through the stock exchange mechanism.
It will act as a medium between Social Enterprises and fund providers.
SEBI had permitted social enterprises registered on these exchanges to raise funds through zero coupon zero principal bonds (ZCZP) in 2022.

ZCZP – Zero Coupon Zero Principle are financial instrument that are included in the list of securities under Securities Contracts (Regulation) Act, 1956.
They do not give any interest, and investors will not get any money back on the maturity of the bond.

Debt Security (Bond)	ZCZP instrument
It is like a loan.	It is not a loan but a donation.
It makes interest payments and the principal when the bond matures.	It doesn’t makes interest payments and the principal on maturity.

Eligibility criteria for issuance – Only by NPO that are registered with Social Stock Exchange (SSE).
ZCZP can only be issued for a specific project with specific tenure.
The project must fall under the list of eligible activities under SEBI (ICDR) Regulations, 2018.
Issuance - They are issued through private placement or public issuance.
- Minimum issue size – Rs. 50 Lakh (originally Rs.1 crore)
- Minimum application size – Rs.10, 000 (originally Rs.2 lakh)
- Minimum subscription required - 75% of the funds proposed
Trade – They shall be issued in dematerialized form only.
They are not available for trading in the secondary market, but they can be transferred to legal heirs.
Maturity – It will mature when the project for which they are raised terminate, or 12 months from the date of allotment.

Issuer – SGBS Unnati Foundation, an NPO formed in November 2011.
- Unnati – Vocational training program for underprivileged and unemployed youth in the age group of 18 to 25 years.
- UNXT – 1 month training programme for final year students at government colleges.
- Sugam – A grassroot entrepreneurship accelerator helping non-urban youth to develop scalable businesses.
Need of funds –To train up to 10,000 graduating youth from government colleges in Uttar Pradesh, Madhya Pradesh, Karnataka, Andhra Pradesh and Tamil Nadu to help them secure employment.
- The youth will be trained for 165 hours (classroom learning and self-learning content on a mobile application).
- Cost per head for training would be ₹2,000 per youth.
Specifics – It is a public issue with face value of ₹1 each of ₹2 crore that will be listed on the NSE.

Unnati ZCZP bond is the 1^st such listing on SSE segment in India.

This listing will be displayed along with other such future bond issuances on the social stock exchange page on the NSE website.
It raised Rs 1.8 crore from 4 investors and include brokerage firm Zerodha and National Bank for Agriculture and Rural Development (NABARD).

There are obviously no pecuniary benefits from these instruments as it is akin to a donation made to a charity.
Greater transparency - The end use of the funds can also be monitored since the enterprises have to disclose details of money utilised and balance amount remaining to exchanges.
Visibility to the social enterprises - It helps them to approach the public at regular intervals if they can show good outcomes.

Quick Facts

Social enterprises – Enterprise that are engaging in the activity of creating positive social impact and that meets primacy of their social intent.
- Not-for-profit organization
- For profit social enterprise

References