What makes a Zero Coupon Zero Principal

Solution

ZCZP instrument will have zero coupon rate and no principal amount shall be payable on maturity. Unlike traditional bonds, ZCZP instruments do not offer any financial return but promises a social return to the funder. They are designed for donors who want their funds to be used for specific social projects with the transparency of a regulated exchange. ·        SEBI allows, Non profit organisations (NPO) to raise funds by issuing ZCZP bonds through social stock exchanges. The conditions related to issuance of ZCZP are: o   ZCZP shall be issued in dematerialized form only. o   ZCZP shall  not  be  transferable  from  the  original  subscriber/  holder  till  the expiry of the tenure of the said instrument. o   The minimum issue size shall be Rs.50 lakh. o   The minimum application size shall be Rs.1000 (reduced from Rs.10,000). o   The minimum subscription required to be achieved shall be 75% of the funds proposed to be raised through issuance of ZCZP Instruments. o   In case of any under subscription, the NPO  shall, in the fund raising document, provide details on the manner of raising balance capital in case of such under subscription between 75% and100%; and possible impact on achieving the social objective(s) in case such under subscription is not arranged: Provided that the funds shall be refunded in case the subscription is less than 75% of the issue size o   The SSE shall maintain the details of the allotment pursuant to issuance of ZCZP by NPO o   The SSE shall specify the additional norms in respect of issue procedure including on agreements with depositories, banks,  etc., ASBA related matters, duration for public issuance, allocation methodology and any other ancillary matter related to issue procedure