For Profit Social Enterprise
Also written FPSE · For Profit Social Enterprise (FPSE)
A company or body corporate operating for profit (not a Section 8 company) that qualifies as a social enterprise, including the 67% test, and lists securities with an identifier marking it as such.
In plain language
A For Profit Social Enterprise (FPSE) is a business that makes and keeps profits, can pay its shareholders, and still exists mainly to create social impact.
The workbook's definition, from Regulation 292A(c) of the SEBI ICDR Regulations: "a company or a body corporate operating for profit, which is a social enterprise for the purpose of ICDR Regulations and does not include a company incorporated under Section 8 of the Companies Act 2013."
What separates an FPSE from an ordinary company is not good intentions. It must pass the same primacy of social intent tests as an NPO — an eligible activity and an underserved target population — plus a test only FPSEs face: at least 67% of its activities must serve the target population.
What separates it from an NPO is capital. An FPSE can raise equity, a residual claim on profits, because it has profits to claim. An NPO cannot, with the partial exception of a Section 8 company.
How it works
Where FPSE securities list (Chapter 2, 2.3.2):
- Debt securities — main board
- Equity securities — main board, SME platform (NSE Emerge / BSE SME) or the Innovators Growth Platform (IGP)
SEBI requires these securities to be listed and traded under the applicable segment with an identifier stating that the scrip is that of a For Profit Social Enterprise. That keeps them distinct from conventional commercial enterprises.
Financing instruments: equity on the main board, SME platform or IGP; equity issued to an Alternative Investment Fund including a Social Impact Fund; debt securities; anything else SEBI specifies.
Double compliance. An FPSE meets the ordinary eligibility and disclosure rules of its segment — Regulation 91B of LODR points it to the main board, SME or IGP disclosure regime. On top of that it makes social impact disclosures, including the Annual Impact Report under Regulation 91E, and discloses the differentiators in its offer document.
The predominance test — at least 67% of activities qualifying — is met through any one or more of:
| Measure | Threshold |
|---|---|
| Revenue from eligible activities to the target population | ≥ 67% of the preceding 3-year average revenue |
| Expenditure on eligible activities to the target population | ≥ 67% of the preceding 3-year average expenditure |
| Target-population customers or beneficiaries | ≥ 67% of the preceding 3-year average customer base or beneficiaries |
Chapter 3 adds that an FPE shall not seek registration or listing unless it is registered as a company under the Companies Act, 2013 (or the erstwhile 1956 Act).
A worked example
Illustrative company and figures.
KisanMitra Agritech Ltd, Indore, sells soil-testing kits and drip-irrigation advisory. It wants to raise ₹25 crore of equity on the SME platform.
Step 1 — primacy. It works on livelihoods for small and marginal farmers, an eligible activity, in districts lagging on development priorities, a valid target population.
Step 2 — predominance. Revenue for the last three years:
| Year | Total revenue | From small and marginal farmers |
|---|---|---|
| FY1 | ₹8.0 crore | ₹4.4 crore |
| FY2 | ₹10.0 crore | ₹6.9 crore |
| FY3 | ₹12.0 crore | ₹9.3 crore |
| 3-year average | ₹10.0 crore | ₹6.87 crore |
6.87 ÷ 10.0 = 68.7% — it passes the revenue test, even though FY1 alone was only 55%. The test uses the 3-year average, not each year.
Step 3 — listing. It lists on the SME platform. Its scrip carries the FPSE identifier. It follows the SME disclosure regime, discloses differentiators such as target segment and social impact, and files an Annual Impact Report every year.
Had FY3 farmer revenue been ₹8.0 crore, the average would be ₹6.43 crore — 64.3%. It would then need to pass on expenditure or on customer base instead, or not qualify at all.
Why NISM asks about it
Chapter 1 gives the ICDR definition and the 67% criteria. Chapter 2 (2.3.2) covers the funding structures, listing segments and identifier, and Chapter 3 the eligibility conditions and differentiators. Chapter 9 (9.2.1) points FPE disclosures to the applicable segment. Expect a question on which boards an FPSE can list equity on (three) and debt on (one), on the Section 8 exclusion, and a numerical on the 3-year-average predominance test.
Common exam traps
- Debt lists only on the main board. Equity has three options: main board, SME platform, IGP.
- A Section 8 company is never an FPSE.
- The 67% test uses the 3-year average, and passing any one of revenue, expenditure or customer base is enough.
- The workbook contradicts itself on legal form. Chapter 1 (1.3.2) says FPSEs "can be registered under the Companies Act, 2013 as a Sole Proprietorship, Limited Liability Partnership, Partnership, Private Limited or Public Limited company". Chapter 2 (2.2.2) includes sole proprietorships, partnerships, HUFs and LLPs among for-profit enterprises. But the ICDR definition says "a company or a body corporate", and Chapter 3 (3.1.2) says an FPE shall not seek registration or listing unless it is registered as a company under the Companies Act. For the SSE, answer with the regulation: a company.
- FPE vs FPSE. The workbook uses "For Profit Enterprise" for the broad universe of for-profit businesses and "For Profit Social Enterprise" for one that qualifies. Only the latter gets the identifier.
- An FPSE does not escape normal listing rules. Social-enterprise status adds obligations; it removes none.
Check yourself
1.To be identified as a social enterprise, a Not for Profit Organisation or a For Profit Social Enterprise shall establish primacy of _____.
- a)social intent
- b)social outcome
- c)social impact
- d)social activity
Show the answer
Answer: (a) social intent
Regulation 292E of the SEBI ICDR Regulations requires an NPO or FPSE to establish primacy of social intent.
"Social impact" is a tempting distractor because the workbook also uses the phrase "primacy of social intent/impact" as a heading — but the regulation's wording is social intent. Outcomes and activities are parts of the results chain, not the eligibility test.
2.A For Profit Social Enterprise had total revenue of ₹4 crore, ₹5 crore and ₹6 crore in the three immediately preceding years, and eligible revenue from the target population of ₹2.4 crore, ₹3.5 crore and ₹4.2 crore. On the revenue route, it:
- a)Fails, because year 1 was only 60%
- b)Passes, because the 3-year average ratio is about 67.3%
- c)Passes only if year 3 alone exceeds 67%
- d)Cannot be judged without all three routes
Show the answer
Answer: (b) Passes, because the 3-year average ratio is about 67.3%
Average total revenue = 15 ÷ 3 = ₹5 crore. Average eligible revenue = 10.1 ÷ 3 ≈ ₹3.367 crore. Ratio ≈ 67.3%, which meets the 67% threshold.
Option A judges one year only. Option C also uses one year. Option D is wrong because the rule is satisfied through one or more routes — one is enough.
3.A for-profit clinic chain's 3-year average revenue from target-population patients is 52% of total, but its 3-year average expenditure on serving them is 70% of total expenditure. Regarding the 67% requirement:
- a)It fails, because revenue is the primary route
- b)It meets the requirement through the expenditure route
- c)It must pass both revenue and expenditure routes
- d)The 67% test does not apply to for-profit entities
Show the answer
Answer: (b) It meets the requirement through the expenditure route
The 67% requirement may be established through one or more of revenue, expenditure or customer/beneficiary routes. Expenditure at 70% clears the bar.
There is no "primary" route (A), no requirement to pass several (C), and the 67% test is specifically for the For Profit Social Enterprise (D is the reverse of the truth).
Where this is taught
Free preparation for NISM Series XXIIIRelated terms
- Social Stock ExchangeA separate segment of a recognised stock exchange on which Not for Profit Organisations and For Profit Social Enterprises register and list securities to raise money for social impact, under SEBI rules.
- Social Impact FundA Category I AIF investing primarily in social ventures and social enterprises, which satisfies the social performance norms laid down by the fund and may both take and give grants.
- Not for Profit OrganisationA social enterprise that is a charitable trust, charitable society or Section 8 company (or other entity SEBI specifies); it can register on an SSE and raise money mainly through ZCZP instruments.
- Predominance testThe FPSE-only eligibility test: at least 67% of activities must serve the target population, shown by revenue, expenditure or customer base averaged over the preceding 3 years.
- Primacy of social intentThe ICDR condition every social enterprise must establish before using an SSE: an eligible social activity, an underserved target population and, for an FPSE, at least 67% of activities qualifying.
- Social enterpriseAn organisation, non-profit or for-profit, that exists primarily to create social impact; under SEBI ICDR it is either an NPO or a For Profit Social Enterprise that has established primacy of social intent.