Sebi mulls listing of cooperatives

The Securities and Exchange Board of India (Sebi) was gathering legal opinion on the listing of cooperatives, sources said.

Any group of individuals can form a cooperative society to act jointly for common benefit. Shares of cooperative societies in India are not offered to the public.

Listing of cooperatives is in practice in the UK, US and Australia. These listed cooperatives are in retail, agriculture and agri-business. The case for listing cooperatives in India made on the performance of dairy cooperatives like Amul and Mother Dairy, which had revenues of $3.5 billion and $1.1 billion, respectively, in 2014-15.

Unlike start-ups and municipal bonds, however, listing of cooperative societies is not easy. A company wanting its securities listed on a stock exchange can apply but cooperatives are incorporated under the Cooperative Societies Act, which is proving to be a hurdle.

"The regulator is consulting legal experts for a way around it," said a source. Sebi is also discussing the issue with the ministry. Listing of cooperatives will require amendments to the Securities Contract (Regulations) Rules, the Companies Act, and the Sebi Act.

"The regulator will need to approach the legal department of the ministry making a case for listing these securities," said a source. A query sent to Sebi earlier this week did not elicit a response.

The majority of cooperative societies that have gone public the world over are marketing cooperatives. Developing and manufacturing consumer products require substantial investments in building and maintaining consumer brands. These investments are not only substantial, they are also risky, thus the need for the public equity route.