A Follow-on Public Offer (FPO) is a tool used by listed companies to raise additional capital by issuing more shares to the public. Unlike an Initial Public Offering (IPO), which is a company’s first equity offer, an FPO is carried out after the company is already listed on a stock exchange. FPOs provide investors with the opportunity to invest further in companies they are familiar with, based on existing financial and market performance.
A Follow-on Public Offer is when a publicly listed company issues new shares to investors to raise capital. It is different from an IPO, which is the first time a company offers its shares to the public.
FPOs are typically used to raise funds for business expansion, working capital, debt repayment, or acquisitions. Because the company is already listed, investors can study its past performance, current shareholding, and market sentiment before applying.
In India, FPOs are governed by the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. These guidelines ensure proper disclosure, fair pricing, and investor protection during the process.
The process begins when the company files a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). After SEBI reviews and approves the document, the company announces the issue date, price band, and other offer details.
Here is a step-by-step overview of how an FPO works:
The company files a DRHP with SEBI
SEBI reviews the document and gives its approval
The company finalises the price band and issue period
Investors place bids during the offer window
After the bidding period, shares are allotted and credited to demat accounts
Before the issue closes, the company submits the Red Herring Prospectus (RHP) with updated financials to the Registrar of Companies. This document provides final information for investors to review.
There are two main types of Follow-on Public Offers:
1. Dilutive FPO
In a dilutive FPO, the company issues fresh shares. This increases the total number of shares in the market and raises new capital. However, it also reduces the earnings per share and dilutes existing shareholders’ ownership.
2. Non-dilutive FPO
In a non-dilutive FPO, existing shareholders such as promoters or institutional investors sell their personal shares to the public. This does not result in fresh capital for the company but increases share liquidity and public participation.
Understanding the types of FPO is essential, as it impacts the company’s capital structure and investor decisions.
The process to apply for an FPO is similar to that of an IPO. Here are the steps:
Choose a broker: Ensure you have a demat and trading account with a SEBI-registered broker.
Log in to your account: Access the IPO/FPO section on your broker’s platform.
Select the FPO: Choose the company offering the FPO and view its prospectus and price band.
Place your bid: Enter the number of shares and the price you are willing to pay within the band.
Block funds: Use ASBA (Applications Supported by Blocked Amount), UPI, or net banking to block funds.
Wait for allotment: Once the FPO closes, shares are allotted based on demand and final pricing.
Investor categories include Retail Individual Investors (RIIs), Non-Institutional Investors (NIIs), and Qualified Institutional Buyers (QIBs). SEBI guidelines allocate specific portions of the issue to each category.
Over the years, several major companies in India have launched (or tried to) successful FPOs:
Yes Bank (2020)
Amount Raised: ₹15,000 crore
Purpose: Capital infusion post-restructuring
Highlight: One of the largest FPOs in Indian banking history
IRFC – Indian Railway Finance Corporation (2021)
Amount Raised: ₹4,633 crore
Purpose: Strengthening capital base for railway infrastructure financing
Note: Though technically an IPO, it was followed by additional fundraising rounds akin to FPOs
Vodafone Idea (2024)
Amount Raised: ₹18,000 crore
Purpose: Debt reduction and network expansion
Highlight: Crucial for telecom sector revival
Adani Enterprises (2023)
Amount Raised: ₹20,000 crore (planned, later withdrawn)
Purpose: Funding green energy and airport businesses
Highlight: High-profile FPO that was called off due to market volatility
REC Ltd. (2007)
Amount Raised: ₹1,680 crore
Purpose: Capital for power sector financing
Legacy: One of the earliest successful FPOs in the PSU space
Each FPO example highlights how companies use follow-on public offers to meet financial goals or regulatory requirements.
There are various reasons why a company might opt for a Follow-on Public Offer:
Raising capital: Companies use FPOs to fund expansion, research and development, or acquisitions.
Reducing debt: The raised capital can be used to pay off loans and improve the balance sheet.
Improving liquidity: By increasing the number of shares in the market, trading activity rises.
Regulatory compliance: Some firms may need to increase public shareholding to meet SEBI’s minimum public float norms.
Strengthening credibility: A well-received FPO reflects investor confidence and may support long-term stock performance.
Unlike loans or bonds, FPOs do not impose repayment obligations, making them a more flexible funding option.
Follow-on public offers offer a range of benefits to both companies and investors:
For companies:
Access to existing investors: Companies can raise funds more easily from a familiar investor base.
Reduced financial stress: Less dependency on interest-bearing loans improves overall financial health.
Improved public shareholding: FPOs help increase market participation and trading volume.
For investors:
Discounted prices: FPOs are often priced below the market value, offering an entry point for cost-conscious buyers.
More data for decision-making: Investors can study financials, stock performance, and industry trends before applying.
Lower risk compared to IPOs: With historical performance data, FPOs are generally perceived to carry less risk than IPOs.
These advantages make FPOs an appealing option for both short-term traders and long-term investors.
A Follow-on Public Offer is an effective way for listed companies to raise capital after their Initial Public Offering. Whether used for expansion, debt repayment, or regulatory compliance, FPOs offer flexibility and transparency to companies. For investors, FPOs represent a chance to invest in familiar businesses, often at a discount to market price.
An FPO is when a company already listed on the stock exchange offers more shares to the public. It's like a second round of fundraising after the IPO.
An IPO is a company’s first offer of shares to the public, while an FPO is issued after the company is already listed. FPOs are often seen as less risky due to available market performance data.
Yes, retail investors can apply for FPOs through their trading or demat accounts using ASBA, UPI, or net banking during the bidding period.
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