As with any investment, due diligence is key to making informed decisions. The Indian stock market contains numerous processes through which companies can raise funds from the public to fund their business activities. IPO or Initial Public Offering is a financial process that allows private companies to raise capital by issuing shares to the general public for the first time. An FPO is a stock market process that allows a publicly traded company to issue additional shares and raise more funds from investors. Unlike an initial public offering, the price of a share of stock in a follow-on offering is market-driven because the company is already public and with existing shares listed on a stock exchange.

Benefits of FPO

Both IPOs and FPOs are vital tools for organisations to elevate the capital they need, but each comes with its own set of issues. The FPO is open for a limited period, during which investors can submit their bids. So, this blog will cover FPO basics, why companies choose them, and what to consider before investing. During the 1980s and 1990s, policy planners realized that a well-developed capital market is essential for sustainable growth in an emerging market economy like India. A package of reforms aimed at enhancing market quality in terms of effectiveness, transparency, and pricing policies was introduced shortly.

As an investor, understanding the types of FPOs and how they differ from listed shares or IPOs can help you make more informed decisions. Whether to invest in FPOs or listed shares depends on your investment goals and risk appetite. A Follow on Public Offer (FPO) is a process where a company that has already gone public offers more shares to the public. A Follow-on-Public Offer (FPO) is a way for companies to raise more money by offering additional shares to the public.

The difference between Follow-on Public Offering (FPO) and an Offer for Sale (OFS) lies in the source of the shares being offered to the public. In an FPO, the company issues and offers additional shares directly to the public, while in an OFS, existing shareholders sell their shares to the public. FPOs are similar to IPOs, but they are only available to companies that have already listed their shares on a BSE or NSE stock exchange. It helps companies raise funds without going through the complete IPO process again.

Should you subscribe to an FPO?

Companies have to file their DRHP (draft red herring prospectus) with SEBI, containing all the FPO details, price band, number of shares, and the fund-raising purpose. Follow-on financing is when a startup that has already raised capital raises additional capital through another round of funding. The company estimates gross proceeds from the sale to be approximately $61.5 million. The proceeds from the sale of additional common stock will be to fund loans made to companies in the industry and for working capital needs. During a non-diluted follow-on offering, shares coming into the market are already existing and the EPS remains unchanged.

Follow-On Offering

• As such, FPOs mean that additional shares are offered to the public by companies that are already listed on exchanges.
• After listing on a stock exchange, companies can actively issue Follow on Public Offerings (FPOs) to raise additional capital from the public.
• As a result, the percentage owned by existing shareholders decreases, which can reduce earnings per share (EPS) and affect the value of their investments.
• Vodafone Idea was reeling under massive Adjusted Gross Revenue (AGR)-related liabilities apart from adjusting to evolving dynamics after Jio’s entry.

For example, they might use the proceeds to pay off debt and improve their debt-to-value (DTV) ratio, or they can use the funds to improve the company’s growth by financing new projects. A company planning an IPO what is follow on public offer typically appoints a lead manager, known as a bookrunner, to help it arrive at an appropriate price at which the shares should be offered. There are two primary ways in which the price of an IPO can be determined. Are you curious about how companies raise capital in the financial markets?

For those who are willing to have a long-term investment horizon can consider investing in FPOs. Therefore, the company intended to use the funds raised through the FPO to support its lending operations and general corporate purposes. You have historical reference for its stock market performance, earnings report and a lot more data to bank on. Generally, FPO shares can be sold immediately after they’re allotted, subject to market conditions and trading regulations. However, it’s advisable to check for specific lock-up periods or restrictions imposed by the company or regulatory authorities.

Companies require capital regularly to fund various business activities such as expansion, paying off debt etc. Business owners often seek external capital as they cannot keep funding the business through personal savings. When a company increases in value, the need for capital increases, requiring them to raise funds through the general public. An at-the-market (ATM) offering gives the issuing company the ability to raise capital as needed. If the company is not satisfied with the available price of shares on a given day, it can refrain from offering shares. Explore our blogs to stay up-to-date with recent updates on mutual funds, investments, and financial planning.

Is FPO more risky than IPO?

• Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience.
• You can set up a systematic investment plan (SIP) if you prefer regular, disciplined investing.
• These questions cover your financial goals, risk tolerance, and investment timeline.

Therefore, it is important for investors to do their research before jumping in. Investing in FPO (Follow on Public Offering) can be a wise choice if you’re looking for a profitable investment opportunity. Notably, companies that have already gone public and have a good track record of performance typically offer FPOs.

📆 Date: Aug 2-3, 2025🕛 Time: 8:30-11:30 AM EST📍 Venue: OnlineInstructor: Dheeraj Vaidya, CFA, FRM

Companies decide to go public for many reasons, ranging from raising capital for new projects, unlocking shareholder value, and also expanding operations. FPOs are a subsequent strategy to raise more funds to lower debt and bolster financial stability, among others. After closing the offer, the new shares offered under the FPO get listed alongside the existing shares on the stock exchanges upon completion of post-offer formalities. The newly allocated FPO shares start trading freely in the secondary market once the stock lists after the offer. This allows liquidity for new FPO shareholders as well as visibility into investor responses to the offer based on trading price trends after listing.

What happens if a company doesn’t succeed in its FPO?

All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. With Stack Wealth, you can invest with peace of mind, knowing your money and data are safe. You can set up a systematic investment plan (SIP) if you prefer regular, disciplined investing. Please choose the amount you want to invest periodically (monthly, quarterly, etc.). The app will automatically deduct this amount from your linked bank account and invest it in your chosen portfolio. A company may decide to issue a Follow-on Public Offer (FPO) for several important reasons.

Types of Follow-On Public Offers (FPOs)

He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career. Other companies like ITC and Indus Towers have also made large strides with their FPOs, raising $2.1 billion and $1.8 billion, respectively. In this blog, we’ll explore what FPO is, how it works, and why it’s an important option for companies looking to power their next growth phase. IRFC or Indian Railway Finance Corporation is a public sector undertaking that provides financial support to Indian Railways.

Non-Dilutive FPO is a type of FPO that does not decrease the valuation and the ownership percentage of the current shareholders. The process witnesses the current shareholders selling their stakes for personal gains, resulting in no change in the share float. Before investing in securities, consider your investment objective, level of experience and risk appetite carefully.

A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company’s initial public offering (IPO). An FPO can dilute the value of existing shares because more shares are added to the market, potentially lowering the stock price and reducing each shareholder’s ownership percentage. The central issue in that enforcement agreement had been judged in court previously. It involved the conflict of interest between the investment banking and analysis departments of ten of the largest investment firms in the United States. Financial planning blog category involves evaluating your current finances and mapping your journey to economic well-being for the future.