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After an Initial Public Offering (IPO), listed companies often require additional funding to support expansion, reduce debt, or strengthen their balance sheets. In such cases, they may turn to secondary equity offerings like Follow-on Public Offers (FPOs) or Qualified Institutional Placements (QIPs). These capital-raising tools allow companies to access public and institutional funds without going through the extensive process of an IPO again.
This guide explains what FPOs and QIPs are, how they work, and their roles in India’s equity markets.
An FPO is a process through which a company already listed on the stock exchange issues new shares to the public to raise additional capital. It is open to retail, institutional, and high-net-worth investors.
Dilutive FPO: New shares are issued, which increases the total share count and may dilute existing holdings.
Non-dilutive FPO: Existing shareholders (often promoters) sell part of their holdings to the public; no new shares are created.
Requires a prospectus and SEBI approval
Follows a similar process as an IPO
Priced through book-building or fixed price
Involves underwriting, roadshows, and marketing
QIP is a method by which a listed company raises funds by issuing equity shares or convertible securities only to Qualified Institutional Buyers (QIBs) such as mutual funds, insurance firms, and pension funds.
No need for extensive regulatory filing like an FPO
Faster execution and lower costs
Minimum number of buyers: 2 for up to ₹250 Cr issue size, and 5 for more
Issued at a price not lower than the average of the previous two weeks’ share price
Here’s how FPOs and QIPs differ across key aspects of the fundraising process:
| Feature | FPO | QIP |
|---|---|---|
Target Investors |
Retail, HNI, and Institutional |
Only Qualified Institutional Buyers |
Regulatory Filing |
Prospectus required |
Simplified placement document |
Time to Market |
Longer (weeks to months) |
Shorter (a few days) |
Cost |
Higher due to compliance & marketing |
Lower due to reduced disclosure |
Shareholder Dilution |
Yes (in dilutive FPOs) |
Yes |
Pricing Method |
Fixed or book-built |
SEBI formula-based minimum price |
Companies turn to FPOs or QIPs based on their capital needs, regulatory obligations, and strategic goals:
For expanding operations, launching new products, or entering new markets.
Many companies raise equity capital to pay off loans and improve their debt-to-equity ratio.
Some companies may need to meet SEBI’s minimum public shareholding (MPS) norms or increase liquidity in the stock.
QIPs are often used when companies need capital quickly or want to onboard specific institutional partners.
Understanding the strengths and drawbacks of both FPOs and QIPs can help investors and companies choose the right fundraising route:
Follow-on Public Offers (FPOs) provide broader access and increased visibility but involve more complexity and potential market exposure:
Pros:
Open to all types of investors
Widens shareholder base
Improves transparency through disclosures
Cons:
Lengthy process
Higher costs
Market risk during offer period
Qualified Institutional Placements (QIPs) offer several advantages, but they also come with certain trade-offs for companies and investors:
Pros:
Faster and cost-effective
Flexibility in timing
Favoured by institutional investors
Cons:
Limited investor pool
May lead to perceived dilution for retail shareholders
In recent years, Qualified Institutional Placements (QIPs) have gained traction as a preferred fundraising tool, especially among large Indian firms:
Many large Indian companies in sectors like banking, telecom, and infrastructure have used QIPs for rapid fundraising.
FPOs are less common but are used for large public disinvestment programs and by PSUs.
QIP volumes have increased significantly in the past five years as companies prioritise speed and institutional support.
SEBI continues to simplify norms for QIPs while ensuring adequate disclosures.
A well-priced FPO or QIP can indicate confidence in the company’s growth story, especially if backed by reputed institutional buyers.
| Investor Type | What to Monitor |
|---|---|
Retail Investors |
FPO pricing vs. market rate, company fundamentals |
Institutional Investors |
QIP participation size, promoter stake changes |
Long-Term Holders |
Dilution impact and fund utilisation plans |
Both Follow-on Public Offers (FPOs) and Qualified Institutional Placements (QIPs) are strategic tools for listed companies to raise funds beyond the IPO stage. While FPOs are more inclusive, QIPs offer efficiency and institutional depth. For investors, understanding these capital-raising methods provides insight into a company’s growth plans and market positioning.
Being aware of the dilution effect, pricing, and intended use of funds is essential for making informed decisions when such offerings are announced.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
An IPO is the first issuance of shares by a company, while an FPO is a subsequent offering after listing.
Only Qualified Institutional Buyers (QIBs), such as mutual funds, insurance companies, and pension funds.
Yes, QIP shares are subject to a lock-in period of one year for the issuing company’s promoters.
Yes, FPOs are open to retail investors along with institutional and HNI participants.
They can, depending on the pricing, dilution impact, and investor sentiment.
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