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Learn what a Follow-on Public Offer (FPO) is, how it differs from an IPO, its types (dilutive/non-dilutive), how companies raise capital through FPOs, and how investors can participate.
A Follow-on Public Offer (FPO) is the process through which a publicly listed company raises additional capital from investors after its Initial Public Offering.
Unlike an IPO, which lists a company for the first time, an FPO is a subsequent offering by an already listed company and may involve fresh shares (dilutive) or a sale by existing holders (non-dilutive).
FPOs influence free float, pricing, ownership mix, and capital structure. For investors, they provide access to established businesses at market-linked prices, alongside dilution and demand considerations.
Next, this guide covers what an FPO is in detail, how it works step by step, the main types, why companies use it, how investors can participate, and how FPOs compare with IPOs.
A Follow-on Public Offer is the issuance of shares by a company that is already listed on a stock exchange.
It takes place after an IPO and may be a fresh issue of shares (dilutive) or a sale by existing shareholders (non-dilutive).
Purpose
Raise additional equity for growth, acquisitions, or debt reduction
Increase free float and improve trading liquidity
Provide partial exit or stake sale for promoters and early investors
Broaden the shareholder base and enhance market visibility
The process of launching a Follow-on Public Offer involves multiple steps, from board approval to listing.
The board approves the FPO, defining the purpose, approximate size, and preferred pricing route.
Lead managers, underwriters, registrars, and legal advisers are appointed to run execution, compliance, and marketing.
A prospectus is prepared covering business, financials, risk factors, promoters, and use of proceeds.
The draft is filed with the regulator (for example, SEBI). Queries are addressed and disclosures updated as required.
Management and bankers meet investors, publish advertisements as permitted, and open the offer window.
Pricing is set via a fixed price or book-building within a disclosed band, based on investor demand.
Retail, non-institutional, and institutional investors apply through brokers or online platforms during the window.
If over-subscribed, proportionate allotment rules apply. Unallotted amounts are unblocked or refunded.
Allotted shares are credited to demat accounts and listed on the exchange, after which normal trading begins.
An FPO follows a regulated, step-by-step path that balances efficient capital raising for issuers with disclosure, transparency, and investor protection.
FPOs are grouped by whether new shares are created or existing shares are sold to the public.
The company issues fresh shares, increasing the total shares outstanding.
Raises new equity capital for uses such as growth, acquisitions, or debt reduction.
Dilutes existing shareholding and per-share metrics unless earnings rise proportionately.
Often expands free float, which may aid liquidity.
No new shares are created; existing shareholders (for example, promoters or PE/VC investors) sell their holdings to the public.
Does not raise capital for the company; proceeds go to the selling shareholders.
Share count stays the same; ownership mix and free float typically increase.
Can improve liquidity and broaden the investor base.
Dilutive FPOs create new shares and raise capital for the company; non-dilutive FPOs transfer existing shares and raise no new funds for the issuer.
The FPO process is similar to an IPO and involves several regulatory and procedural steps from approval to listing.
The board approves the proposal, setting objectives, approximate size, timing, and the preferred pricing route (fixed price or book building).
Lead managers, underwriters, registrars, and legal advisers are appointed to handle execution, due diligence, marketing, and compliance.
A draft offer document/prospectus is prepared covering the business, audited financials, risk factors, promoters and shareholding, legal proceedings, and use of proceeds.
The draft is filed with the regulator (for example, SEBI). The issuer addresses observations, updates disclosures, and receives clearance to proceed.
Management and bankers meet investors, release advertisements as permitted, and publish the timetable and (where applicable) the price band ahead of opening.
Pricing is set via fixed price or discovered within a published band using book building based on investor demand.
Investors apply during the window through ASBA/UPI-enabled channels. If oversubscribed, proportionate allotment rules apply; unallotted amounts are unblocked or refunded.
Allotted shares are credited to demat accounts and listed on the exchange, after which normal trading begins and continuous disclosure duties apply.
This regulated sequence standardises disclosures and execution, helping protect investors while enabling issuers to raise capital efficiently.
Companies opt for a Follow-on Public Offer for several strategic and financial reasons.
Raise additional capital: Fund expansion, acquisitions, R&D, working capital, or reduce debt to strengthen the balance sheet.
Improve liquidity and free float: Increase the number of shares available for trading, aiding price discovery and investor participation.
Enable promoter or investor exit (non-dilutive): Provide a partial or staged sell-down for promoters, PE/VC investors, or early backers without issuing new shares.
Enhance market profile: Broaden public shareholding, reinforce transparency, and deepen institutional ownership, supporting long-term market credibility.
Overall, FPOs help companies strengthen their capital base, improve liquidity, and build investor confidence in line with long-term strategy.
From an investor’s perspective, FPOs offer both opportunities and trade-offs.
Access to established listed companies with operating track records.
Market-linked pricing (often via book building) instead of purely promotional narratives.
Portfolio diversification beyond new listings.
Higher free float can improve liquidity over time.
Dilution risk can weigh on EPS and existing shareholding percentages in dilutive issues.
Price volatility around the offer window and listing.
Oversubscription can limit allotment, leaving applications only partly filled.
In non-dilutive sales, a large seller’s overhang may affect near-term sentiment.
Evaluate each FPO on fundamentals, valuation, dilution and demand conditions before applying.
FPOs are governed by stringent regulations to safeguard investor interests such as:
SEBI’s role: Regulates disclosure norms, approval processes, pricing, and allotment mechanisms.
Disclosure Requirements: Companies must reveal comprehensive financial and operational information.
Listing Obligations: Companies must comply with continuous disclosure and corporate governance post-FPO.
Investors can take part in an FPO through a simple application process, similar to IPOs but focused on an already listed company.
Step 1: Check readiness
Ensure a KYC-compliant demat account, PAN, and enabled ASBA or UPI mandate through your bank or broker.
Step 2: Review offer details
Read the prospectus summary on your broker app or exchange page, note the price band or fixed price, lot size, and offer window.
Step 3: Choose category
Apply under the correct bucket such as Retail, Non-Institutional (HNI), or Institutional, as applicable to your profile.
Step 4: Place the bid
Enter quantity and price within the band or select cut-off where allowed, then authorise payment via ASBA or UPI.
Step 5: Track and modify within the window
You may revise or cancel bids until the issue closes; keep UPI mandates approved before the platform deadline.
Step 6: Funds blocking
Application money is blocked in your bank account until allotment; unsuccessful or partial amounts remain unblocked or are released.
Step 7: Allotment outcome
After the offer closes, allotment is calculated; you receive an allotment status update and any unblocked funds are released.
Step 8: Credit and listing
Allotted shares are credited to your demat before listing; trading begins on the scheduled listing date.
Participating in an FPO is straightforward through broker platforms and banking channels, with steps that mirror IPO applications while offering access to established listed companies.
Understanding the key differences between IPOs and FPOs helps investors make informed decisions based on company stage, risk appetite, and investment goals. Here’s how an IPO and FPO differ in their feature:
| Feature | IPO | FPO |
|---|---|---|
Purpose |
To become publicly listed |
Raise fresh capital or sell shares |
Issue |
Private company |
Listed company |
Capital Raised |
Usually first capital infusion |
Additional capital or sale by existing shareholders |
Investor Access |
First-time investors |
Existing and new investors |
Market Information |
Limited history available |
Established market data available |
This comparison clearly outlines how IPOs and FPOs differ in structure and intent, allowing you to align your investment strategy with the right opportunity.
The following are some of the examples of an FPO:
Reliance Industries FPO (2009): Raised significant funds for expansion.
Coal India FPO (2010): One of India’s largest public offers enhancing market participation.
Follow-on Public Offers serve as an important capital raising avenue for companies already listed on stock exchanges. They allow businesses to fund growth, manage debt, or provide liquidity for existing shareholders. For investors, FPOs offer opportunities to invest in established firms with a degree of market history. Understanding the types, process, and implications of FPOs enables informed investment decisions aligned with broader portfolio goals.
This content is for educational 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.
A Follow-on Public Offer (FPO) is an issuance or sale of shares by a company already listed on a stock exchange to raise additional capital or allow existing shareholders to sell shares.
An IPO is a company’s first sale of shares to the public, whereas an FPO is a subsequent offering by an already listed company.
FPOs can be dilutive, where fresh shares are issued, or non-dilutive, where existing shareholders sell shares.
Investors apply through brokers or online platforms during the offer period by submitting application forms and funds.
FPOs typically involve established companies and may carry comparatively lower risks than IPOs, but market risks still apply.
Yes, promoters can sell part of their holdings through non-dilutive FPOs.
A demat account, PAN card, and KYC-compliant documents are required to apply for FPO shares.
An FPO (Follow-on Public Offer) is when an already listed company raises funds by issuing new shares or enabling a sale of shares to the public, whereas an OFS (Offer for Sale) is a separate exchange-led mechanism where existing shareholders—often promoters or institutions—sell their shares directly through a bidding window without issuing new shares or a prospectus-style offer document.
An FPO can influence prices through dilution and supply effects. In a dilutive FPO, the increased share count may weigh on per-share metrics and near-term price, while improved free float and use of proceeds (such as debt reduction or growth funding) can support medium-term valuations; in non-dilutive sales, added supply or seller overhang may pressure prices short term even though share count is unchanged.
An IPO is a company’s first sale of shares to the public to list on an exchange, with no prior trading history, while a follow-on (FPO) is a subsequent offer by an already listed company to raise additional capital or enable existing holders to sell, benefiting from existing market data and disclosure history.
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