Follow-on Public Offers (FPOs)

A Follow-on Public Offer (FPO) is a capital-raising mechanism available to companies that are already listed on a stock exchange. It allows such companies to issue new shares or offer existing shares to the public after their Initial Public Offering. In the Indian stock market, a Follow-on Public Offer affects share supply, ownership distribution, and free float. 

A Follow-on Public Offer is a public issue of shares by a company that is already listed on a stock exchange. Unlike an IPO, which introduces a company to the market for the first time, a follow on public offer takes place after listing and involves either:

• the issue of new equity shares, or

• the sale of existing shares by current shareholders.
   

A Follow-on Public Offer is used to adjust share capital, ownership structure, or public shareholding in a listed company.

The process of launching a Follow-on Public Offer involves multiple stages, from board approval to listing.

• Board approval and objectives

The board approves the FPO, defining the purpose, approximate size, and preferred pricing route.

• Appoint intermediaries

Lead managers, underwriters, registrars, and legal advisers are appointed to run execution, compliance, and marketing.

• Draft the offer document

A prospectus is prepared covering business, financials, risk factors, promoters, and use of proceeds.

• Regulatory filing and observations

The draft is filed with the regulator (for example, SEBI). Queries are addressed and disclosures updated as required.

• Offer opening and permitted investor communication

Management and bankers meet investors, publish advertisements as permitted, and open the offer window.

• Price discovery

Pricing is set via a fixed price or book-building within a disclosed band, based on investor demand.

• Investor applications

Retail, non-institutional, and institutional investors apply through brokers or online platforms during the window.

• Allotment and refunds

If over-subscribed, proportionate allotment rules apply. Unallotted amounts are unblocked or refunded.

• Listing and trading

Allotted shares are credited to demat accounts and listed on the exchange, after which normal trading begins.
 

FPOs follow SEBI-mandated disclosure and procedural requirements for public share issuance.

FPOs are grouped by whether new shares are created or existing shares are sold to the public.

Dilutive FPOs

• 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.
   

Non-Dilutive FPOs

• 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.

Follow-on Public Offers in India are governed by the regulatory framework laid down by the Securities and Exchange Board of India (SEBI) for companies that are already listed on a recognised stock exchange. These rules determine how additional shares can be issued or sold to the public and how such offers must be conducted.

Key regulatory elements applicable to an FPO include:

• Eligibility of the issuer
  Only companies that are already listed on a recognised stock exchange are permitted to raise funds through a Follow-on Public Offer.
  

• Disclosure and offer documents
  The issuing company is required to file an offer document containing updated financial statements, risk disclosures, shareholding details, and the stated purpose of the issue, in line with SEBI’s disclosure standards.
  

• Pricing framework
  FPOs may be issued through a fixed-price route or a book-building mechanism. The price or price band must be disclosed in advance and follows the same market-linked discovery process used for public issues.
  

• Shareholder and exchange approvals
  The FPO must be approved by the company’s board and, where required, by shareholders. The offer is also subject to regulatory observations before it can open for subscription.
  

• Allotment and settlement rules
  Applications are processed through ASBA and exchange systems, with allotment carried out on a proportionate basis if demand exceeds the number of shares offered.
  

• Post-issue compliance
  After the FPO, the newly issued or sold shares are credited to demat accounts and admitted for trading on the stock exchange, following standard listing and disclosure requirements.
   

Together, these guidelines define how Follow-on Public Offers are structured, priced, disclosed, and settled within India’s regulated securities market.

A Follow-on Public Offer takes place after a company is already listed on a stock exchange and involves the public sale of shares through a regulated offering process. During an FPO, shares are made available to investors either through the issuance of new equity by the company or through the sale of existing shares by current shareholders.

Once the offer is announced, the company publishes a detailed offer document that sets out the size of the issue, the pricing method, the purpose of the offering, and key financial and regulatory disclosures. The offer then opens for subscription for a defined period, during which applications are received through stock exchange–linked platforms.

After the subscription window closes, shares are allocated based on demand and regulatory allotment rules. Any unallotted amounts are released, and the allotted shares are credited to investors’ demat accounts. These shares then become available for trading on the stock exchange along with the company’s existing listed shares.

Overall, an FPO adds new or redistributed shares to the market through a structured process that follows disclosure, allotment, and settlement requirements set by the exchanges and the regulator.

A Follow-on Public Offer follows a defined regulatory and exchange-driven sequence from approval to listing.

Board Approval and Decision

The company’s board approves the proposal, including the size of the issue, timing, and the pricing method (fixed price or book-built).

Appointment of intermediaries

SEBI-registered merchant bankers, registrars, underwriters, and legal advisers are appointed to manage execution, disclosures, and regulatory compliance.

Preparation of offer documents

A draft offer document is prepared containing audited financials, business details, risk disclosures, shareholding patterns, legal information, and the stated use of proceeds.

Regulatory Filing and Observations

The draft is filed with SEBI. The issuer responds to regulatory observations and updates disclosures before receiving approval to proceed.

Offer Communication and Opening

The issue timetable, price band (if applicable), and statutory advertisements are published in accordance with SEBI regulations.

Price Determination

The issue price is set either at a fixed level or discovered within a disclosed band through the book-building mechanism.

Application and Allotment

Applications are submitted through exchange-enabled ASBA or UPI channels. If the issue is oversubscribed, shares are allotted on a proportionate basis and unallotted funds are released.

Listing of Shares

Allotted shares are credited to demat accounts and admitted for trading on the stock exchange, after which regular trading and disclosure requirements apply.

This sequence defines how an FPO is executed within the SEBI-regulated capital-raising framework.

The level of participation in a Follow-on Public Offer (FPO) is shaped by a combination of company-specific, market-related, and structural factors observed during the offer period.

Issuer’s financial position and disclosures
The company’s financial statements, operating performance, debt levels, and use-of-proceeds disclosures form the primary reference points for how the issue is viewed in the market.

Offer structure (dilutive or non-dilutive)
Subscription patterns differ depending on whether the FPO involves fresh equity issuance or a sale by existing shareholders, as this determines whether the total share count will change.

Price and price band
In book-built FPOs, the disclosed price band and the final issue price influence how demand builds across retail, non-institutional, and institutional categories.

Prevailing market conditions
Overall equity-market sentiment, index movement, interest-rate expectations, and liquidity conditions during the offer window affect participation levels.

Existing market price of the stock
Because the company is already listed, the current traded price in the secondary market acts as a reference against which the FPO price is compared.

Investor category allocation
The percentage reserved for retail, non-institutional, and institutional investors shapes how bids are distributed across segments.

Promoter and shareholder participation
Whether promoters or large shareholders are selling shares, and to what extent, can influence how the ownership mix changes after the offer.

Together, these elements explain how demand forms during an FPO and how subscription figures evolve across investor categories during the issue period.

A Follow-on Public Offer (FPO) is a mechanism available to listed companies to raise additional equity capital or modify shareholding structure within the regulatory framework applicable to public issues. An FPO may involve the issuance of new shares, the sale of existing shares, or a combination of both, depending on the structure disclosed in the offer document.

An FPO may be undertaken for the following purposes:

• Raising additional equity capital
  In a dilutive FPO, new shares are issued to increase paid-up capital, with proceeds used for purposes disclosed in the offer document, such as capital expenditure, debt repayment, acquisitions, or general corporate requirements.
  

• Facilitating sale of existing shareholdings
  In a non-dilutive FPO, promoters or other shareholders may offer part of their existing holdings for sale without increasing the company’s total share capital.
  

• Adjusting public shareholding and free float
  An FPO can increase the number of shares available for trading, which alters free float and public ownership levels in the market.
  

• Meeting regulatory shareholding requirements
  Listed companies are required to maintain minimum public shareholding levels under SEBI regulations. An FPO may be used as one of the permitted methods to meet these thresholds.
  

• Reorganising ownership structure
  An FPO can change the distribution of shareholding among promoters, institutional investors, and public shareholders, depending on the nature of the offer.
   

Overall, an FPO provides a regulated route for listed companies to access capital or reorganise ownership while operating within SEBI’s disclosure, eligibility, and market-conduct requirements.

FPOs impact share availability, pricing, and ownership distribution for market participants.

Advantages of FPOs

A Follow-on Public Offer can influence a company’s capital structure, shareholding mix, and market presence in several measurable ways.

Access to capital markets

• Listed companies can raise additional funds from the public without going through a fresh listing process.

• The offering is made to a market where trading, price discovery, and disclosures already exist.

Capital infusion

• In a dilutive FPO, new equity shares are issued, bringing fresh capital into the company.

• These funds may be used for purposes such as business expansion, debt reduction, or working capital, as disclosed in the offer document.

Enhanced liquidity

• An increase in the number of publicly traded shares can raise the free-float available in the market.

• Higher free float generally supports more active trading and tighter bid-ask spreads over time.

Public market presence

• A public offer increases the number of shareholders and broadens ownership.

• This can lead to wider institutional and retail participation in the company’s stock.

Portfolio diversification

• FPOs allow investors to access shares of companies that already have a market history, financial disclosures, and trading data.

• This provides an alternative to participating only in first-time public issues.
   

Disadvantages of FPOs

While FPOs serve as a capital-raising and share-distribution mechanism, they also introduce structural and market-level effects.

Share dilution (in dilutive FPOs)

• When new shares are issued, the total number of outstanding shares increases.

• This changes ownership percentages and per-share financial ratios such as earnings per share.

Price movement around the issue period

• The announcement and execution of an FPO can affect market supply and demand for the stock.

• This may lead to short-term price fluctuations during the offer and listing phase.

Allotment constraints

• When demand exceeds the number of shares offered, allotment is done on a proportionate basis.

• As a result, not all applications may be fully satisfied.

Selling-shareholder impact (in non-dilutive FPOs)

• When large existing shareholders sell shares through an FPO, the increase in available stock can influence short-term trading dynamics.

• Although the total share count remains unchanged, ownership concentration may shift.

Market perception effects

• FPO announcements can be interpreted differently depending on whether shares are newly issued or sold by existing holders.

• These structural aspects are reflected in how the offer is received by the market.

Follow-on Public Offers are regulated under the SEBI (Issue of Capital and Disclosure Requirements) Regulations and related exchange rules. These frameworks define how listed companies may issue or offer shares through an FPO.

• SEBI’s role: SEBI prescribes disclosure standards, pricing frameworks, and allotment procedures and issues observations on offer documents filed by the issuer.
  

• Disclosure requirements: Companies are required to publish detailed financial, business, risk, and shareholding information in the FPO offer document and through stock-exchange filings.
  

• Listing and post-issue obligations: Shares issued or offered through an FPO remain subject to the continuous disclosure and compliance requirements applicable to listed companies under SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations.

Applications in a Follow-on Public Offer are submitted through exchange-enabled and bank-linked systems, using the same infrastructure applied to public issues of listed securities.

• Account and payment setup

Participation requires a PAN-linked demat account and a bank account enabled for ASBA or UPI-based public issue payments.

• Access to offer details

The offer document, price band or fixed price, lot size, and issue timetable are published through stock exchange filings and broker or bank interfaces.

• Investor category selection

Applications are recorded under the applicable category such as Retail Individual, Non-Institutional (HNI), or Qualified Institutional Buyer, based on regulatory definitions.

• Bid submission

Bids are entered within the disclosed price band or at the cut-off price, where permitted, through ASBA- or UPI-enabled platforms.

• Modification window

Bid quantity or price can be revised or withdrawn until the offer closing time as permitted by exchange systems.

• Fund blocking

The application amount is blocked in the linked bank account and is debited only for the quantity of shares allotted.

• Allotment and release of funds

After the issue closes, shares are allotted according to exchange rules and any unutilised blocked amount is released.

• Credit and listing

Allotted shares are credited to demat accounts before listing and then become available for exchange trading.

Several Indian companies have used the Follow-on Public Offer (FPO) route to raise additional capital or broaden public shareholding after being listed on stock exchanges. These issues were carried out under SEBI’s public-issue framework and involved detailed offer documents, pricing bands, and regulated allotment processes.

Reliance Industries Ltd (2009)

Reliance Industries launched one of India’s largest Follow-on Public Offers in 2009. The issue involved the sale of equity shares to public investors and was structured to strengthen the company’s capital base and support long-term business expansion. At the time, it was among the biggest equity offerings in the Indian market.

State Bank of India (2017)

State Bank of India raised capital through an FPO to support its balance sheet and capital adequacy requirements. The issue brought in fresh equity from public investors and institutional participants, making it one of the largest follow-on issues in India’s banking sector.

NHPC Ltd (2010)

NHPC carried out an FPO after its initial public listing to raise additional funds for power generation projects. The issue helped broaden public ownership while providing capital for infrastructure development.

These examples show how FPOs are used by already-listed companies to raise additional equity, adjust ownership structures, or meet capital requirements under SEBI’s public-issue framework.

A Follow-on Public Offer (FPO) is a regulated mechanism through which a company that is already listed issues new shares or offers existing shares to the public. It is governed by SEBI’s disclosure, pricing, and allotment framework and affects share capital, ownership structure, and market float depending on the type of issue. FPOs form part of the ongoing capital market processes used by listed companies after their initial public offering.

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.