Difference Between IPO and FPO

An IPO is when a company sells shares to the public for the first time and lists on a stock exchange. An FPO is when an already listed company issues more shares to raise funds.
Difference Between IPO and FPO
3 min
09-July-2025

An IPO (Initial Public Offering) launches a private company into public markets by selling shares for the first time, while an FPO (Follow‑on Public Offering) is an additional share issuance by an already listed firm. In early July 2025, India saw its largest IPO of the year: HDB Financial Services, valued at $1.5 billion, rose over 13% on debut amid strong demand. The IPO pipeline remains robust, with firms like NSDL, Credila and Tata Capital targeting a combined $2.4 billion in July.

What is an IPO?

An Initial Public Offering (IPO) is the process through which a company issues its equity shares to the public. The issuing company gets funds in exchange for issuing its shares, which it can use to further its business objectives.

The IPO listing time comes around once the IPO process is complete. The equity shares are then listed on stock exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), where they can be freely traded between investors without the involvement of the issuing company.

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How significant is an IPO for a company?

Before we compare IPO vs FPO, let us quickly look at the importance of an Initial Public Offering from the perspective of the company.

1. Provides access to capital

An IPO provides companies with access to a vast pool of capital from public investors. Through the process, the company can raise large sums of money for expansion, research and development, debt repayment or other strategic initiatives.

2. Enhances visibility and credibility

Once the IPO is complete, the company gets listed on stock exchanges. This enhances their visibility and credibility in the market, enabling them to potentially attract more customers, partners and talented employees.

3. Provides liquidity to existing shareholders

An Initial Public Offering provides liquidity to existing shareholders by allowing early investors and employees to sell their stakes to the public.

How significant is an IPO for investors?

An Initial Public Offering is not only a major milestone for a company; it could potentially bring in a lot of benefits for the investors as well. Here are some ways in which an IPO is significant for investors.

  • Access to previously inaccessible companies
    By participating in an IPO, investors gain access to shares of a company that were previously inaccessible to them.
  • Potential for substantial returns
    By investing in a company that is still in its nascent stages, investors can potentially yield substantial returns if the company performs well in the future.

What is an FPO?

Follow-On Public Offering (FPO) is when a company that has already completed its IPO and is listed on the stock exchanges offers additional equity shares to the public to raise additional capital. The additional shares are usually offered at the current market price. However, it may also be issued at a discount to the market price to attract more investors. To put it simply, all public equity share issues after the Initial Public Offering are termed FPOs.

How significant is an FPO for a company?

Now that you know what these two avenues are, let us quickly look at the significance of a Follow-On Public Offering before moving on to the differences between an FPO and an IPO.

1. Access to additional capital

An FPO enables publicly listed companies to raise additional funds without resorting to debt financing or other costly alternatives. With the additional funds, the company can bolster its financial position, pursue growth opportunities and strengthen its balance sheet.

2. Serves as an indicator of confidence

A Follow-On Public Offering demonstrates management's belief in the company's future performance and could be viewed as an indicator of confidence in the entity’s prospects.

How significant is an FPO for investors?

Similar to the level of significance of an FPO for a company, it is also significant for investors. Here are some factors that make an FPO quite significant to the investors:

1. Price advantage

When companies launch an FPO, they mostly offer the additional shares at a discount (at a price lower than the current market prices of the shares). This discount makes investing in FPOs an ideal investment opportunity to buy the shares of a company at a lower rate.

2. Financial statements

Unlike an IPO, which provides little information about a company's financials, an FPO provides extensive financial information. As the company is already public, investors can easily analyse its historical performance and determine whether investing in the shares will yield profits.

Key Differences Between IPO and FPO

While shares are issued to the public in both IPOs and FPOs, they differ in several key aspects. Understanding what they are is crucial for making informed investment decisions. Here is a tabulated comparison of IPO vs FPO:

Particulars

IPO

FPO

Timing

Equity shares are issued to the public for the first time

Equity shares are issued to the public after the company is already listed on the stock exchanges

Company

Issued by privately-held companies

Issued by publicly traded companies

Information availability

Information regarding the company is not easily available

Information on the company is publicly available and can be accessed by anyone

Price determination

Offer price is determined by the company along with the lead managers to the issue based on various factors

Equity shares are typically offered at the current market price or at a slight discount to the current market price

Underwriting

Always involves underwriting by investment banks

Underwriting is generally not involved

Regulatory requirements

Subject to rigorous regulatory scrutiny and disclosures

Regulatory requirements are less stringent

Potential for higher returns

Carries a high potential for capital appreciation

Lower potential for capital appreciation

Risk

Carries a much higher risk

Comparatively lower risk

 

Conclusion

With this, you must now be well-versed in the differences between an FPO and an IPO. Now, it is essential to understand that despite the differences, both of them are crucial mechanisms for companies to raise capital from the public markets. In addition to providing companies with a host of benefits, investing in these equity share issues can also be hugely beneficial for investors.

Check related articles:

How to apply for an IPO?

What is cut-off price in IPO?

What are SME IPOs?

What is a lot size in IPO?

What is IPO Allotment Process?

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Frequently asked questions

Is an FPO good for investors?

An FPO can be beneficial for investors as it increases the liquidity of a company’s shares by introducing more shares into the market. This enhanced liquidity makes it easier for investors to buy and sell shares. Additionally, an FPO helps diversify the company’s investor base as new investors participate in purchasing shares.

How is FPO different from IPO?

An Initial Public Offering (IPO) occurs when a company issues its shares to the public for the first time to raise capital for growth and expansion. In contrast, a Follow-on Public Offering (FPO) takes place when a company that is already publicly listed issues additional shares to raise extra funds.

Is FPO good or bad for a company?

An FPO is generally positive for a company seeking to raise more capital after its IPO. It provides access to additional funding for growth, expansion, debt repayment, or other operational needs. However, it may dilute existing shareholders’ equity. Still, when used strategically, FPOs can improve financial stability and market presence, signalling investor confidence and a healthy business outlook to the broader market.

Which is better IPO or FPO?

Choosing between an IPO and FPO depends on a company’s stage and objective. An IPO suits private companies entering the stock market to raise initial capital and expand visibility. In contrast, an FPO suits already-listed firms needing additional funding or restructuring shareholding. Neither is universally better—each serves distinct purposes, with IPOs marking market entry and FPOs enabling further capital inflow or strategic adjustments.

Can FPO shares be sold?

Yes, FPO (Follow-on Public Offering) shares can be sold after they are allotted and listed on the stock exchange. Just like regular shares, they become part of the public float and can be traded in the secondary market. Investors who purchase FPO shares can hold or sell them based on market conditions, price performance, or personal financial goals, similar to shares acquired through an IPO.

What is the difference between FPO and NFO?

An FPO (Follow-on Public Offering) is when a listed company issues additional shares to raise capital. It involves equity markets and offers shares to the public. NFO (New Fund Offer), on the other hand, is related to mutual funds. It’s when an asset management company launches a new fund scheme. So, FPO deals with company shares, while NFO is about investing in a new mutual fund.

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