Follow-On Public Offer (FPO)

A Follow-On Public Offer (FPO) allows an already listed company to make another public offer after its IPO. It can involve a fresh issue of shares, an offer for sale by existing shareholders, or both.

• FPOs mainly take 2 forms: a fresh issue that increases outstanding shares and an offer for sale that does not create new shares.
• Companies may use fresh-issue proceeds for expansion, business requirements, or debt repayment.
• A fresh issue can dilute the ownership percentage of existing shareholders.
• In an offer for sale, the proceeds go to the shareholders selling their shares.
• Under SEBI rules, an FPO is generally kept open for 3–10 working days.
• Investors can apply through ASBA, where the application amount remains blocked in their eligible bank account until allotment.
   

A Follow-On Public Offer (FPO) is a public offer made by a company that is already listed. It takes place after the company has completed its Initial Public Offering.

An FPO may involve fresh shares issued by the company, an offer for sale of shares held by existing shareholders, or a combination of both.

If fresh shares are issued, the company receives the money raised through the issue. The total number of outstanding shares also increases, which can reduce the ownership percentage of existing shareholders.

An FPO still has to follow the applicable SEBI requirements. However, eligible listed companies may use the fast-track route, under which the offer-document process differs from a regular public issue.

An FPO follows a regulated process before shares are allotted to investors.

1. Approve the FPO

The company’s board first approves the proposal. It decides the type of offer, the number of shares involved, and the intended use of funds where fresh capital is being raised.

2. Appoint intermediaries

The company appoints intermediaries such as merchant bankers, registrars, and legal advisers. They assist with the offer documents, issue process, pricing, and allotment.

3. File the required documents

The issuer and lead managers prepare and file the required offer documents with the relevant authorities. The exact filing process may differ when an eligible company uses SEBI’s fast-track FPO route.

4. Decide the price

The offer may use a fixed price or a price band. In a book-built issue, investors place bids according to the price range specified in the offer documents.

5. Open the subscription

Investors can apply while the FPO is open.
Subscription period: A further public issue is generally open for at least 3 working days and not more than 10 working days under SEBI regulations.

6. Finalise allotment

After the issue closes, the registrar finalises the allotment according to the applicable rules and the applications received.

7. Credit the shares

Shares allotted to successful applicants are credited to their demat accounts.

8. Begin trading

After the required approvals and listing process are completed, the newly allotted shares can be traded along with the company’s existing listed shares.
 

FPOs can mainly involve fresh shares, existing shares offered for sale, or a combination of both.

1. Dilutive FPO

A dilutive FPO occurs when a listed company issues fresh equity shares.
Because new shares are created, the total number of outstanding shares increases. As a result, the ownership percentage of existing shareholders may be diluted.
The Earnings Per Share (EPS) may also decline if the company’s earnings do not increase in proportion to the higher number of shares.
The money raised through the fresh issue goes to the company. It may then use these funds for purposes such as expansion, business requirements, or debt repayment.
Example: If a listed company issues fresh shares through an FPO to fund an expansion project, the number of shares in circulation increases and the company receives the proceeds.

2. Non-dilutive FPO

A non-dilutive FPO involves existing shareholders, such as promoters, offering their shares to the public.
No new shares are created. Therefore, the total number of outstanding shares does not increase simply because of the offer.
There is also no direct EPS dilution from an increase in the number of shares. However, this does not mean that the market price cannot rise or fall after the offer.
The money raised goes to the shareholders selling their shares rather than to the company.
Example: If an existing shareholder sells part of their holding through the public offer, ownership changes hands but no additional shares are created.

3. At-the-market FPO

An at-the-market or ATM offering involves newly issued shares being sold gradually in an existing market at prevailing market prices rather than through one large fixed-price sale.
The original article describes this as an FPO type. However, ATM offerings are more commonly associated with overseas securities-market frameworks. Under SEBI’s definition of an Indian FPO, the relevant distinction is between a fresh issue, an offer for sale, or a combination of both.
 

If you want to apply for an FPO, the basic process is as follows:

1. Understand the FPO

Read the offer document before applying. It contains information about the company, its financial performance, risks, the shares being offered, and the purpose of raising funds where applicable.

2. Keep your Demat account active

You need an active Demat account because allotted shares are credited electronically to it.

3. Choose the permitted application route

An ASBA application may be submitted electronically or through permitted intermediaries, depending on the facilities available to you.

4. Apply through ASBA

Use the ASBA facility to apply. ASBA stands for Application Supported by Blocked Amount.
The application amount is blocked in the bank account specified in your ASBA application. It is not limited to an HDFC Bank account.

5. Submit the application

Submit the required application details through the permitted ASBA channel. The funds remain blocked until the allotment process determines how much needs to be debited or unblocked.

6. Check allotment and listing

After the FPO closes, the allotment is finalised. Successful applicants receive the allotted shares in their demat accounts.
 

Several listed Indian companies have used FPOs to make further public offers after their IPOs.

• Power Finance Corporation Limited: PFC completed an FPO in 2011. The offer included both a fresh issue of shares and an offer for sale by the Government of India.
• Tata Steel Limited: Tata Steel completed its FPO in 2011 and raised capital through the issue.
• Power Grid Corporation of India Limited: Power Grid completed an FPO in 2013 that combined a fresh issue with an offer for sale.
• ITI Limited: ITI launched an FPO process in 2020 but later withdrew the issue, citing market conditions. It shows that an announced FPO does not necessarily result in a completed issue.

The securities quoted are for example purposes only and not a recommendation.

A company may use an FPO to raise additional equity capital after it is already listed.

The money raised through a fresh issue may be used for purposes such as:

• Funding large projects
• Expanding the business
• Meeting operational requirements
• Repaying existing debt

In a dilutive FPO, new outstanding shares are created. This increases the company’s equity capital but can reduce the ownership percentage held by existing shareholders.

In an offer for sale, the company does not receive the proceeds because the shares already belong to existing shareholders.

An FPO gives you more publicly available information to study than an issue by a company entering the public market for the first time. The company is already listed, so you can review its financial history and past market information.
However, this does not make an FPO automatically less risky or profitable.
An FPO may sometimes be offered at a discount to the prevailing market price, but a discount does not guarantee a gain. The share price can move after the issue depending on the company’s performance and market conditions.
Before applying, you should read the offer document and understand why the shares are being offered, whether the issue involves fresh shares or an offer for sale, and the risks disclosed by the company.
 

An FPO can serve different purposes depending on how it is structured.

• Capital raising: A fresh issue can help a company raise funds for expansion, operations, projects, or debt repayment.
• Available company history: Since the company is already listed, investors can examine its existing financial and market information before applying.
• Potentially higher liquidity: A fresh issue can increase the number of shares available in the market, although this does not guarantee lower price volatility.
• Debt reduction: A company may use funds raised from fresh shares to repay existing borrowings.
• Broader shareholding: An FPO can allow more investors to participate in the company’s equity.

• Access for investors: Existing and new investors can apply for shares offered through the FPO, subject to the terms of the issue.

  
  
  

FPOs allow listed companies to raise additional equity capital for expansion, debt repayment, and other business requirements.
When an FPO includes fresh shares, the increase in outstanding shares can dilute the ownership percentage of existing shareholders. Investors may also react to the issue price and the purpose for which the company plans to use the funds.
Share prices can therefore move after an FPO announcement or issue. A fall is not automatic, just as an FPO does not guarantee an increase in the share price.
The impact depends on how investors assess the company, the structure of the offer, and prevailing market conditions.
 

A Follow-On Public Offer allows an already listed company to offer additional shares to investors after its IPO. It may involve fresh shares, existing shares offered for sale, or both. Companies may use an FPO to raise funds for expansion, business needs, or debt repayment. However, fresh issues can dilute existing shareholders’ ownership. Before applying, investors should review the offer structure, pricing, financial position, purpose of the issue, and disclosed risks to make an informed decision.