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What is FPO: All you Need to Know

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This blog will help you understand the types of FPOs, the reasons companies pursue them, their pros and cons, and provide a real-world example. By the end, you’ll understand exactly what an FPO entails and when companies opt to go down the FPO route.

Table of Contents:

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What is a Follow-on Public Offer (FPO)?

A Follow-on Public Offer (FPO) is the process by which a company that is already listed on a stock exchange issues new shares to the public. Unlike an Initial Public Offering (IPO), where a private company offers its shares to the public for the first time, an FPO is by a company that is already publicly listed. 

In an FPO, the existing publicly listed company offers new shares to investors in order to raise additional capital. This allows the company to expand its operations, enter new markets, fund research and development, pay off debt, or acquire other companies. The company files the required paperwork with market regulators and offers the new shares at a set price, either at market price, a discount, or a premium. Investors can then subscribe to the FPO to purchase the newly issued shares. 

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Types of Follow-On Offerings (FPOs)

Follow-On Offerings (FPOs) are a way for companies to gather funds by offering more shares to the public following their initial public offering (IPO). Typically, two types of Follow-On Public Offerings (FPOs) are commonly undertaken by companies:

Dilutive Follow-on Public Offers:

These FPOs involve the issuance of new shares by a company to public investors. This will dilute the ownership stake of existing shareholders, as they will now own a smaller percentage of the company. But for the company, it’s a way to gather money for growing and expanding its business.

Example: In December 2022, the Adani group conducted a Rs 20,000 crore (approx. $2.5 billion) dilutive FPO for its flagship company, Adani Enterprises Ltd. This FPO offered new shares equivalent to 10% of the total outstanding shares of the company. The newly issued shares raised funding for the company’s capital expenditure plans but also led to a dilution in ownership for existing Adani Enterprises’ shareholders.

Non-Dilutive Follow-on Public Offers:

In these FPOs, instead of newly created shares, only secondary shares owned by promoters or other major investors are offloaded to the public. This does not impact the total share capital or dilute existing shareholder ownership in any manner.

Example: In July 2022, edtech major Byju’s conducted a non-dilutive, Rs 300 crore (approx. $37 million) FPO. The company did not issue new shares;  instead, only certain existing investors sold a part of their holdings to raise funding. This gave some liquidity to selling shareholders while involving no dilution for public owners.

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Why Does a Company Need an FPO?

A listed company typically undertakes an FPO to efficiently raise large-scale capital from the market to finance business expansion plans, repay heavy debt burdens, provide liquidity to shareholders, enhance working capital capabilities, or meet recurring funding needs to support scaling operations. Access to new equity financing helps fuel major capital investments in new products/markets, acquisitions, manufacturing assets, and general working capital to run high-growth daily operations.

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How Does an FPO work?

A company planning a Follow-on Public Offer (FPO) first files the offer documents with the relevant stock exchange regulator, outlining the details of the proposed share sale. This includes the amount of capital to be raised, the number of shares offered, the offer price, and the intended use of the funds raised.

The company sets a price range within which investors can bid for the FPO shares. This price band has both a floor and a cap price per share. The final FPO share price gets fixed considering investor demand. Investors, including institutions and retail individuals, then subscribe to the FPO within the offer period and place bids for the quantity of shares they wish to purchase at or within the price band.

If the FPO gets fully subscribed, shares get allotted to bidders on a proportionate basis. If undersubscribed, the full bid quantities may be allotted to the applicants. The payment for share allocation is made based on the final per-share price.

After closing the offer, the new shares offered under the FPO get listed alongside the existing shares on the stock exchanges upon completion of post-offer formalities. The newly allocated FPO shares start trading freely in the secondary market once the stock lists after the offer. This allows liquidity for new FPO shareholders as well as visibility into investor responses to the offer based on trading price trends after listing.

Example: Follow-On Offerings(FPO)

In May 2022, telecom operator Vodafone Idea tapped markets with a mammoth Rs 10,000 crore FPO, trying to sustain its uncertain financial position. This marked one of India’s largest ever follow-on issues by a telecom corporation. Vodafone Idea was reeling under massive Adjusted Gross Revenue (AGR)-related liabilities apart from adjusting to evolving dynamics after Jio’s entry. Through its mega FPO, Vodafone attempted to raise bailout equity capital to repay debt and reboot growth.

Offer Details

  • Vi planned to sell shares worth Rs 10,000 crore to institutional investors and public shareholders.
  • Floor price was set at Rs 12 per equity share with a cap of Rs 13 per share.
  • Ultimately,  over 2,186 million new shares were allotted via the issue.


The FPO aimed at shoring up Vi’s balance sheet and providing funding flexibility for the capital-starved telecom firm to grow operations. So its prime objective was to raise funds for ongoing capex, debt repayments, and working capital and improve liquidity that had dried up with persistent losses.

Subscription Levels

The response was moderate,  as Vi had been reporting heavy losses.

  • The overall issue got subscribed to only 1.05 times, despite its large size.
  • Institutional buyers bid for 2.11 times the 559 million shares allotted to them.
  • Non-institutional buyers applied for 0.23 times the allotted shares.

Through this mega FPO, debt-burdened Vodafone Idea tried raising Rs 10,000 crore via dilution of existing shareholder stakes, but saw a mixed response, highlighting the challenges telecom players were facing.

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Difference Between FPO and IPO

While both Follow-on Public Offerings (FPOs) and Initial Public Offerings (IPOs) allow companies to raise capital by offering shares to the public. However, they differ in various aspects, including the stage of the company, purpose, and regulatory requirements. An IPO marks a company’s first entry into the public stock market, whereas an FPO occurs when a publicly listed company issues additional shares to the public.

This table offers a comparison of FPO and IPO, highlighting their differences:

AspectFPO (Follow-on Public Offering)IPO (Initial Public Offering)
MeaningIssuance of additional shares by a publicly listed company.Initial sale of shares by a private company to the public.
Stage of CompanyCompany is already publicly listed.Company transitions from private to public.
PurposeRaise additional capital or funds for expansion, acquisitions, debt repayment, etc.Raise capital for the company’s growth, expansion, or initial investment.
Regulatory RequirementsLess stringent compared to an IPO.More rigorous regulatory requirements and scrutiny.
Market PerceptionIndicates confidence in the company’s growth and performance.High anticipation and speculation about the company’s potential.
CostGenerally lower costs compared to an IPO.Higher costs due to regulatory compliance and initial public offering expenses.
Investor BaseExisting shareholders and new investors.New investors who were not previously associated with the company.
DilutionExisting shareholders might experience dilution due to increased shares.Initial shareholders’ ownership stakes may dilute with new shares issued.

Advantages and Disadvantages of FPO

As Follow-on Public Offer (FPO) involves the issuance of new shares, both companies and shareholders can be impacted in both positive and negative ways. Undertaking an FPO brings its own set of trade-offs, from easier financing access to unwanted dilution effects. Let’s look at some of the advantages and disadvantages of FPO:


  • It enables current shareholders to engage in the company’s future expansion by providing them with the opportunity to purchase additional shares.
  • It increases the public float and liquidity of the company’s shares.
  • It helps in raising additional capital, which can be used for expansion, working capital, paying debts, etc.
  • It enhances the company’s brand and public image.
  • The existing shareholders get shares at a discounted price compared to the market price.


  • It dilutes the promoter’s control over the company.
  • Additional shares increase the supply of shares in the market, which may cause downward pressure on the stock price.
  • The process of follow-on public offers is lengthy and involves high costs like, merchant bank fees,, legal and compliance expenses.
  • It requires extensive disclosures and compliance with strict regulatory norms for public issues.
  • The funds raised may not be sufficient if the purpose of fund raising is large capital expenditure or acquisition.

How to Buy a FPO?

To apply for an FPO, you first need to have a demat and trading account with any brokerage house. Once the FPO opening date nears, locate the FPO details on your brokerage platform or the stock exchange website. Carefully read through the offer document to know the issue objectives, price band, lot size, etc.

Decide on your desired application size and place the order with your brokerage firm. The allotment of shares happens on a proportionate basis if the issue is oversubscribed. The broker will accordingly credit shares into your demat account and unblock excess funds after the basis of the allotment is finalized. Start trading the newly acquired shares once they get listed on the stock exchange after the FPO closes.


A follow-on public offer presents an additional opportunity for retail investors to gain exposure in an already listed company by applying for fresh shares issued to raise growth capital. By carefully evaluating the offer document and fundamentals of the issuing company, investors can make informed decisions about participating in such secondary market offerings for portfolio diversification and long-term wealth creation.

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What is the meaning of a follow-on offering?

The meaning of a follow-on offering (FPO) refers to a process where a company issues additional shares of stock following its initial public offering (IPO). FPOs allow companies to raise more capital by selling more shares to the public.

Is it good to invest in FPO?

Whether it’s good to invest in an FPO depends on various factors, including the company’s financial health, market conditions, and your investment goals. FPOs can offer an opportunity for growth or dilution of existing shares, so thorough research is crucial before investing.

What is the purpose of the FPO?

The purpose of an FPO is primarily to raise additional funds for the company. These funds can be used for various purposes, like expansion, debt repayment, research and development, or other corporate activities aimed at enhancing the company’s growth.

Can we sell FPO shares immediately?

Generally, FPO shares can be sold immediately after they’re allotted, subject to market conditions and trading regulations. However, it’s advisable to check for specific lock-up periods or restrictions imposed by the company or regulatory authorities.

Who is eligible for FPO?

Individuals eligible for participating in an FPO typically include existing shareholders, institutional investors, and the general public. Eligibility criteria may vary based on regulations, company policies, and the nature of the offering.

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