Companies can swiftly raise capital without having to announce the what is follow on public offer offering. Additionally, ATM offerings generally entail lower costs compared to traditional follow-on offerings and demand minimal management engagement. However, conducting thorough research and analysing the company’s financials and prospects is important before investing. Although business owners can raise initial funds through an Initial Public Offering (IPO), what happens when the company needs additional funds? This is where a Follow-On Public Offer (FPO) helps business owners to ensure they have adequate funds to keep their business activities running smoothly. In FP either new shares are offered or old promoter shares are put on offer again.

The infusion of cash is good for the long-term outlook of the company, and thus, it is also good for its shares. 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.

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.

More About IPO

• Therefore, if a business aims to raise a substantial capital sum, this may not be the preferred method.
• The trading avenues discussed, or views expressed may not be suitable for all investors.
• The share price during the initial public offering (IPO) is arrived at based on the company’s performance, and the company hopes to achieve the desired price per share during the IPO listing.
• This makes FPOs appealing to investors who are willing to take on some risk in exchange for the chance to buy shares at a lower price.
• Usually the gain of cash inflow from the sale is strategic and is considered positive for the longer-term goals of the company and its shareholders.

Non-Dilutive FPO is a type of FPO that does not decrease the valuation and the ownership percentage of the current shareholders. The process witnesses the current shareholders selling their stakes for personal gains, resulting in no change in the share float. In fact, a lot of times the price fixed for an IPO is kept lower than the market price to induce shareholders to invest in the FPO. ITI had put a fresh issue of 18 crore shares on offer within a price band of Rs 71 to 77 per share. This was done to increase the public shareholding and dilute the government’s stake in the company which was above 85% in January. A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company's initial public offering (IPO).

Q What is Rights issue?

FPOs should not be confused with IPOs, the initial public offering of equity to the public. FPOs are additional issues made after a company is established on an exchange. When it comes to the pricing of an upcoming IPO, it is a fixed price issue or the price is set through a book building process. In the case of a Follow-On Public Offering, the price discovery mechanism is more or less similar to an IPO. However, the only difference is that the price of a follow-on issue is almost always lower than that prevailing market price. A Follow-On Public Offering is the process through which a company can issue its shares once again to the public to raise funds through the sale.

Types of Follow-On Public Offers

Instead, the shares that are already in existence are sold to investors by shareholders. This is akin to the Offer for Sale (OFS) component of an upcoming IPO. The price of the shares is determined by market factors and is typically lower than the current market price. Companies develop an FPO to either raise additional capital for the company or reduce its debt.

Difference Between FPO and IPO

• You have historical reference for its stock market performance, earnings report and a lot more data to bank on.
• It helps entities diversify equity and ensure raising additional capital for their business.
• On September 25, 2019, Axis Bank conducted a QIP in order to raise Rs Crs.
• Often, FPO shares are priced at a discount to the market rate, making them attractive to investors who may choose to sell at a premium once listed.

It not only turns advantageous for companies, but also for investors who get the shares at a less expensive rate and get a higher stake in the company, in return. This includes new investors looking to purchase the shares of a company as well as existing shareholders wanting to increase their ownership within the entity. In a non-dilutive FPO, however, the control of the company isn’t diluted since no new shares are issued to the investors.

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After listing on a stock exchange, companies can actively issue Follow on Public Offerings (FPOs) to raise additional capital from the public. Funding expansion plans, making acquisitions, paying off debt, or investing in new projects are some examples. Larger and established companies often do FPOs with a higher market capitalization. Thus, FPOs can also help increase the liquidity of a company’s shares and provide an exit strategy for existing investors. IPOs and FPOs are used by companies or corporations that want to raise funds from the public. Qualified Institutional Placement (QIP) and Follow-on Public Offering (FPO) are methods companies use to raise capital, but they differ in investor type and share issuance.

The shares had a face value of Rs 2 with a price band of Rs 615 to Rs 650 per share. The lot size for the FPO issue was 21 shares, with the issue size amounting to Rs 4,300 crores. Companies require capital regularly to fund various business activities such as expansion, paying off debt etc. Business owners often seek external capital as they cannot keep funding the business through personal savings. When a company increases in value, the need for capital increases, requiring them to raise funds through the general public. Another question that may cross your mind is why go for a follow on public offer if the shares of the company are already listed?

Company Analysis: How do Investors evaluate a company?

A company issuing fresh shares through FPO can pull out of the offering if its share price falls. Due to its ability to offer shares on the secondary market at current market prices, at-the-market FPOs are also called controlled equity distributions. Follow-on public offering (FPO) is a scheme under which an organization that is already listed on the stock exchange issues extra shares after the initial public offering (IPO).

The company board issues a new set of shares to be offered to the public. Such an FPO is undertaken by the company to fund expansion activities or pay for debts. A recent example of dilutive FPOs in the case of Indian stock markets is ITI Ltd. Follow on public offer or FPO is a way by which companies already listed on the stock exchange issue shares to the public. It is different from an IPO which is when a company offers its shares to the public for the first time.

The share price during the initial public offering (IPO) is arrived at based on the company’s performance, and the company hopes to achieve the desired price per share during the IPO listing. However, the share price for FPO is market-driven because the share is already trading on the stock exchange. Therefore, this helps the investor understand the company valuation before buying. Also, the price of follow on public shares is usually at a discount price than the current trading price.

Kindly note that this page of blog/articles does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This article is prepared for assistance only and is not intended to be and must not alone be taken as the basis of an investment decision. Please note that past performance of financial products and instruments does not necessarily indicate the prospects and performance thereof.

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. A Follow-On Public Offer (FPO) is a type of public offering in which a company already listed on the stock exchange issues new shares of its stock to the public. The companies that have already raised funds through IPOs by issuing their shares for the first time can issue additional shares through FPOs. A follow-on public offer (FPO) is the issuance of new shares by a public company after its initial public offering (IPO). As such, FPOs mean that additional shares are offered to the public by companies that are already listed on exchanges. Follow-on public offerings, which are also known as secondary offerings, are generally used by companies to raise additional capital for their growth.