If you’ve ever followed the stock market, you’ve probably heard about IPOs, right? That exciting moment when a company first sells its shares to the public. But what happens after that? Sometimes, even after getting listed, a company still needs more funds to grow or clear debts. That’s when something called an FPO steps in.
So, what is FPO in share market all about? In simple terms, it’s when a listed company offers more of its shares to the public to raise extra money. In this blog, we’ll walk through how FPOs work, why companies choose them, and what investors should keep in mind before investing.
FPO stands for Follow-on Public Offer, it is a process where a company that is already listed on the stock exchange issues new shares to the public. In simple terms, an FPO in share market means selling extra shares to raise more money after the company has already gone public through an IPO.
The main goal of an FPO is to bring in additional funds to expand the business, reduce debt, or meet other financial needs. Since the company’s shares are already being traded, investors can easily check its past performance and make smarter investment choices. This makes FPOs more transparent and less risky than IPOs for most investors.
When it comes to FPO in share market, not all follow-on offers work the same way. Companies choose the type of FPO based on their financial goals and the needs of their shareholders. Broadly, there are two main types of FPO Dilutive FPO and Non-Dilutive FPO.
A dilutive FPO happens when a company issues new shares to the public. This increases the total number of shares available in the market. Since there are now more shares than before, the ownership percentage of existing shareholders slightly decreases. That’s why it’s called “dilutive.”
The main purpose of a dilutive FPO is to raise extra funds for the company’s growth, such as expanding operations, clearing loans, or launching new projects. Although the earnings per share (EPS) might reduce for a while, this type of FPO can strengthen the company’s financial position in the long run.
Example: When ONGC launched its FPO, it was done to raise funds for business expansion and meet government divestment targets.
In a non-dilutive FPO, the company itself does not issue new shares. Instead, existing shareholders like promoters or early investors — sell part of their holdings to the public. Since no new shares are created, the total number of shares in the market stays the same, and there’s no dilution in ownership.
This type of FPO helps investors gain access to shares that were earlier privately held, without changing the company’s capital structure. The money from these sales goes directly to the selling shareholders, not to the company.
Example: SBI Cards saw its promoters sell a portion of their stake through a non-dilutive FPO to increase the public shareholding while keeping the company’s total shares unchanged.
The main difference between FPO and IPO is that an IPO (Initial Public Offering) is when a company sells its shares to the public for the first time, while an FPO in share market happens after the company is already listed. In simple terms, an IPO marks the start of a company’s stock market journey, whereas an FPO is a step taken later to raise additional funds.
| Basis of Difference | IPO (Initial Public Offering) | FPO (Follow-on Public Offer) |
|---|---|---|
| Meaning | The first time a company offers its shares to the public. | A listed company issues new or existing shares to raise more funds. |
| Company Stage | Used by companies entering the stock market for the first time. | Used by already listed companies to raise extra capital. |
| Risk Level | Usually higher, as investors don’t have prior market data. | Relatively lower, since investors can check past performance. |
| Pricing | Price is decided based on company valuation and investor demand. | Price is usually based on current market trends and share value. |
| Objective | To raise funds for launching or expanding the business. | To raise additional funds for growth or debt repayment. |
| Ownership Dilution | Creates new ownership among public investors. | May dilute existing ownership if new shares are issued. |
| Investor Confidence | Based on potential and projections. | Based on real market performance and reputation. |
To understand how FPO works in the share market, think of it as a follow-up process where a listed company invites the public to buy more of its shares. The goal is to raise fresh capital for expansion, repay loans, or meet other financial goals. The process of an FPO in share market is well-structured and regulated to maintain transparency and protect investor interests.
Here’s how an FPO typically works, step by step:
Overall, the FPO process in share market is designed to help companies strengthen their capital base while giving investors another chance to invest in a company they already trust.
Applying for an FPO in share market is a simple and quick process, especially if you already have a Demat account. Here’s a step-by-step guide on how to apply for an FPO using platforms like Lakshmishree and their Shree Varahi app.
An FPO in share market can be a great opportunity for both companies and investors, but like any other market offering, it has its own set of pros and cons.
Investing in an FPO in share market can be a smart move, but only if you know what to look for. Since an FPO involves companies that are already listed, you’re not betting on an unknown business like in an IPO. Instead, you’re evaluating a company with a visible performance history, making your decision more informed and data-driven.
Before investing in any Follow-on Public Offer, consider these key points to help you decide wisely:
An FPO in share market is an effective way for already listed companies to raise additional funds while giving investors another chance to buy their shares. It plays a vital role in helping businesses grow, improve liquidity, and strengthen financial stability. For investors, an FPO offers a more transparent and less risky investment option compared to an IPO, as the company’s performance is already known.
The full form of FPO in share market is Follow-on Public Offer. It means a listed company offers new or existing shares to the public to raise additional funds after its initial public offering (IPO).
The main difference between FPO and IPO is that an IPO is the first time a company issues its shares to the public, while an FPO is offered later by an already listed company to gather more capital.
Yes, retail investors can easily apply for an FPO in share market using their Demat accounts through online platforms like Lakshmishree’s Shree Varahi app, just like they do for IPOs.
Investing in an FPO can be good for short-term gains if the company’s financials and market demand are strong, but investors should always analyze price trends and business fundamentals before applying.
Some well-known examples of successful FPOs in India include those from ONGC, NTPC, and SBI, which helped the companies raise large funds while allowing investors to participate in established businesses.
Disclaimer: This article is intended for educational purposes only. Please note that the data related to the mentioned companies may change over time. The securities referenced are provided as examples and should not be considered as recommendations.
