What is FPO (Follow on Public Offer)?

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The basic difference between Initial Public Offer (IPO) and Follow on Public Offer (FPO) is as the names suggest IPO is for the companies which have not listed on an exchange and FPO is for the companies which have already listed on exchange but want to raise funds by issuing some more equity shares.

Companies usually go to debt market for raising their short term needs. Either they issue bonds or get loans. But if they have massive expansion plans they may not raise sufficient funds in the debt market and even if they could it costs more. Companies come up with follow on offer to restructure their business or to raise funds for new business or to expand the existing business.

Similar to an IPO a price band is fixed (usually with the help of Investment banks) for the issue and interested investors can apply for it. Unlike the corporate actions (such as bonus, rights issue which are applicable only to the existing stake holders) FPO is open to all investors. The price band for the FPO depends on the market value of the existing company shares and the reason for raising funds.

In an FPO shares are issued in any of the ways listed below.

1. Promoters dilute their stake by offering some of their shares to the public.

2. Company issue fresh shares.

3. A combination of the above two approaches.

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{ 47 comments… read them below or add one }

rijo January 24, 2010 at 8:50 am

Very well explained. Thanks

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Kavina January 31, 2010 at 6:38 am

Hitherto, I’m really confusion between these terms. But this neat explanation clarified me

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Harsha February 2, 2010 at 6:29 am

Thanks it was very well defined!

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vikram February 19, 2010 at 6:04 am

Thank for kind cooperation.

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vijay March 5, 2010 at 5:35 am

How do we differentiate between Rights issue and FPO ?…..

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RAMESH March 5, 2010 at 6:19 am

Can any 1 let me know the listing process of FMPS by mutual funds on NSE?

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avijit March 11, 2010 at 9:00 pm

WHAT IS fully and partly convertible debentures?WHAT IS QIP?

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nivas March 15, 2010 at 11:00 am

thanks ,,, i got my answer,.

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chetan March 21, 2010 at 6:05 am

thanks, some more details could have been included

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srinivasa reddy May 19, 2010 at 7:53 am

fine explanation.

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PRAJNA October 7, 2010 at 3:43 am

WHAT IS ELM?

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Satyam October 7, 2010 at 3:16 pm

Hi Prajna,

ELM is Extreme Loss Margin. Here are the 2 links which will provide you more information.
http://lastbull.com/nse-quotes-%E2%80%93-extreme-loss-rate/
http://lastbull.com/nse-quotes-%E2%80%93-different-types-of-marginsvolatility/

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Renu Tikiani October 21, 2010 at 6:11 am

thank It was Very well difine.

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R.Kesavan November 7, 2010 at 12:40 pm

Your elucidation of difference between IPO and FPO is quite stimulating and the clarity is well brought out to the lay persons and the ignoramuses like me. Kudos and encomiums !!!
R.Kesavan.
kesavan7777@yahoo.com

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arindam November 9, 2010 at 3:47 pm

short and crisp but easily comprehendible….thanks you very much for explicit explanation.

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yogesh soni November 10, 2010 at 3:00 pm

very well define.thanks

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Abhishek Nigam December 1, 2010 at 5:59 am

I have a question regarding the allotment price in case of the FPO.
What would be the impact of price on the share after FPO allotment?
How does it vary as per market rate of that share?

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Pankaj Priyadarshi December 2, 2010 at 6:59 am

Abhishek,
It depends on whether new shares are issued in FPO.
If the promotors are selling their stake in FPO and there are no new shares, the price will not be impacted. In this case number of outstanding shares doesn’t increase.
In some cases, company issues new shares in FPO. In this case, number of stocks will increase and hence prices will go down.

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BHAVNA January 18, 2011 at 11:30 am

THANKS ,I GOT MY ANSWER

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PRAVEEN January 23, 2011 at 7:35 am

nice explanation….
thanks………..!

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fpo February 3, 2011 at 1:50 pm

Well defined,
thanks

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kulothungan February 24, 2011 at 10:25 am

good explanation

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Sathish Emmadi February 24, 2011 at 3:34 pm

Thanks Kulothungan. Keep visiting the site.

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abhay February 27, 2011 at 12:41 pm

thanks dude but i need more about prefincial share public limited and limited ….revocation..

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Sathish Emmadi February 27, 2011 at 2:04 pm

Hi Abhay,

I didn’t get you. If you were referring to Preferential Shares please take a look at http://lastbull.com/what-are-preferential-shares/

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Antony March 20, 2011 at 8:12 am

Iam a beginner and i am happy that i was able to understand your description……….Thanks

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Rina April 29, 2011 at 8:03 am

THANKS FOR CLARIFYING MY CONFUSIONS ABOUT THESE TWO…

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RAJ June 1, 2011 at 4:08 am

TY dude.. it s a good defination….

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ANUJ June 18, 2011 at 5:11 am

NICE ARTICLE

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Sathish Emmadi June 18, 2011 at 5:22 pm

Hi Anuj,

Thank you. Keep visiting the site.

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Rahul bhavsar June 19, 2011 at 8:23 am

Hii!!!!
I already know about recession but would u please explain how the recession of other country like U.S.A.will affect the economy of INDIA?

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NEER June 19, 2011 at 1:55 pm

vry well defined…….

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Sathish Emmadi June 19, 2011 at 4:34 pm

Hi Rahul,

I am explaining it in short.

When Lehman Brothers filed bankruptcy, all creditors ran to insurance firms like AIG to exercise Credit default Swaps (CDS, an agreement where in an insurer pays money to the lender if the borrower defaults). AIG was at the edge of bankruptcy after paying most of the lenders. All the companies worldwide where AIG invested got affected. The effect is spiral.

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Sathish Emmadi June 19, 2011 at 4:38 pm

For example if AIG defaults, the insurer of AIG and other companies deals has to pay.

In current circumstances, if Greece defaults, the European banks(which invested in Greece Sovereign debt)’ balance sheets will get bad. So all the companies across the world where these banks invested will suffer.

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Sathish Emmadi June 19, 2011 at 4:39 pm

Thanks Neer. Recommend articles of the site to your friends.

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Rahul bhavsar June 20, 2011 at 5:49 am

Hii!!!!
I want to buy infrastructure bond plz help me in following
>how to buy infra.bond?
>Any bank A/C & stock broker is needed?
> is there any age limit?

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Jagjit singh September 15, 2011 at 4:04 pm

hi m frm icici direct, ONGC FPO is about to launch in few days. You can get open yr bank and demat ac with ICICI. For more info contact me on mail jagjitsingh.av@gmail.com

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Sathish Emmadi June 20, 2011 at 3:55 pm

Hi Rahul,

At present no infrastructure bond issue is open. I provide details about the infra bonds without fail. You can register for sending articles on email and read the details when they are posted. Or You can check the site regularly.

Bank Account is needed as you need to give a cheque and the interest amount would be credited online if you opt for it. brokerage account is needed in some cases depending on the issue. I don’t think there is any age limit.

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rohit k . naidu June 29, 2011 at 4:41 am

good one thank you

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Sathish Emmadi July 1, 2011 at 2:13 pm

Thanks Rohit,

Keep visiting the site.

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dhruv August 2, 2011 at 10:07 am

i would like to know if the prices of new shares issued in fpo can be more than the market price of existing shares of the same company. please reply ASAP. i have a debate too prepare. i would be highly grateful.

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CA VIKRANT KUMAR August 2, 2011 at 11:12 am

VERY CONCEPTUALLY DEFINED IN QUITE PLAIN AND SIMPLE TERM

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Sathish Emmadi August 2, 2011 at 2:29 pm

Thanks Vikrant. Keep visiting the site.

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Sathish Emmadi August 2, 2011 at 2:32 pm

Hi Dhruv,

Yes, it is quite possible. In this case, if the sentiment is positive in the scrip the market price goes up to match the FPO price.

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raj August 30, 2011 at 5:31 am

Hi Dhruv,
Thanks, I have doubt. If market price is less than FPO, then why should any one buy in FPO?

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Mangesh September 7, 2011 at 8:17 pm

1)How the share price is decided?
2) What factors should investor know if he has to predict if the price of certain share will go high or dip down? How to predic it?

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Gaurav September 21, 2011 at 12:55 pm

Thanks for sharing this piece of information….

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