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What is an FPO (Follow-on Public Offer)
An FPO is a public offering by a company that is already listed on the exchange. It can involve issuing new shares to raise fresh capital (dilutive FPO) or selling existing shares on behalf of the promoter (non-dilutive FPO). Open to all investors, unlike a rights issue which is restricted to existing shareholders.
In one line
A Follow-on Public Offer (FPO) is a public offering of shares by a company that is already listed on the exchange, either issuing new shares to raise fresh capital for the company or enabling existing shareholders to sell their stake, and it is open to all investors including those who did not hold shares before, unlike a rights issue which is restricted to existing shareholders.
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FPO vs IPO: the key difference
An IPO (Initial Public Offer) is when a company offers its shares to the public for the first time, moving from private to publicly listed. An FPO follows after the company is already listed and has an existing market price. Because the company is already trading, there is a reference price in the market, which makes pricing an FPO somewhat more straightforward than an IPO. Investors can compare the FPO price against the current market price to judge whether the offer is attractive.
Both IPO and FPO follow the SEBI-regulated public offer process, including a Red Herring Prospectus (RHP), a book-building or fixed-price mechanism, mandatory disclosures, and an allotment process. The investor experience is broadly similar: you apply through ASBA (Application Supported by Blocked Amount) via your bank or broker, your funds are blocked rather than immediately debited, and shares are allotted post-closure.
Dilutive vs non-dilutive FPO
A dilutive FPO involves the company creating and issuing new shares to the public. The money raised goes to the company for purposes disclosed in the offer document (capacity expansion, debt repayment, working capital, acquisitions, etc.). Because new shares are added, the existing shareholder base is diluted: each existing shareholder owns a smaller percentage of the company after the FPO, though the company now has more cash on its balance sheet.
A non-dilutive FPO involves existing shareholders (promoters or financial investors) selling their shares to the public. No new shares are created and the company receives nothing from the offer. This is mechanically similar to an OFS, but structured as a full FPO with a prospectus and a book-building process rather than the OFS exchange-window format. The distinction matters for investors: in a dilutive FPO you are funding the company's future; in a non-dilutive one you are simply buying existing shares from the sellers.
Pricing and why the FPO price matters
Because a listed company already has a market price, the FPO price is benchmarked against it. An FPO priced at or above the market price offers little incentive for investors to lock in their capital through the offer process rather than simply buying on the exchange. FPOs are therefore typically priced at a discount to the market price to attract buyers.
However, the discount is often small and may not reflect the full information value in the offer. Investors should read the RHP carefully to understand why the company is raising capital, how it plans to deploy the funds, and how the dilution affects earnings per share projections. An FPO for a high-quality business raising capital for a clear return-generating purpose is very different from a distressed company raising capital to service debt.
FAQ4 reader questions · AEO-eligible
Common questions on what is an fpo.
What is the difference between an FPO and an IPO?
An IPO is the company's first public offer when it lists on the exchange for the first time. An FPO is a subsequent public offer by a company that is already listed. An FPO has the reference of an existing market price; an IPO does not.
Is an FPO better than a rights issue?
They serve different purposes. An FPO is open to all investors (including new ones) while a rights issue is exclusive to existing shareholders in proportion to their holding. Both raise capital for the company, but an FPO can bring in entirely new investors while a rights issue keeps the capital raise within the existing shareholder base.
How do I apply for an FPO?
The application process is identical to an IPO. You apply through ASBA via your bank or broker's platform, specifying the number of lots at the offered price. Funds are blocked in your bank account until allotment.
Does an FPO dilute existing shareholders?
A fresh-issue FPO (where new shares are created) dilutes existing shareholders' percentage ownership. A non-dilutive FPO or OFS-style FPO (where existing shares are sold by existing holders) does not create new shares, so no dilution occurs.
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