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A Follow-On Public Offer (FPO) allows publicly traded companies to issue additional shares to raise capital after their initial public offering (IPO). FPOs are categorized into diluted, non-diluted, and at-the-market offerings, each affecting outstanding shares and earnings per share differently. The success of an FPO depends on company profitability, market sentiment, and growth potential, making it a safer investment option compared to IPOs.

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A Follow-On Public Offer (FPO) allows publicly traded companies to issue additional shares to raise capital after their initial public offering (IPO). FPOs are categorized into diluted, non-diluted, and at-the-market offerings, each affecting outstanding shares and earnings per share differently. The success of an FPO depends on company profitability, market sentiment, and growth potential, making it a safer investment option compared to IPOs.

Uploaded by

vanshika bagaria
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

FOLLOW-ON PUBLIC OFFER (FPO)

FPO is a process where public traded companies issue additional shares to investors after the initial
public offering (IPO). This process is done by companies to raise further capital, often for expansion or
debt reduction, leveraging their established presence in the stock market. These shares are made
available to everyone, not just current shareholders. Additionally, the business must be publicly traded
on a stock exchange and have previously offered an IPO.

In FPO, documentation and regulatory scrutiny is not much needed, the company needs to provide the
prospectus to potential investors. Unlike IPOs that either has a Book Building Offering or a Fixed Price
Offering, FPOs are categorized into three parts:

1. Diluted FPO - It is a process where company issues fresh shares to public to raise capital. It
results in increasing company’s total outstanding shares and decreasing earning per shares (EPS).
The share price is reduced though the value of company remains the same.
2. Non-diluted FPO – It is a process where company’s largest shareholders, such as board of
directors or the founder of the company, offers the shares they hold privately to the general
public. It does not increase the number of outstanding shares. As there is no change in shares so
the EPS of company is not effected.
3. At-the-market FPO – This allow the companies to raise funds based on real-time price of the
shares. It means that if the company issuing fresh shares states fall in the share price, it can pull
out offering the shares to the public. It is also called controlled equity distributions.

Many Indian enterprises have used an FPO to obtain extra money by issuing new shares. Ruchi Soya,
owned by Patanjali, is one such case. They published their FPO on March 24th, 2022, which was opened
for investor subscription until March 28th,2022.

The shares had a face value of Rs. 2 and proved between Rs. 615 and Rs. 650 per share. Total issue size
was of 4300 crores. On April 8th,2022 the shares were listed on stock markets.

The success of FPO entirely depends on factors such as profitability of the company, market and investor
sentiments. Also current market trend and growth potential of the company. Furthermore, the Indian
Government has used the FPO method as an effective way to disinvest it’s stake in government listed
companies. Even the investors consider FPO as a better investment option. It is so because for IPO the
risk level should be very high, as there is not much valuable insight into the company. So FPO is
considered as a safer option for both individual investors and new investors as they can evaluate and
analyze the company by executing technical and fundamental analysis.

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