Follow On Public Offer (FPO)


When a company wants to raise capital from the public, it has several options available to it. One such option is a Follow On Public Offer (FPO). In this article, we will explore what an FPO is, how it works, and why companies choose this method to raise funds. We will also discuss the advantages and disadvantages of FPOs and provide some real-life examples to illustrate their use.

What is a Follow On Public Offer (FPO)?

A Follow On Public Offer (FPO) is a method used by companies to raise additional capital from the public after their initial public offering (IPO). In an FPO, the company issues new shares to the public and the existing shareholders can also sell their shares. The shares are listed on a stock exchange, allowing investors to buy and sell them.

Unlike an IPO, where a company goes public for the first time, an FPO is a subsequent offering made by a company that is already listed on a stock exchange. FPOs are often used by companies to raise funds for various purposes, such as expansion, debt repayment, or working capital requirements.

How does an FPO work?

The process of an FPO involves several steps:

  1. Decision to raise capital: The company's management decides to raise additional capital from the public through an FPO.
  2. Appointment of intermediaries: The company appoints investment banks or merchant bankers as intermediaries to manage the FPO process.
  3. Filing of offer document: The company prepares an offer document, also known as a prospectus, which contains all the relevant information about the FPO, such as the number of shares to be issued, the price at which they will be offered, and the purpose of the FPO.
  4. Approval from regulatory authorities: The offer document is filed with the regulatory authorities, such as the Securities and Exchange Board of India (SEBI) in India, for their approval.
  5. Marketing and roadshows: Once the offer document is approved, the intermediaries market the FPO to potential investors through roadshows, presentations, and other promotional activities.
  6. Subscription period: The FPO opens for subscription for a certain period of time, during which investors can apply for shares.
  7. Allotment of shares: After the subscription period ends, the company allots shares to the investors based on the demand and availability of shares.
  8. Listing on stock exchange: Once the shares are allotted, they are listed on a stock exchange, allowing investors to buy and sell them.

Advantages of FPOs

FPOs offer several advantages to companies:

  • Access to capital: FPOs provide companies with a way to raise additional capital from the public, which can be used for various purposes, such as funding expansion plans or reducing debt.
  • Increased liquidity: By listing additional shares on a stock exchange, FPOs increase the liquidity of the company's stock, making it easier for investors to buy and sell shares.
  • Opportunity for existing shareholders to sell: FPOs allow existing shareholders to sell their shares, providing them with an opportunity to exit their investment or reduce their stake in the company.
  • Enhanced visibility and credibility: FPOs can enhance a company's visibility and credibility in the market, as it demonstrates the company's growth potential and its ability to attract public investment.

Disadvantages of FPOs

While FPOs offer several advantages, they also come with some disadvantages:

  • Market conditions: The success of an FPO is highly dependent on market conditions. If the market is bearish or investor sentiment is low, it may be challenging for the company to raise the desired amount of capital.
  • Dilution of ownership: When a company issues new shares through an FPO, it dilutes the ownership stake of existing shareholders. This can lead to a decrease in the earnings per share and the control of existing shareholders.
  • Costs and regulatory requirements: FPOs involve significant costs, such as underwriting fees, legal fees, and marketing expenses. Additionally, companies need to comply with various regulatory requirements, which can be time-consuming and expensive.

Examples of FPOs

Let's take a look at some real-life examples of FPOs:

  1. Reliance Industries: In 2020, Reliance Industries, one of India's largest conglomerates, raised approximately $7 billion through an FPO. The funds raised were used to reduce the company's debt and strengthen its balance sheet.
  2. State Bank of India: In 2017, the State Bank of India, India's largest public sector bank, raised around $1.8 billion through an FPO. The bank used the funds to meet its capital adequacy requirements and support its growth plans.
  3. Tata Motors: In 2015, Tata Motors, a leading automobile manufacturer in India, raised approximately $750 million through an FPO. The company utilized the funds to repay debt and invest in new product development.


Follow On Public Offers (FPOs) provide companies with a way to raise additional capital from the public after their initial public offering (IPO). FPOs offer advantages such as access to capital, increased liquidity, and an opportunity for existing shareholders to sell their shares. However, they also come with disadvantages, including market dependency, dilution of ownership, and costs and regulatory requirements.

Despite the challenges, FPOs have been successfully used by companies around the world to raise funds for various purposes. By understanding the process and weighing the pros and cons, companies can make informed decisions about whether an FPO is the right choice for their capital-raising needs.

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