Follow on public offer or FPO is a way by which companies already listed on the stock exchange issue shares to the public. It is different from an IPO which is when a company offers its shares to the public for the first time.

Types of FPO

There are two ways in which a company can conduct its follow on public offer:


Dilutive FPO is when the new offer of shares actually increases the number of outstanding shares of the company.

The company board issues a new set of shares to be offered to the public. Such an FPO is undertaken by the company to fund expansion activities or pay for debts. A recent example of dilutive FPOs in the case of Indian stock markets is ITI Ltd. FPO.

Indian Telecom Industries Ltd.or ITI is a telecom manufacturing company based out of Bangalore. It is a public sector company.

ITI had put a fresh issue of 18 crore shares on offer within a price band of Rs 71 to 77 per share. This was done to increase the public shareholding and dilute the government’s stake in the company which was above 85% in January.

However later in February 2020, ITI withdrew its FPO citing prevailing market conditions.


Nondilutive, as the name suggests, does not dilute the existing shareholding. The shares issued in a non-dilutive IPO are those that are already in existence. This means that it is the directors or the bigger shareholders who sell their shares and offer them to the public.

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The non-dilutive FPO does not carry any material benefits for the company. Mostly it is used to change the shareholding ownership pattern.

Why does a company need an FPO?

A company generally needs a follow-on offering to raise ‘additional capital’ for various reasons and this goal is achieved by conducting a dilutive FPO where new shares are offered and new money is generated.

What happens in an FPO?

The issue price for an FPO is mostly lower than the prevailing market price. This is done by the company to get more and more subscribers to its issue. Lower demand for the listed shares eventually brings down the market price and levels it with the FPO issue price.

Should you subscribe to an FPO?

Follow on offers do have an upper hand when compared to IPOs. You have an idea about the company, its management, business practices, efficiency, etc.

The company is not new to you. You have historical reference for its stock market performance, earnings report and a lot more data to bank on.

It does not carry as much risk as an IPO. In fact, a lot of times the price fixed for an IPO is kept lower than the market price to induce shareholders to invest in the FPO.

So many investors engage in arbitrage when they buy shares in the FPO at a discounted market price and then sell it in the market to get a premium on their transaction.

FPO is for investors who do not have the time and are not adept with complex financial knowledge to analyse IPOs.

FPOs too require you to research the company and historical performance but the degree of homework required in FPO is much easier hence it goes very well for such slightly risk-averse investors; giving them an opportunity to access shares of a company at a discounted price.

FPO versus listed shares

Another question that may cross your mind is why go for a follow on public offer if the shares of the company are already listed? What is the difference? The only reason why any investor would go for FPOs over listed shares is because of the price advantage.

How is a follow on offering different from an initial public offering (IPO)?

Initial Public Offer is when unlisted companies offer shares for the first time and get listed on the stock exchanges. FPOs is something that happens when a company has already listed on the exchanges and wants to offer shares again to the public.

In IPO new shares are offered. In FP either new shares are offered or old promoter shares are put on offer again.

The IPO price is set by the company within a price band. Prices at which FPO shares are offered are a discount to the market price.

Here are a few differences between the IPO and FPO. 

1. Meaning The first issue of shares by a company Issuance of shares by a company to raise additional capital after IPO
2. Price Fixed or variable price range Price is market-driven and dependent on number of shares increasing or decreasing
3. Share capital Increases because the company issues fresh capital to the public for listing. Number of shares increases in dilutive FPO and remains the same in non-dilutive FPO
4. Value Expensive Cheaper in most cases because the value of the company is getting further diluted.
5. Risk Riskier Comparatively less risky
6. Status of the company An unlisted company issues an IPO An already listed company issues an FPO