Further Public Offer
Also written FPO · Further Public Offer (FPO) · Follow-on public offer
A fresh public offer of securities by a company that has already made an IPO — used to raise more capital or, as an offer for sale, to widen public shareholding.
In plain language
An IPO happens once. After that, a listed company that wants to raise money from the public again makes a Further Public Offer.
It can raise new capital — for growth, or to redo its capital structure by retiring debt. Or it can be an offer for sale by existing shareholders, typically when the promoters need to bring their stake down, either to meet the minimum public shareholding requirement or because the IPO lock-in has ended and they choose to dilute.
How it works
Eligibility (section 3.8.2). An issuer may make an FPO if it has not changed its name within the last one year before filing the offer document — or, if it has, at least 50 per cent of the preceding full year's revenue came from the activity indicated by the new name.
If it does not meet that condition, it may still make an FPO through book building, undertaking to allot at least 75 per cent of the net offer to QIBs and to refund the full subscription money if it fails to do so.
Why an offer for sale matters here. Companies listed on the exchanges must maintain a minimum public shareholding of 25 per cent (section 3.17.1). Companies that listed with a smaller public float under the Rs 1,600 crore-plus bands of the minimum-offer rules must reach 25 per cent within three years of listing (section 3.7.1). A promoter offer for sale through an FPO is one route there; section 3.17.1 notes that promoters may also sell through a QIP for the same purpose.
How it differs from its neighbours.
| Offered to | Existing company? | |
|---|---|---|
| IPO | The public | First offer |
| FPO | The public | Already listed |
| Rights issue | Existing shareholders, in proportion | Yes |
| QIP | QIBs only, private placement | Listed for at least 1 year |
A worked example
Illustrative figures. A listed company has 10 crore shares; the promoters hold 8 crore (80 per cent), so the public holds only 20 per cent. The share trades at Rs 300. The promoters need public shareholding at 25 per cent.
Route 1 — offer for sale in an FPO.
Promoters sell 0.5 crore shares → 7.5 crore of 10 crore = 75%
Money raised: 0.5 crore × Rs 300 = Rs 150 crore, paid to the promoters
Share capital: unchanged at 10 crore shares
Route 2 — fresh issue in an FPO.
Promoters keep 8 crore; need 8 ÷ total = 75% → total = 10.67 crore
New shares ≈ 0.67 crore → 8 ÷ 10.67 = 75%
Money raised: 0.67 crore × Rs 300 ≈ Rs 200 crore, paid to the company
Both reach 25 per cent public shareholding. Route 1 puts Rs 150 crore in the promoters' pockets and changes nothing for the company's balance sheet. Route 2 gives the company Rs 200 crore of new capital and dilutes every existing shareholder's percentage.
Why NISM asks about it
Chapter 3 (Primary Markets) lists the FPO alongside the IPO as a type of public issue (section 3.8) and sets out its eligibility and purposes in section 3.8.2. Questions test the name-change condition, the 75 per cent QIB fallback, and the difference between an FPO, a rights issue and a QIP.
Common exam traps
- An FPO is only for a company that has already made an IPO.
- An FPO is offered to the public; a rights issue only to existing shareholders. Confusing the two is the standard error.
- An FPO can be an offer for sale, in which case the company raises nothing.
- The name-change test is one year, with the 50 per cent revenue exception.
- The 75 per cent QIB condition applies only where the issuer fails the eligibility test — it is a fallback route, not a universal rule.
Where this is taught
- Series XXI-B · Chapter 2: Introduction to Securities Marketsintroduced here
- Series IX · Chapter 4: Issue Management – Important Termsintroduced here
- Series II-A · Chapter 7: Public Offer of Securitiesintroduced here
- Series XXI-A · Chapter 2: Introduction to Securities Marketsintroduced here
- Series X-A · Chapter 6: Securities Market Segmentsintroduced here
- Series XII · Chapter 3: Primary Marketsintroduced here
Related terms
- Offer for SaleAn offer of securities by existing shareholders — promoters, institutions, the government — to the public through an offer document. The sellers get the money; the company issues no new shares.
- Private placementAn issue of securities to a select group of identified investors — institutions, banks, mutual funds — rather than to the public, with fewer formalities and no advertising.
- Rights issueAn offer of new shares at a set price to existing shareholders in a fixed ratio to what they already hold, so that their proportionate stake is not diluted when the company raises fresh capital.
- Initial Public OfferThe first offer of a company's shares to the public — by fresh issue, by existing shareholders selling through an offer for sale, or both — after which the shares must be listed.
- Qualified Institutions PlacementA fast route by which an already-listed company places eligible securities privately with Qualified Institutional Buyers, without the prospectus and timetable of a public issue.
- Offer documentThe document inviting subscription to an issue — a red herring prospectus, prospectus, shelf prospectus or information memorandum in a public issue, and a letter of offer in a rights issue.