If you’ve ever applied for an IPO and later saw the same company offering more shares to the public, you’ve likely come across an FPO or Follow-on Public Offer. But what exactly is a Follow-on Public Offer in the stock market, and how does it affect retail investors like you?
Simply put, a Follow-on Public Offer is when a listed company issues additional shares to raise more capital from the public. It’s a tool companies use after their IPO, often to fund expansion, reduce debt, or meet regulatory requirements. While IPOs get all the media hype, Follow-on Public Offers can also offer valuable investment opportunities, sometimes even at a discounted price.
With more Indian companies turning to public markets for funding, investors need to understand the Follow-on Public Offer’s meaning, how it works, and what to watch out for before investing.
In this blog, we’ll break down the 5 most important things every investor should know about Follow-on Public Offers, including the types of Follow-on Public Offers, key differences from IPOs, risks, and how to analyze them before you invest.
Let’s Jump In.
What is an FPO in the Stock Market?
A Follow-on Public Offer, is when a company that is already listed on the stock exchange issues additional shares to the public. It’s called a “follow-on” because it comes after the company has already gone public through an IPO (Initial Public Offering).
In simple terms, Follow-on Public Offers is a way for listed companies to raise more funds either by issuing fresh shares or by allowing existing shareholders (usually promoters) to sell part of their stake to the public.
Why Do Companies Go for FPOs?
Companies opt for Follow-on Public Offers when they need to:
- Raise capital for business expansion or acquisitions
- Repay or reduce debt
- Improve liquidity or meet SEBI’s minimum public shareholding norms
- Strengthen their balance sheet without taking on new loans
For investors, this is an opportunity to buy into a listed company at a pre-decided price, which is often offered at a discount to the current market price.
FPO vs IPO: What’s the Difference?
| Feature | IPO (Initial Public Offer) | FPO (Follow-on Public Offer) |
| Company Status | Not yet listed | Already listed |
| Purpose | To list on stock exchange and raise initial capital | To raise additional funds post-listing |
| Risk Level | Higher (no price history) | Lower (public financials available) |
| Availability of Information | Limited | Extensive (past performance, filings, stock data) |
| Pricing | Book-building or fixed price | Often at discount to CMP |
Understanding these basics will help you make better investment decisions when considering Follow-on Public Offers.
Suggested Read: Smartly Evaluate an IPO in 2025 with This Powerful Retail Investor Checklist
Types of FPOs Investors Should Know
When investing in a Follow-on Public Offer, it’s important to understand that not all Follow-on Public Offers are the same. Broadly, there are two types of Follow-on Public Offers in the stock market, and each affects the shareholding structure and your potential returns differently.
Dilutive FPO
In a dilutive Follow-on Public Offer, the company issues new shares to the public. This increases the total number of outstanding shares, which leads to dilution of existing shareholders’ equity.
What it means for investors
- Share price may drop temporarily due to dilution
- Earnings per share (EPS) may fall in the short term
- But it also means fresh capital is coming into the company for growth or debt reduction
Non-Dilutive FPO
In a non-dilutive Follow-on Public Offer, no new shares are created. Instead, existing shareholders, typically promoters or early investors sell their shares to the public. The total number of outstanding shares remains the same.
What it means for investors
- No dilution of equity
- It may raise concerns if promoter stake is reducing significantly
- But it can also increase public float and improve liquidity
Quick Comparison: Dilutive vs Non-Dilutive FPO
| Feature | Dilutive FPO | Non-Dilutive FPO |
| New Shares Issued | Yes | No |
| Capital Raised Goes To | Company | Selling shareholders |
| Shareholding Dilution | Yes | No |
| EPS Impact | May decrease | No direct impact |
| Public Float | Increases | Increases |
| Market Perception | Neutral to Positive | Depends on promoter intent |
Understanding these types of Follow-on Public Offers can help you make smarter decisions and avoid red flags.
Suggested Read: Powerful Guide to Understanding Fundamental Analysis in Stocks vs Technical Analysis in Stocks in 2025
Why Do Companies Issue FPOs in India?
A Follow-on Public Offer is more than just a way to raise money. It’s a strategic move. But why do companies issue Follow-on Public Offers, especially after already raising funds through an IPO?
Here are the most common reasons:
Raising Capital for Expansion
Companies may need additional funds to:
- Launch new products
- Enter new markets
- Acquire other businesses
- Build new infrastructure or plants
Follow-on Public Offers allow companies to raise this capital without taking on more debt, making them financially healthier in the long run.
Debt Repayment or Restructuring
Firms with high interest burdens or maturing debt often turn to Follow-on Public Offers to:
- Pay off loans
- Reduce interest expenses
- Improve creditworthiness
This improves their balance sheet and can boost investor confidence.
Meet SEBI’s Minimum Public Shareholding Norm
SEBI requires at least 25% of shares to be held by the public for most listed companies. Promoter-heavy firms often issue Follow-on Public Offers to reduce their stake and increase public float.
Improve Stock Liquidity
Follow-on Public Offers increase the number of shares available in the market. This can:
- Reduce price volatility
- Attract more institutional investors
- Make the stock more actively traded
Build Market Credibility
A Follow-on Public Offer signals that the company is confident in its future and willing to open up more of its ownership to the public. This can:
- Enhance reputation
- Strengthen investor trust
- Show transparency in operations
By understanding the real reasons behind a Follow-on Public Offer, investors can better evaluate if the offer aligns with long-term company growth or if it’s just a short-term cash grab.
Suggested Read: What Are Corporate Actions and How Do They Effectively Transform Your Investments in 2025?
5 Things Every Investor Must Know Before Investing in an FPO
Thinking of applying for a Follow-on Public Offer in the stock market? Before you do, here are five essential things to consider that can help you make a smarter investment decision.
Are FPO Shares Offered at a Discount?
One of the biggest attractions of Follow-on Public Offers is that companies often offer shares at a discounted price compared to the current market price (CMP). This is done to:
- Attract retail and institutional investors
- Ensure full subscription of the offer
- Provide a cushion for short-term returns
Tip: Always compare the Follow-on Public Offer price vs current stock price to judge the real value you’re getting.
Do FPOs Have Less Risk Than IPOs?
Unlike IPOs, where data is limited, Follow-on Public Offers give investors a clear advantage, the company is already listed. You can:
- Review past quarterly results
- Analyze historical stock performance
- Check management commentary and track record
This transparency makes Follow-on Public Offers less risky than IPOs for informed investors.
Why is the Company Raising More Money?
Not all fundraises are good. Before you apply, ask:
- Is money going toward growth or just repaying debt?
- Is the promoter selling shares or is the company issuing new ones?
Go through the Follow-on Public Offer document to understand how the funds will be used. A clear, growth-focused plan is a positive sign.
Will Your Shareholding Be Affected by the FPO?
If it’s a dilutive Follow-on Public Offer, new shares are added, which may reduce your share in the company’s earnings (EPS dilution). Also:
- Check if promoters are reducing their stake
- Look at institutional interest (QIB participation)
Insight: Promoter selling isn’t always bad but if it’s sudden and large, dig deeper.
Does Market Sentiment Affect FPO Performance?
Even a good company’s Follow-on Public Offer can underperform if the overall market is bearish or if there’s low investor interest. Timing plays a role:
- Monitor grey market premium (GMP), if available
- See how recent Follow-on Public Offers have performed
- Track media reports and analyst reviews
Bottom line: Don’t just follow the crowd, apply only if it fits your investment strategy.
Risks and Opportunities of Investing in FPOs
Like every market investment, Follow-on Public Offers come with their own set of risks and rewards. Understanding both sides can help you make smarter decisions when evaluating a Follow-on Public Offer in India.
Risks of Investing in an FPO
Shareholding Dilution
In a dilutive Follow-on Public Offer, new shares are issued. This can:
- Reduce your percentage of ownership
- Lower earnings per share (EPS) in the short term
Promoter Exit Signals
If a large part of the Follow-on Public Offer involves promoters selling their stake, it could be a warning sign unless backed by valid business reasons.
Market Volatility
Follow-on Public Offers launched in weak or uncertain market conditions may:
- Struggle to attract investors
- List below the offer price
- See lower-than-expected demand
Fund Utilization Risks
If the raised capital is not used efficiently (e.g., wasted on unprofitable ventures or debt rollovers), it could harm the company’s fundamentals.
Opportunities in FPOs
Attractive Entry Price
Many Follow-on Public Offers offer shares at a discount to the current market price, giving investors a chance to buy into a proven business at a better rate.
Lower Risk Than IPOs
Follow-on Public Offers are issued by already listed companies with:
- Known financials
- Track record of performance
- Available public data and analyst opinions
This reduces guesswork compared to IPOs.
Chance to Invest in Growing Companies
If the Follow-on Public Offer is funding expansion, R&D, or acquisitions, it may create long-term growth for the company and value for investors.
Better Liquidity & Wider Shareholding
Follow-on Public Offers often improve market liquidity and diversify ownership, which may reduce volatility and attract institutional buyers.
When you evaluate both the risks and opportunities of Follow-on Public Offer investment, you’ll be better equipped to decide whether to apply or skip the offer.
Suggested Read: Best Stock Buying Strategies and Best Stock Selling Strategies in 2025 for Great Profits
How to Analyze an FPO Before Applying: A Checklist for Investors
Before investing your hard-earned money in an Follow-on Public Offer, it’s essential to conduct a thorough analysis. This can help minimize risks and improve the chances of a successful investment. Here’s a checklist of key factors every retail investor should evaluate before applying for a Follow-on Public Offer:
Understand the Purpose of the FPO
Read the company’s offer document or Draft Red Herring Prospectus (DRHP) carefully to understand why the funds are being raised. Is the money for expansion, debt repayment, acquisitions, or regulatory compliance? A well-defined and constructive use of proceeds is usually a positive sign.
Compare Offer Price with Current Market Price
Review the Follow-on Public Offer pricing details, check how much discount (if any) the issue price offers compared to the latest stock price. A meaningful discount often provides a margin of safety, but watch out for extremely low discounts or premiums, which might reduce investment attractiveness.
Evaluate the Company’s Past Stock Performance
Analyze the company’s stock trend over the past 6-12 months. Has it shown consistency, volatility, or decline? Stocks with poor recent performance might indicate underlying issues or market skepticism.
Review Financial Health and Promoter Credibility
Study the company’s financial statements: revenue growth, profit margins, debt levels, and cash flows are critical metrics. Also, assess the promoters’ track record for trustworthiness and past corporate governance standards.
Check Institutional (QIB) Participation
High subscription and demand from Qualified Institutional Buyers (QIBs) often signal strong confidence in the issue. Though retail investors cannot rely solely on this, institutional participation is a useful indicator of the Follow-on Public Offer’s attractiveness.
Consider Market and Sector Sentiment
Factor in broader market conditions and sector-specific trends that can influence post-listing performance. A bullish market or favorable industry outlook generally bodes well for new share issues.
Assess Dilution Impact and Shareholding Pattern Post-FPO
If it’s a dilutive issue, calculate potential earnings per share (EPS) dilution or equity dilution and factor its impact on your investment. Also, verify changes in promoter and public shareholding after the Follow-on Public Offer.
By systematically assessing these points, you can make an informed choice about whether to apply for an Follow-on Public Offer and how much risk you’re willing to take.
FPOs to Watch in 2025: What’s Happening in the Indian Market?
While 2025 hasn’t seen a flood of Follow-on Public Offer activity yet, two companies have made headlines for different reasons, one for launching its Follow-on Public Offer, and the other for considering it as a future capital-raising route.
Here’s a closer look at these two:
CFF Fluid Control Ltd: SME FPO (July 2025)
Status: FPO Launched Exchange: BSE SME Issue Size: ₹87.75 crore FPO Price: ₹585 per share FPO Dates: July 9 to July 11, 2025 Listing Date: July 16, 2025 Issue Type: Fresh issue (Dilutive)
What the Company Does
CFF Fluid Control is involved in designing and manufacturing flow control systems, particularly for the defence and marine sectors.
Purpose of the FPO
- To meet working capital requirements
- To fund general corporate purposes
This Follow-on Public Offer gives retail and institutional investors the chance to enter a niche industrial manufacturing company that supplies mission-critical components.
State Bank of India (SBI): FPO Under Consideration
Status: Not yet launched (Board-level discussion held in May 2025) FPO Type: To be decided Purpose: Fundraising for FY26 via Follow-on Public Offer, rights issue, QIP, or other modes Board Meeting Date: May 3, 2025
What’s Known So Far
SBI’s board approved a plan to raise additional equity capital in FY26. A Follow-on Public Offer is one of the options being considered, along with Qualified Institutional Placement (QIP) and rights issue.
While no final Follow-on Public Offer timeline or amount has been announced, if SBI proceeds, it could be one of the largest Follow-on Public Offers in India, given its size and investor base.
These two cases represent both ends of the Follow-on Public Offer spectrum in 2025; a small-cap company actively raising funds via the SME route, and a banking giant exploring public capital infusion as part of a long-term strategy.
Final Thoughts: Should You Apply for an FPO?
Follow-on Public Offers are a great way to invest in companies that are already listed and come with publicly available financials. They often offer shares at a discount, giving retail investors a potentially valuable entry point.
But price isn’t everything.
Before applying, always look deeper; understand why the company is raising funds, assess dilution risks, and check market sentiment. A transparent Follow-on Public Offer with strong promoter backing and institutional interest is usually a better bet.
In 2025, we’ve already seen action in the SME space with CFF Fluid Control Ltd, and big names like SBI are considering future Follow-on Public Offers. This shows that companies, big and small, continue to rely on public funding as part of their growth plans.
So, should you apply?
Only if the Follow-on Public Offer aligns with your investment goals, risk appetite, and you’ve done your due diligence.
A discount is attractive but value is what makes the difference.
FAQs
What is an FPO in investing?
A Follow-on Public Offer occurs when a company that is already listed on a stock exchange offers new shares to investors. It is an additional share issuance after the company’s Initial Public Offering (IPO), allowing the company to raise more capital by selling new equity shares to the public.
Does Follow-on Public Offer reduce share prices?
In dilutive Follow-on Public Offer, the company issues an additional number of shares in the market for the public to buy . However, the value of the company remains the same. This reduces the price of shares and automatically reduces the earnings per share also.
Is FPO better than IPO?
An FPO is relatively a safer bet for individual investors and new investors. Investing in an IPO requires more research than FPO. You need to understand the company fundamentals. If you are a long term investor, with a good risk appetite and have faith in the company, you can consider investing in an IPO.
How does Follow-on Public Offer affect share prices?
Investors closely analyze the offering details, company performance, and growth prospects before making investment decisions. The successful execution of a Follow-on Public Offer can instill confidence in the market, attracting more investors and potentially driving up the company’s stock price.
