A Follow-on Public Offering (FPO) is a method by which companies that are already listed on the stock exchange issue additional shares to the public. This is different from an Initial Public Offering (IPO), where a company offers its shares to the public for the first time.

Types of FPO

There are two main types of FPOs: Dilutive and Non-dilutive.

• Dilutive FPO
• Definition: In a dilutive FPO, the company issues new shares, increasing the total number of outstanding shares.
• Purpose: Companies typically conduct dilutive FPOs to raise funds for expansion or to pay off debts.
• Example: An example of a dilutive FPO in India is ITI Ltd. In early 2020, ITI, a telecom manufacturing company, offered 18 crore new shares priced between Rs 71 to 77 per share. This was aimed at increasing public shareholding and reducing the government’s stake, which was over 85%. However, ITI later withdrew the FPO due to unfavourable market conditions.
• Non-dilutive FPO
• Definition: In a non-dilutive FPO, the company does not issue new shares. Instead, existing shareholders, such as directors or large investors, sell their shares to the public.
• Purpose: Non-dilutive FPOs do not increase the total number of shares or provide new capital to the company. They are usually used to change the company's ownership structure.
• Benefits: While non-dilutive FPOs do not bring additional funds to the company, they can help adjust the shareholding pattern.