Here we are with another new blog on FPO – Further Public Offer. In the earlier blog, we talked about IPO (Initial Public Offer) which was the very first step of issuing shares to the public or one can say the first time when the company lists its share on the stock exchange either BSE or NSE or when the company goes public. In today’s blog, we’ll be discussing another type of issue which is a Further Public Offer where the listed company i.e., the issuer issues new shares to the public.
So, in today’s blog, we’ll be discussing the following questions: -
1. What is FPO?
2. Types of FPO?
3. Eligibility criteria for FP0?
4. Advantages of FPO?
5. IPO vs. FPO
What is an FPO?
A Further Public Offer is as the name clearly depicts that it is another public offer. Here, a company that is already listed on the stock exchange or which has already come up with an IPO earlier will issue new shares or existing private shares to its existing shareholders or the general public.
Types of FPO: -
So basically, there are two FPOs first one is dilutive and the other one is non-dilutive.
In the diluted FPO the board of directors of the firm decides to raise the share float level or the number of accessible shares. This form of FPO offering aims to raise capital to lower debt or grow the firm, increasing the number of shares outstanding in the process.
In the non-dilutive FPO the directors or significant shareholders sell off privately held shares, this strategy is helpful.
Eligibility Criteria for FPO: -
Before talking about the eligibility for coming up with an FPO, let’s just look at the companies which are non-eligible to bring an FPO.
a) If the selling shareholders, the issuer, or any of its promoters, promoter group, or directors are prohibited from accessing the capital market.
b) If any of the issuer's promoters or directors is a promoter or director of another firm that the SEBI has restricted from accessing the capital market.
c) if any promoters or directors of the issuer are willful defaulters.
d) if any of the issuer's promoters or directors is a fugitive offender.
The above mentioned four are conditions in which a company lies than that particular company cannot raise capital or can bring an FPO.
Now, let’s discuss the eligibility criteria which a company should keep in mind before launching the FPO.
a) An issuer may make an FPO if it has changed its name within the prior year and earned at least 50% of its income from the activity suggested by the new name in the preceding full year.
b) If an issuer does not meet the aforementioned condition, it may make an FPO only if the issue is made through the book-building process and the issuer agrees to allot at least 75% of the net offer to qualified institutional buyers and to refund the full subscription money if it fails to meet the aforementioned minimum allotment to QIBs.
Advantages of FPO: -
A public corporation may opt to raise additional equity for a variety of reasons. They may, for example, use the proceeds to pay off debt and improve their debt-to-value ratio, or they could use the funds to boost the company's growth by financing new initiatives.
IPO vs. FPO: -
In an IPO an unlisted company raises capital by making a fresh issue of securities or offering its existing securities for sale to the public for the first time whereas in FPO a listed company that wants additional capital, makes either a fresh issue of securities or an offer for sale of existing securities to the public.
Previous FPOs: -
Ruchi Soya:- One of the top FMCG companies in the Indian edible oil market is Ruchi Soya Industries, which was founded in 1986 and is a part of the Patanjali Group.
Ruchi Soya offered shares with a price band of Rs. 615 to Rs. 650 and the issue was closed on 28th March 2022.
Yes Bank:- A Mumbai-based company incorporated in 2003. An Indian private sector bank is called Yes Bank. It has evolved into a full-service commercial bank that satisfies the financing needs of MSME, corporate, and retail clients by offering banking and technology-driven products and services.
Ruchi Soya offered shares with a price band of Rs. 12 to Rs. 13 and the issue was closed on 17th July 2020.
Author: Prakhar Jain
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