What is FPO: The dispute between Adani Group and American research firm Hindenburg remains a topic of discussion these days. But along with this the FPO of Adani Enterprises is also in focus. This FPO is worth Rs 20,000 crore.
In such a situation, it is important to understand that what is FPO i.e. Follow-on Public Offer? How is it different from IPO? Along with this, it should also be known that why companies bring FPO... So let's know the answers to all these questions...
What is FPO?
Through FPO, the company issues its follow on public offer. Means the company which is already listed in the stock market, offers new shares to the investors. These are different from the stocks present in the market. Mostly these shares are issued by the promoters. FPO is used to diversify the equity base of the company.
Why companies bring FPO?
To launch the shares in the market, the company first brings IPO. But, once listed, if new shares are to be issued, then FPO is used in that case. The company issues new shares with the aim of capital raising or to pay off its debt. Through new shares, the company raises capital from the market and then uses it according to its needs.
IPO and FPO difference?
Companies use IPO or FPO for their expansion. Companies resort to IPO or FPO when funds are needed to grow the business. This fund is used to meet the needs of cash flow or to grow the business. For the first time, the company launches its shares in the market through IPO. That's why it is called Initial Public Offer. While additional shares are brought to the market in FPO.
There is a fixed price for the sale of shares in an IPO, which is called the price band. The price band of company shares is decided by the lead bankers. At the same time, at the time of FPO, the price band of the shares is kept lower than the price of the shares present in the market. It is also decided according to the number of shares. Usually the company offers it at a lower price than the current market price.