What is a FPO? Here's how it's different from an IPO

The Adani Enterprises FPO (Follow on Public Offer) has become a talking point after the US-based short seller Hindenburg Research accused the conglomerate of a "brazen stock manipulation and accounting fraud scheme." The Gautam Adani-led company, however, denied allegations and linked them to a "calculated attack" on India, its institutions and its growth story.

Adani Enterprises' Rs 20,000 crore follow-on share sale is available for subscription till January 31. It went live on January 27. Group CFO Jugeshinder Singh has expressed confidence that it will be fully subscribed by the end of the offer period on January 31.

"All our stakeholders including bankers and investors have full faith in the FPO. We are extremely confident about the success of the FPO," he said.

What is an FPO?

Follow-on Public Offer (FPO) is a process by which an already listed company on Indian bourses- National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)- issues new shares to the existing shareholders or investors. The proceeding generated by FPO can be used to raise equity or reduce debt. There are two types of PFO- Diluted and non-diluted. 

In Diluted FPO, additional fresh shares are issued for individuals to invest in. The number of shares increases and the ownership percentage of existing shareholders decreases. In non-diluted FPO, existing investors sell their shares to the public. Hence, there is no dilution in ownership of shares 

How FPO is different from IPO?

An Initial Public Offering (IPO) is a process by which a private firm becomes a publically-held company and its stocks are available to Qualified institutional buyers (QIBs), non-institutional investors (NNIs) and retail individual investors (RIIs). The shares are listed on NSE, BSE or both. 

The major difference between an IPO and FPO is that an IPO is an initial or first issue whereas an FPO is an additional issue. The price of IPO is fixed or within a set range whereas the price of FPO is market driven.