Short answer: A follow-on public offer (FPO) is an offering made by a company that is already listed on a stock exchange. The company issues fresh shares to the public, offers existing shares for sale, or does both, in order to raise capital. Whether the offer is “diluted” depends on whether new shares are created.
Last reviewed: 5 November 2026
At a glance
| Type | Who gets the shares | Effect on total share count |
|---|---|---|
| Diluted FPO | Company issues new shares | Rises |
| Non-diluted FPO | Existing shares held by promoters, directors or pre-IPO investors are sold | Unchanged |
| Combined FPO | Both new shares and existing shares are offered | Rises by the number of new shares |
| IPO (for contrast) | First public issue by a company not yet listed | Not an FPO, because the company was unlisted |
How is an FPO different from an IPO?
The difference lies in the company’s listing status. An FPO is made by a company that is already listed on a stock exchange. An initial public offering (IPO) is the first public share issue by a company that is not yet listed.
So a listed company that wants more money from the public makes an FPO, while an unlisted company making its first public share sale makes an IPO.
What happens to the share count in a diluted FPO?
In a diluted FPO, the company issues new shares. This increases the total number of shares, and it lowers each existing shareholder’s percentage ownership of the company.
Dilution also affects earnings per share (EPS), which is the company’s profit divided by its number of shares. If profit stays the same while the share count rises, each share earns less.
Hypothetical example (all figures invented for illustration): Suppose a company has 1 crore shares and a net profit of ₹10 crore, so EPS is ₹10. It issues 25 lakh new shares, taking the total to 1.25 crore. If profit stays at ₹10 crore, EPS falls to ₹8. A shareholder holding 1 lakh shares, who owned 1% before, now owns 0.8%.
The example holds profit constant. In practice, the money raised could change a company’s earnings in either direction, so the EPS effect is not fixed.
What happens in a non-diluted FPO?
In a non-diluted FPO, no new shares are created. Existing shares held by promoters, directors or pre-IPO investors are sold to the public instead.
The total share count stays the same, so the company receives no new capital from the sale. The money goes to the selling shareholders, not to the company’s balance sheet.
Why do companies launch an FPO?
Companies typically launch an FPO to fund business expansion, repay debt, add working capital, or finance acquisitions and other projects. Working capital is the money a business uses for its day-to-day operations, such as paying suppliers and salaries.
The reason matters for shareholders. A company raising money to repay debt is making a different decision from one raising money to buy another business, and the outcome of each depends on how the money is used.
How does the FPO process work?
An FPO follows four broad steps:
1. Appointing merchant bankers. The company appoints merchant bankers, who are financial intermediaries that manage the issue. 2. SEBI approval of the draft offer document. The draft offer document, which describes the offer, must be approved by the Securities and Exchange Board of India (SEBI), the market regulator. 3. Bidding through ASBA. Investors place bids through ASBA (Application Supported by Blocked Amount), a system in which the bid money stays in the investor’s bank account until shares are allotted. 4. Book-building and cut-off price. Under book-building, bids are collected to gauge demand, and a cut-off price is set after that process.
What are the risks for existing shareholders?
Existing shareholders often react negatively to an FPO, because issuing new shares dilutes their holdings. A shareholder keeps the same number of shares but owns a smaller slice of the company.
A dilutive FPO can also reduce EPS, as the worked example shows. Shareholders who do not take part in the offer may find their ownership and per-share earnings both lower, even if the company’s total profit has not fallen.
Frequently asked questions
Is an FPO the same as an IPO?
No. An FPO is made by a company already listed on a stock exchange, while an IPO is the first public share issue by a company that is not yet listed.
Does an FPO always create new shares?
No. In a non-diluted FPO, no new shares are created, and existing shares held by promoters, directors or pre-IPO investors are sold instead.
Why can an FPO reduce earnings per share?
If new shares are issued, the same earnings are spread across a larger number of shares. This lowers the earnings per share, which is why existing shareholders often react negatively to an FPO.
Sources and last check
Facts in this article were checked against the sources below on 5 November 2026. Rules and figures can change; check the primary source before acting.
- upstox.com (broker education)
- kotakneo.com (broker education)
- 5paisa.com (broker education)
- zerodha.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.
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