UNLOCKING CAPITAL FOR ESTABLISHED COMPANIES

Introduction
In the dynamic world of finance, companies are constantly on the lookout for avenues to
raise capital and fuel their growth. One such avenue gaining traction is the Follow-on Public
Offering (FPO), also known as a Secondary Initial Public Offering (Secondary IPO). The
primary objective of an FPO is to generate funds for various purposes. This mechanism
allows established companies that have already gone public to issue additional shares and
raise funds from the market. In this article, we will explore the concept of FPO and its
significance in the modern financial ecosystem.

Understanding FPO
An FPO, also known as a secondary public offering, is a process through which a company
that is already publicly traded offers additional shares to the public. FPOs serve as an
attractive option for companies looking to finance expansion plans, fund acquisitions, repay
debts, or invest in research and development. Unlike an initial public offering (IPO), where a
company goes public for the first time, an FPO allows existing public companies to raise
fresh capital by issuing new shares. Furthermore, FPOs offer flexibility in pricing newly
issued shares. Companies can assess market conditions, demand for their stock, and their
own financial performance to determine the most suitable price. This flexibility allows
companies to optimize the pricing strategy, ensuring they raise the desired amount of
capital while maintaining investor interest.

Key Benefits of FPO

 Capital Infusion:
FPOs provide an opportunity for companies to strengthen their capital base by accessing
additional funds from the market. By issuing additional shares, companies can secure funds
to fuel their growth plans, invest in research and development, upgrade infrastructure, or
expand into new markets.

 Increased Public Ownership:

FPOs offer an opportunity for existing shareholders to increase their ownership in the
company. This can strengthen their commitment and alignment with the company's vision
and strategy.

 Flexibility in Pricing:
FPOs offer companies flexibility in setting the price of newly issued shares. The pricing can
be based on market conditions, demand for the stock, and the company's performance,
allowing them to maximize the funds raised.
Illustration
Now, let’s suppose there is a company named CORRUX Ltd, which is already listed on the
Stock exchange and registered with SEBI, which in particular means that CORRUX Ltd has
already shared its equity with the shareholders. After successfully completing its IPO a few
years ago, CORRUX Ltd. witnessed significant growth in its business operations. To finance
its ambitious expansion plans, CORRUX Ltd. decides to launch an FPO. In the FPO, CORRUX
Ltd. offers an additional 20000 shares to the public at a price of ₹400 per share. The
company's existing shareholders have the option to participate in the FPO and purchase
additional shares. The FPO receives an overwhelming response from investors, and all the
offered shares are subscribed, resulting in CORRUX Ltd. raising ₹8000000 in capital.

Conclusion
FPOs have emerged as an effective tool for established companies to access capital and
propel their growth. The ability to raise additional funds, enhance market recognition,
increase public ownership, and flexibility in pricing are key advantages of FPOs. As the
financial landscape continues to evolve, FPOs will likely continue to be an attractive option
for companies seeking to access the capital market.