How to Apply for FPO?
15 January, 2025
Synopsis
- A Follow-on Public Offering (FPO) takes place after the completion of an IPO.
- FPO shares are credited to your Demat account upon allotment.
- You can choose to apply for the FPO online or through physical forms.
The public issue of shares by companies are of various types which includes Initial Public Offerings (IPOs), Follow-on Public Offerings or Further Public Offering (FPOs), Rights Issues and Bonus Issues. Each type serves a different purpose and caters to different requirements. For instance, FPOs are conducted by listed companies who want to raise additional capital for business purposes.
Unlike an Initial Public Offering (IPO), which happens when a company decides to go public and sell its shares for the first time, a Follow-on Public Offering (FPO) happens after an IPO process has been completed. The issuance of shares in FPO is to the public by a company that is already listed on a stock exchange. Such an offering introduces new shares to the market, or existing shares of the company. Companies usually offer FPOs to raise equity or reduce debt.
Tips before applying to an FPO
When investing in an FPO, it is important not to be swayed by rumours surrounding expected returns. Instead, you should make decisions based on your own risk appetite and investment parameters.
Before applying for an FPO, you must conduct a pre-application analysis. You must understand the supply and demand forces of the market and consider key intermediaries such as merchant bankers, bankers/lead managers, registrars, transfer agents and stockbrokers. This analysis will help you assess the purpose of the FPO, whether it is to raise capital for expansion or other purposes.
How to apply in FPO?
There are numerous advantages for investors looking to apply for an FPO. So, let us delve into the process of application. Here are the steps to apply for an FPO in India.
Understand the FPO- You should familiarise yourself with the FPO and the company offering it. You must review the prospectus, which contains important information about the company, its financials and the purpose behind the FPO.
Open a Demat Account- You must ensure that you have a Demat account, as FPO shares are credited to your Demat account upon allotment. If you do not have one, you can open it through a Depository Participant (DP).
Choose the Applying Method- You must decide whether you want to apply for the FPO online or through physical forms.
Online Method- You could opt for the Application Supported by Blocked Amount (ASBA) method. It allows you to apply for the FPO by blocking the bid amount in an HDFC Bank account until allotment.
Offline Method- Alternatively, you could obtain the application form from a registered intermediary such as the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) and fill it with accurate details.
Submitting the Application- Then, you can submit the completed application form along with payment through a cheque or demand draft to the intermediary.
Allotment and Listing- After the FPO closes, the company and intermediaries will process the allotment of shares based on the subscription received. Allotment status and listing details will be communicated through the Stock Exchanges.
Note- After application, your shares are allocated through a process of allotment. However, if the FPO is oversubscribed, you will receive shares based on the allotment process (i.e., pro-rata basis) and the remaining amount will be refunded.
In conclusion, investing in an FPO presents remarkable opportunities. However, you should not overlook the potential risks involved in participating in FPOs, such as market volatility. Be aware of your options, stay informed and invest wisely. Open a Demat account online with HDFC Securities today and experience easy access to your investments.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not an investment recommendation. Investments are subject to market risks and other risks.
