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Follow-on Public Offer (FPO) 
What is FPO?
A Follow-on Public Offer (FPO) is also called further public offer. When a listed company comes out with a fresh issue of shares or makes an offer for sale to the public to raise funds it is known as FPO. In other words, FPO is the consequent issue to the public after initial public offering (IPO). The word FPO came into news after the YES Bank announcement to raise Rs 2,000 crore through FPO and debt.

How is it different from an IPO?
As the name suggests initial public offering (IPO) is the first offer for purchase to public. This is a process when an unlisted company raises funds by offering its shares to the public and consequently gets listed on a stock exchange. A company can either issue fresh securities or offer its existing securities to public. However, if the same company comes out with another issue to the public, the second issue would be called an FPO. For instance, ICICI Bank was a listed entity but came out with FPO of around Rs 8,750-crore equity shares in July 2007. The issue remained open for subscription between July 19, 2007, and July 22, 2009. Similarly Bharat Earth Movers (BEML), which was listed in National Stock Exchange on November 5, 2003, came out with a public offer of 49 lakh shares in 2007. Shares of BEML were issued at Rs 1,075 after the closure of the FPO.

Under the Fast Track Issues (FTI), a listed company, which meets certain entry norms, can proceed further with FPOs by filling a copy of RHP to regulators. These companies donít need to file a draft offer document. However, it is mandatory for a private company, which wants to come out with an IPO.

What are the other kinds of issues through which companies raise money?
Apart from IPO and FPO, a company can raise funds through a rights issue and private placement. A rights issue and bonus issue are made to the existing shareholders. However, a rights issue is also a way to raise funds but in a bonus issue new securities are issued to existing shareholders without any consideration.

What are the regulatory requirements?
In case, a company wants to come out with FPO and have changed its name within a year, at least 50% of the revenue of the last one-year must have come from the activities defined by the new name. The size of the issue should not be more than five times the pre-issue net worth of the company as mentioned in the balance sheet of the previous financial year.

Nevertheless, a group of companies - private and public sector banks - are exempt from these norms. Also, infrastructure companies whose projects have been appraised and financed by any public financial institution or companies such as IDFC and IL&FS do not need to comply with these norms. Also, the promoter must contribute at least 20% of the post-issue capital or 20% of the issue size.

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