Investments

Difference Between IPO and FPO

3 min read

Dec 9, 2025

938 Views

In India’s stock market, companies have two main ways to ask the public to raise money - IPO and FPO.

IPO and FPO full form are Initial Public Offerings (IPOs) and Follow-on Public offerings (FPOs). Both IPO and FPO are about selling shares, but they happen at different times for different reasons. You don’t need to be an expert to just know that understanding when and why a company is selling shares can help you make smarter choices if you ever want to invest and be part of a company’s story.

Paying attention to the difference between IPO and FPO can also help you spot good opportunities early and learn how businesses grow with the help of public support and trust. Let's learn about IPO vs FPO in detail.

What is an IPO?

When a private company puts up its shares for offer to the public for the first time on a stock exchange, it is called an IPO.

The IPO process has several key steps:

The company hires an investment bank to help figure out its value.
It then submits an offer document to the SEBI for approval.
Then the company sets a price range for its shares and promotes them to potential investors.
Once the bidding is over, shares are given to the successful bidders.

In India, to qualify for an IPO, a company must show that it is financially stable. This includes meeting requirements like:

As per SEBI (ICDR) Regulations, 2018, companies can access IPOs through two routes – the Profitability Route (with thr esholds of ₹3 crore net tangible assets, ₹15 crore average pre-tax profit, etc.) or the QIB Route (where companies not meeting profitability norms can still list, but 75% of shares must be allocated to Qualified Institutional Buyers).

Types of IPO

Fixed price issue: The company sets a fixed price for shares, and you will know exactly what you will pay for buying one.
Book building issue: You will be bidding within a price range, with the final price being set based on demand.
Offer for sale (OFS): Existing shareholders sell their shares directly to the public, without the company issuing new ones.
SME IPO: Smaller and medium-sized companies use this type of IPO to access capital markets with relaxed eligibility criteria.

Other Capital-Raising Methods

Rights issue: The company offers additional shares to existing shareholders at a discounted price.

What is an FPO?

An FPO is an additional share issuance by a company that is already listed on a stock exchange. It allows established public companies to raise additional capital. FPOs are conducted by companies with existing market histories and trading patterns, providing you with substantial public information for decision-making.

Companies pursue FPO for various strategic reasons, including financing expansion plans, reducing debt burdens, funding acquisitions, or meeting regulatory capital requirements.

Types of FPO

Dilutive FPO: The company issues new shares, increasing the total number of shares and slightly reducing the value of existing ones. This helps the company raise fresh capital to fund operations, repay debt, or expand its business. However, it can lead to earnings per share (EPS) dilution, impacting investor sentiment temporarily.
Non-dilutive FPO: Existing shareholders, like promoters, sell their shares without creating new ones, so the company’s share count stays the same. This type of FPO doesn’t raise funds for the company but offers liquidity to early investors or promoters. It reflects the confidence of the company in maintaining strong fundamentals without additional capital.
At-the-market offering: The company sells shares directly into the market at current prices over time, offering flexibility in fundraising. This method allows issuers to capitalise on favourable market conditions and minimise dilution. It provides more control over the timing and quantity of shares sold, often resulting in lower issuance costs.

IPO vs FPO - key differences

The major differences between FPO and IPO are:

Parameter	Initial public offering	Follow-on public offering
Definition	First-time share issuance by a private company to the public.	Additional share issuance by an already listed company.
Company status	Unlisted private company.	Already listed public company.
Purpose	To go public and raise initial capital.	To raise additional capital for expansion, debt reduction, etc.
Pricing mechanism	Fixed price or book-building method; price determined by valuation and demand.	Generally priced with reference to the prevailing market price, often at a discount (not mandated by SEBI).
Risk level	Higher risk due to limited public information.	Lower risk as the company has established a market history.
Information availability	Limited to prospectuses and private disclosures.	Extensive public information, including past performances.
Lock-in period	SEBI (2021) mandates 18 months lock-in for promoters’ 20% stake, 6 months for excess holdings, and 6 months for pre-IPO investors.	No lock-in for existing shares; potentially 1 year if promoter contribution exceeds 20%.
Cost	Higher due to additional regulatory requirements.	Lower, because the company already complies with listing requirements.
Listing gains	Potentially higher for strong companies.	Usually modest compared to IPOs.

For investors looking for comprehensive investment solutions while navigating the IPO vs FPO debate, Axis Bank's Demat Account offers a seamless platform for participating in both IPOs and FPOs. This 3-in-1 account combines Savings, Demat, and Trading functionalities, allowing you to pursue financial objectives with ease and confidence.

Conclusion

Understanding the IPO vs FPO is essential for both companies seeking capital and investors looking for opportunities. While an IPO marks a company's market debut, an FPO represents continued market engagement by established public entities.

You should carefully consider the key FPO vs IPO differences when making investment decisions. Both IPO and FPO mechanisms play vital roles in India's capital markets.

FAQs

Which is better, IPO or FPO?

FPO and IPO differences are significant. An IPO offers ground-floor investment opportunities in emerging companies with higher growth potential but comes with greater risk. FPOs provide investment chances in established companies with proven track records, typically offering more stability but potentially lower explosive growth.

Is an FPO good for investors?

An FPO can be beneficial if you are seeking opportunities in established companies with transparent track records. They typically involve less uncertainty than IPOs, as market history and pricing benchmarks will exist. However, you should still conduct thorough research on the company's fundamentals and the purpose of the FPO.

How does an FPO work?

An FPO works similarly to an IPO but for already-listed companies. The company files regulatory documents, appoints merchant bankers, determines a price (usually at a discount to the market price), opens a subscription period, allocates shares based on demand, and then lists the new shares on exchanges where its existing shares trade.

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.