Initial Public Offer (IPO) and Follow-on Public Offer (FPO)
- If you want to be a company shareholder and seek the right opportunity, then you are at the right place to know all about IPOs and FPOs.
- Companies require funds to operate and expand such operations. Initially, these companies start with a corpus arranged individually or as a group through personal or angel funding or even bank loans.
- Eventually, the start-up corpus would not be enough for sustenance in the long run. Therefore, the company agrees to raise funds from the general public through IPOs and FPOs.
What are IPOs and FPOs?
- IPO or Initial Public Offer is a scenario where the company transforms its holding from a privately held company to a public holding company.
- It is the first such public offer; thus, the name stands for Initial Public Offer.
- The company benefits from an IPO in terms of capital raised from such an offer that is at the same time interest-free (if the company decided to get a bank loan, it would have to pay interest).
- On the other hand, the public from whom the capital is raised benefit from gaining ownership in the company management and get a good return when the company performs in the form of dividends.
- FPO is the short form of Follow-on Public Offer.
- The company issues FPOs to raise money in the eventual course of business from time to time.
- The first FPO is called IPO. FPOs and IPOs help the company raise interest-free capital from the public, and in return, the company pays a dividend out of the profit generated to the shareholders.
Benefits
1
Higher returns as compared to bank deposits
Though bank deposits assure a fixed annual income for your funds, returns from IPOs and FPOs are market linked to the performance of the company. Therefore, the returns are expected to be quite high, much more than the fixed income assured by bank deposits.
2
Golden opportunity to become a part of the success journey of a Company
While IPOs help you invest in a company at an early stage, FPOs help you become a part of the success journey of the company in subsequent periods. In both scenarios, you would be an integral part of the organisational management and be proud of the successful journey too!
3
Chance to double your money in the future
Companies such as Infosys or HCL have had a tremendous journey in the stock market. Just imagine if you had subscribed to an IPO of Infosys with a fund capacity of INR 25,000; what would the returns have been like? If you had invested Rs.10,000 in Infosys shares during its IPO listing in 1993, its worth over Rs. 2 crores now.
4
Become a co-owner of a company and participate in decision making
As shareholders of the company, you would become an owner of the company and the management needs to satisfy your queries, as and when required.
5
Transparent and reliable investment opportunity
Such IPO and FPO listings have to follow the regulations of SEBI (Securities and Exchange Board of India). Therefore, the dealings are quite transparent and reliable too.
Such alluring benefits would surely motivate you to invest in IPOs and FPOs
through consulting a professional in the field is advisable for better returns.
Such alluring benefits would surely motivate you to invest in IPOs and FPOs
through consulting a professional in the field is advisable for better returns.
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