FOLLOW ON PUBLIC OFFER

FOLLOW ON PUBLIC OFFER

Subject : Economics

Context :Capital markets watchdog SEBI relaxed the framework for follow-on public offers (FPOs), a move that will help promoters of companies to raise funds more easily through this route.

Concept :

• The applicability of minimum promoters’ contribution norm and the subsequent lock-in requirements for the issuers making the FPO have been done away with by the regulator, as per a notification.
• Earlier, promoters were mandated to contribute 20% towards a FPO.
• Besides, in case of any issue of capital to the public, the minimum promoters’ contribution was required to be locked-in for three years.
• SEBI said the relaxation would be available for those companies which are frequently traded on a stock exchange for at least three years. Also, such firms should have redressed 95% of investor complaints.

Follow on Public Offer

• A follow-on public offer (FPO), also known as a secondary offering, is the additional issuance of shares after the initial public offering (IPO).
• Companies usually announce FPOs to raise equity or reduce debt.
• The two main types of FPOs are dilutive—meaning new shares are added—and non-dilutive—meaning existing private shares are sold publicly.
• An at-the-market offering (ATM) is a type of FPO by which a company can offer secondary public shares on any given day, usually depending on the prevailing market price, to raise capital.