• Source:JND
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Vodafone Idea (VI), the country's leading telecom company facing a financial crisis, has come up with a follow-on public offering (FPO). The company has planned to raise Rs 18000 crore from the market to alleviate its problems. The most interesting aspect about this is that this is the country's largest FPO to date, which i opened for subscription from 18 to 22 April.

VI FPO's allotment date is April 23rd. There is a possibility that the company's FPO shares will be listed on BSE and NSE on April 25. If you are also confused between FPO and IPO, then here we are providing you with detailed information on the differences between the two.

Difference between FPO and IPO

When a company wants to raise money by getting listed on the stock market for the first time, it comes up with an Initial Public Offer (IPO). By doing this, it issues shares to the public for the first time and lists the company's shares on the stock exchange. With this, the company becomes public and its shares get listed on the BSE or NSE.

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On the other hand, when a company that is already listed on the stock exchange wants to raise money from the market again for its expansion and other needs, it comes out with a follow-on public offer (FPO). For this, the company's promoters and big shareholders sell their stake in the market.

Why do companies bring FPO?

Generally, when companies need additional funds to start a new business or to repay a loan, they come out with an FPO. The company does this in two ways.

The first way is by issuing additional shares to the public. In this, the company's value remains the same. This is known as a dilutive FPO. As the number of shares increases the price per equity share decreases. Talking about the second method, the company's big shareholders offer to sell their equity in the market. By doing this, the company's promoters and big shareholders sell their stake. In this, the number of shares of the company remains the same and there is no impact on the valuation.

Also Read: Vodafone Idea's Follow-On Public Offer Opens For Subscription; Details

Like in an IPO, investors can participate in an FPO by bidding. Successful buyers get shares. Investing in an FPO may be less risky than in an IPO. Understand it this way, when you invest in an IPO, you choose a stake in a private company and you get to know the profit or loss only after the company's shares are listed.