CORPORATE ACTIONS # FPO VS OFS VS RIGHTS ISSUE

 

Dear Readers,

We have recently posted about various Corporate Actions. This post will cover the aforesaid types of Corporate Actions. 

 Please go through our former post on IPO before reading this. The link is:- https://growyourmoneyplant.blogspot.com/2021/07/lets-launch-ipo.html.

FPO ( Follow on Public Offer ) : It is a process by which already listed company on a Stock Exchange Platform raises capital by issuing additional shares to the general Public. The process is exactly similar  to the IPO, the only difference is that when the company introduce its shares in the Market for the first time, it is called as IPO and when the company introduce shares through the same process second time, then that is called as FPO.

COMPARISON BETWEEN FPO AND IPO

BASIS FOR COMPARISON	IPO	FPO
Meaning	IPO refers to an offer of securities made to the public for subscription by the company for the first time	FPO refers to an offer of securities for subscription to the public by a publicly-traded enterprise
Issuer	Unlisted company	Listed company
Raising Capital	Through the first time from public	Through a subsequent public contribution
Risk	High	Comparatively low
Objective	The main objective is raising capital through public investment	The main objective is subsequent public investment
Predictability	Less predictable	More predictable
Profit	Higher than FPO	Lower than IPO
Types	Equity shares and Preferred shares	Dilutive offering and Non-Dilutive offering

OFS ( Offer for Sale ) : The company shares are primarily held with initial Promoters and later if they dilute their shares to raise capital from the market, then that process is called as Offer for Sale. This is relatively simple method as compare to FPO, as it requires less guidelines to be followed.

WHY COMPANIES GO FOR OFS?

To make it easier for promoters of public listed companies to cut their holding and comply with the minimum public shareholding. The OFS Mechanism was first introduced in the market by SEBI in 2012. 

RIGHTS ISSUE : A rights issue is another method to raise capital from the Market.It is an offer for the existing shareholders to purchase additional new shares in the company. This offer is called as Rights.

With these rights, the shareholder can purchase new shares at a discount to the market place on a stated future date. 

Key takeaways on Rights Issue:-

☝ Investor may excercise his right and may buy the complete lot of shares being offered in Rights Issue.

☝ Investor may ignore the offer and do not execute his Right.

☝ Investor may sell his Rights to others.

The above three types of Methods are used by the companies for raising Capital from the Market after being listed through IPO Process on the Stock Exchange.

Ashapuri Gold Ornament FPO Details

IPO Opening Date	Mar 3, 2021
IPO Closing Date	Mar 8, 2021
Issue Type	Fixed Price Issue FPO
Face Value	₹10 per equity share
IPO Price	₹81 per equity share
Market Lot	1600 Shares
Min Order Quantity	1600 Shares
Listing At	BSE SME
Issue Size	3,705,600 Eq Shares of ₹10 (aggregating up to ₹30.02 Cr)

Bharat Electronics OFS Detail

Issue Date (Non Retail Investors)	22 Feb 2017
Issue Date (Retail Investors and Non Retail Investors)	23 Feb 2017
Issue Timings	09:15 to 15:30
Offer Size for Retail Investors	22,33,628
Offer Size for Non Retail Investors	89,34,511
Floor Price	1,498.00
Lot Size	1
Minimum Bid Quantity	1
Maximum Bid Quantity	1,11,68,139
Discount to Retail Investors	5% to the Cut off price

Megasoft Rights Issue Detail

Issue Open	Jul 22, 2021 - Aug 5, 2021
Security Name	Megasoft Limited
Issue Size (Shares)	2.95 Crores
Issue Size (Amount)	₹29.50 Crores
Issue Price	₹10 per share
Face Value	₹10 per share
Minimum Lot size
Market Lot
Listing At	BSE, NSE
Terms of Payment	The full amount of Rs.10 per Rights Equity Share is payable on Application.
Entitlement	2 Rights Equity Share for every 3 Fully Paid-up equity shares held on the Record Date