IPO, FPO, OFS, QIP, rights: the one map

One company, many routes. A company that needs money — to build a factory, pay down debt, buy a competitor, or let its early investors cash out — has a handful of ways to raise it from the equity market. Which one it can use comes down to three yes/no questions.

Is the company already listed on a stock exchange? An unlisted company can do only one thing: an IPO, its first public sale. A listed company has more options.

Who is the company selling to? Anyone with a brokerage account? Only the people who already own shares? Only the biggest institutions — mutual funds, insurers, pension funds?

Are new shares being created, or are existing ones changing hands? A fresh issue puts new money into the company’s bank account. An offer for sale puts the money into the pockets of the selling shareholders — founders, early investors, private-equity funds — and the company gets nothing.

The routes are the IPO, the FPO, the OFS, the rights issue, and the QIP. Each is a different answer to those three questions, and each is defined in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 — the ICDR Regulations. ¹

IPO — the first public issue

An IPO is the first time a company sells its shares to the public. Until then the company is private: owned by its founders, a handful of early investors, maybe a venture-capital or private-equity fund. The IPO opens the door — anyone with a brokerage account can buy in, and the company’s shares start trading on the NSE and BSE.

Two things can happen in that sale. The company can issue new shares and keep the money — capital it uses to expand. And the early owners can sell some of their existing shares to the new public investors, cashing out part of a bet they made years earlier. The first is a fresh issue; the second is an offer for sale. An IPO can be either, or a combination of both.

The ICDR Regulations do not define “initial public offer” in their definitions chapter; the term is the heading of Chapter II, which governs the first public issue of specified securities by an issuer whose securities are not already listed. ¹ It is the only route an unlisted company can take.

FPO — a public issue by a company already listed

An FPO, or further public offer, is a public issue of shares by a company that is already listed. Unlike an IPO, the company already has a market price, a trading history, and public shareholders. It is coming back to the market for more.

An FPO can take three forms: the company issues new shares and raises fresh capital; existing shareholders sell their shares to the public in an offer-for-sale component, with the proceeds going to them; or a combination of both. The ICDR defines it as an offer of specified securities by a listed issuer to the public for subscription, and it includes an offer for sale to the public by existing holders in a listed issuer. ¹ The point: it is a public offer — anyone can apply, just like an IPO — but the company is already listed.

OFS — offer for sale: existing shares, no new capital

In an offer for sale, existing shareholders — not the company — sell their shares to the public. No new shares are created. The company receives nothing; the proceeds go entirely to the selling shareholders.

An OFS shows up in two contexts. It can be a component of an IPO or FPO, where the company issues fresh shares and the early investors sell some of theirs in the same transaction. Or it can be a standalone transaction on the exchange, often used by promoters to reduce their own stake — one way to meet the minimum public shareholding requirement that listed companies are subject to.

The ICDR defines a “selling shareholder” as any shareholder of the issuer offering specified securities for sale in a public issue. ¹ The company is merely the platform; the sellers are the ones cashing out.

Rights issue — offering shares to existing shareholders first

A rights issue gives existing shareholders the right — but not the obligation — to buy new shares in proportion to their current holding. It is not open to the general public. Only the people who already own the company’s shares on a specific date get the offer.

The company sets a record date. Every shareholder on that date receives a rights entitlement, and has three choices: subscribe and buy the shares, sell the rights in the open market to someone who wants them, or let the rights lapse. The ICDR defines a rights issue as an offer of specified securities by a listed issuer to the shareholders of the issuer as on the record date fixed for the purpose. ¹ The defining feature is exclusivity: the offer goes only to existing shareholders.

QIP — a fast private placement to big institutions

A qualified institutions placement is a private placement: a listed company issues shares only to qualified institutional buyers (QIBs) — the big money. Mutual funds, insurers, pension funds, foreign portfolio investors, banks, and other entities SEBI considers sophisticated enough to fend for themselves.

A QIP is the quick route. Because it is a private placement to institutions, it bypasses the full public-offer machinery — the draft red herring prospectus, the public bidding window, the retail allotment process. The trade-off is who can buy: a QIP is open only to QIBs, not to retail investors or high-net-worth individuals. ¹

It still needs shareholder approval. Regulation 172(1) says a listed issuer may make a QIP only if a special resolution approving the placement has been passed by its shareholders, specifying that the allotment is proposed to be made through a QIP. ¹ One exception: no resolution is required if the QIP is an offer for sale by promoters or promoter group for compliance with minimum public shareholding requirements. ¹

The three-question map

Route	Company status	Buyers	New shares?
IPO	Unlisted	Public	Fresh portion: yes. OFS portion: no
FPO	Listed	Public	Fresh portion: yes. OFS portion: no
OFS	Listed	Public (on exchange)	No
Rights issue	Listed	Existing shareholders only	Yes
QIP	Listed	QIBs only	Fresh: yes. OFS variant: no

One route is deliberately left off this map: the buyback, where a company buys back its own shares from shareholders — returning capital instead of raising it. That is the mirror image, a capital-return route with its own rules under the SEBI Buyback Regulations, and it has its own article.

The routes here cover the ways a company raises equity capital from the market. The three questions — listed or not, who buys, new shares or old — are the map. Everything else is detail.

Footnotes

1. SEBI ICDR Regulations, 2018, last amended on March 8, 2025 — definitions of “further public offer”, “selling shareholder”, “qualified institutions placement”, “rights issue”, and the QIP conditions in Regulation 172(1). sebi.gov.in. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸