Strategic Management and Corporate Finance · Raising of Funds from Equity and Procedural Aspects - Public Funding

Further Public Offer, Rights Issue and Other Equity Routes

Updated 11 October 2026 · Fact-checked

A listed or unlisted company can raise equity again through a further public offer (new shares to the public by prospectus), a rights issue (offer to existing shareholders), an offer for sale (existing holders sell shares) or a qualified institutions placement (issue to institutional buyers). Compare them on who is offered, who receives the money, and which rules apply.

Understand Further Public Offer, Rights Issue and Other Equity Routes

Once a company has equity capital, it can raise more in several ways. The routes differ on three points: who is offered the shares, whether the company or the selling shareholders get the money, and which law governs the process.

A further public offer (FPO) is an offer of fresh shares to the public through a prospectus by a company that is already listed or has already made an earlier public offer. It is a public offer under section 23(1)(a). The Explanation to section 23 says public offer includes an initial public offer or a further public offer of securities to the public through a prospectus. The company gets the money because new shares are issued.

A rights issue is an offer to existing shareholders in proportion to their holdings. Section 23 lets both public and private companies use rights issues (and bonus issues) under the Act. A listed company, or one planning to list, must also follow SEBI law. Shareholders keep their proportion if they subscribe, so control is not diluted for them. The company gets the money.

An offer for sale (OFS) is different. Under section 28, certain members, in consultation with the Board, offer all or part of their existing shares to the public. No new shares are created and the company gets no money; the selling members do. The offer document is deemed to be a prospectus issued by the company, so the content rules and the liability for mis-statements apply as if the company issued it. The selling members must collectively authorise the company to act for them and must reimburse its expenses.

A qualified institutions placement (QIP) is a issue of shares to qualified institutional buyers (QIBs) by a listed company. It is a fast route because it avoids a full public offer document and uses a placement document instead. The details of eligibility, pricing and lock-in are in the SEBI ICDR Regulations, which this page summarises only in outline. Note that the Act's private placement rules in section 42 exclude QIBs when counting the identified persons, and a QIP is not an offer to the general public.

Key rules to remember

Public offer under the Act: Public company may issue securities to the public through prospectus: section 23(1)(a); This covers IPO and FPO. The Explanation to section 23 includes further public offer and offer for sale through a prospectus.
Rights and bonus issues: Public company: section 23(1)(c). Private company: section 23(2)(a); A listed company, or one intending to list, must also comply with SEBI law.
Offer for sale document: Offer for sale document = deemed prospectus of the company: section 28(2); Prospectus content rules and liability for mis-statements apply. Selling members reimburse the company's expenses under section 28(3).
Who gets the money: FPO and rights issue: company. OFS: selling shareholders.; OFS creates no new shares and does not raise capital for the company.
Private placement limit and QIBs: Identified persons not more than 50 (or higher number prescribed) in a financial year, excluding QIBs and ESOP employees: section 42(2); Useful to contrast QIBs, who are excluded from the count, with the general public.
Deemed public offer: Offer to more than the prescribed number of persons is deemed an offer to the public: section 42(3) Explanation III and section 42(11); A private placement made in breach of section 42(2) is deemed a public offer.

How to solve Further Public Offer, Rights Issue and Other Equity Routes questions

For any question on equity routes, identify the route first, then apply the rules for that route in the order provision, facts, conclusion.

1Read the facts and note whether the company is public or private, and listed or unlisted.
2Identify the route: offer to the public by prospectus (FPO), offer to existing shareholders (rights), sale by existing holders (OFS) or issue to institutions (QIP).
3Ask who receives the money and whether new shares are created.
4State the governing provision: section 23 for the route, section 28 for OFS, and SEBI regulations for listed companies and QIP.
5Apply the provision to the facts, such as number of persons offered, type of document used, and who bears expenses.
6Conclude clearly, and add practical compliance points such as board approval, offer document and filing.

Quickest way: Three-question route test

When to use it: Use when a question asks you to distinguish or choose between equity routes.

Who is offered: public, existing shareholders, or institutions?
Who gets the money: company or selling holders?
Which document: prospectus, letter of offer or placement document?
Write one line of law for each answer and then the conclusion.

Common mistakes in Further Public Offer, Rights Issue and Other Equity Routes

Treating an offer for sale as a way for the company to raise funds.
Both OFS and FPO are offers to the public through a prospectus.
Fix: Remember that OFS involves existing shares. The selling members receive the money, not the company.
Saying an OFS document is not a prospectus.
Students think only the company issues a prospectus.
Fix: Quote section 28(2): the document is deemed to be a prospectus issued by the company, with the same liability rules.
Saying a private company cannot make a rights issue.
Confusion with public offers, which a private company cannot make.
Fix: Section 23(2)(a) allows private companies to issue by rights or bonus issue, and by private placement.
Counting QIBs in the 50-person private placement limit.
Students remember the number but not the exclusion.
Fix: Section 42(2) excludes QIBs and ESOP employees from the count.
Confusing QIP with private placement under section 42.
Both are offers to a limited group.
Fix: Keep them separate. A QIP is a SEBI route for listed companies to QIBs. Section 42 is the Act's private placement route with its own conditions.

Worked examples

Example 1

Sundaram Textiles Ltd, a listed company, wants ₹50 crore for expansion. Its promoters also want to sell part of their holding to the public. Advise which routes fit each purpose and how the offer document is treated.

Show the solution

The company needs fresh funds, so it must issue new shares. A further public offer through a prospectus under section 23(1)(a) or a rights issue under section 23(1)(c) would raise money for the company.
Because it is listed, SEBI law applies in addition to the Act.
The promoters' sale involves existing shares, so it is an offer for sale under section 28.
The promoters must act in consultation with the Board, and must collectively authorise the company to act on their behalf and reimburse its expenses (section 28(1) and (3)).
The OFS document is deemed to be a prospectus issued by the company (section 28(2)), so the content rules and misstatement liability apply.

Answer: Use an FPO or rights issue for the company's ₹50 crore. Use an OFS for the promoters' sale. The OFS proceeds go to the promoters, and the OFS document is a deemed prospectus.

Example 2

Veda Tech Pvt Ltd, a private company, offers shares to all its existing shareholders in proportion to their holdings. A director says a private company cannot do this. Is he right?

Show the solution

Provision: section 23(2) says a private company may issue securities by way of rights issue or bonus issue under the Act, or by private placement under Part II.
Facts: the offer is to existing shareholders in proportion to their holdings, so it is a rights issue.
Analysis: a rights issue is not a public offer. Private companies cannot make a public offer, but this is not one.
Conclusion: the director is wrong.

Answer: The director is wrong. Section 23(2)(a) permits a private company to make a rights issue, provided the Act's requirements are met.

Exam tips

Write the route, the section and the person who gets the money in the first lines of every answer.
For a distinction question, use two or three points: offerees, who gets the money, document, and governing law.
Cite section 28(2) when you discuss OFS liability, and section 23 when you classify routes.
For QIP, state eligibility and pricing only as per the SEBI ICDR Regulations and avoid numbers you are not sure of.
Close each case answer with a practical compliance point such as board approval or filing.

Practice questions from Raising of Funds from Equity and Procedural Aspects - Public Funding

Further Public Offer, Rights Issue and Other Equity Routes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ExecutivePublic Issue Basics and Types of Issues

Further Public Offer, Rights Issue and Other Equity Routes: frequently asked questions

What is the difference between an FPO and a rights issue?

An FPO offers fresh shares to the public through a prospectus. A rights issue offers fresh shares only to existing shareholders in proportion to their holdings. In both, the company receives the money.

What is the difference between an offer for sale and a fresh issue?

In a fresh issue the company issues new shares and receives the money. In an offer for sale, existing members sell their shares to the public under section 28 and receive the proceeds. The OFS document is deemed to be the company's prospectus.

Can a private company make a rights issue?

Yes. Section 23(2)(a) allows a private company to issue securities by rights issue or bonus issue under the Act. It cannot make a public offer.

Is a QIP a public offer?

A QIP is an issue by a listed company to qualified institutional buyers under SEBI rules. It uses a placement document rather than a prospectus. Check the ICDR Regulations for eligibility and procedure.