IPO, OFS, and FPO – How are they different?


Initial Public Offering is when a company is introduced into the publicly traded stock markets for the first time. In the IPO, the company’s promoters choose to offer a certain percentage of shares to the public. The reason for going public and the process of an IPO is explained in detail in Chapters 4 and 5.

The primary reason for going public is to raise capital to fund expansion projects or cash out early investors. After the IPO is listed on the exchange and is traded in the secondary market, promoters of the company might still want additional capital. There are three options available: Rights Issue, Offer for Sale and Follow-on Public Offer.

Rights Issue

The promoters can choose to raise additional capital from its existing shareholders by offering them new shares at a discounted price (generally lower than Market Price). The company offers new shares in the proportion of shares already held by the shareholders. For example, a 1:4 Rights Issue would mean that every 4 shares held 1 additional share is offered. Although this option looks good, it limits the company to raise the capital from a small number of investors who are already holding shares of the company and might not want to invest more. A rights issue leads to the creation of new shares that are offered to the shareholders, which dilutes the value of the previously held shares.

An example of a Rights issue is South Indian Bank which announced a 1:3(One share for every 3 held) issue for Rs 14 which is 30% lower than the Market Price the stock was trading (Rs 20 as on Record date 17 Feb 2017). The bank offered 45.07 lakh shares to the existing shareholders.

The rights issue is covered in detail in Chapter 11, covering key Corporate Actions.


The promoters can choose to offer the secondary issue of shares to the whole market, unlike a rights issue restricted to existing shareholders. The Exchange provides a separate window through the stockbrokers for the Offer for Sale. The exchange allows a company to route funds through OFS only if the Promoters want to sell out their holdings and/or maintain minimum public shareholding requirements (Govt. PSU have a public shareholding requirement of 25%).

There is a floor price set by the company, at or above which both Retail and Non-Retail investors can make bids. The shares are allotted, if bids are at a cut-off price or above will be settled by the exchange into the investor Demat account in T+1 days.

An example of an Offer for Sale is NTPC limited, which offered a maximum of 46.35 million shares at a floor price of Rs 168 and was fully subscribed in the 2 day period. The OFS was held on 29th August 2017 for Non-Retail Investors and 30th August 2017.


An FPO also has the same intent of raising additional capital after it has been listed but follows a different mechanism for applying and allotting shares. Shares can be diluted, and fresh shares can be created and offered in an FPO. Just like an IPO, an FPO requires that Merchant Bankers be appointed to create a Draft Red Herring Prospectus which has to be approved by SEBI after which bidding is allowed in a 3-5 day period. Investors can place their bids through ASBA and shares are allotted based on the Cut-off Price decided after the book-building process. Since the introduction of OFS in 2012, FPOs are seldom used due to the lengthy approval process.

The company decides on a Price Band, and the FPO is publicly advertised. Prospective investors can bid for the issue using the ASBA portal through Internet Banking or apply offline through a Bank Branch. After the bidding process is complete, the cut-off price is declared based on the demand and the additional shares allotted are listed on the exchange for trading in the secondary markets.

An example of an FPO is of Engineers India Ltd which underwent an issue in February 2014 with Rs 145-Rs 150. The issue was oversubscribed by 3 times. The shares on the day of the starting date of the issue were trading at Rs 151.1. The lower price band was at a 4.2% discount from the market price.

Difference between OFS and FPO

  • An OFS is used to offload Promoters’ shares while an FPO is used to fund new projects.
  • Dilution of shares is allowed in an FPO leading to change in Shareholding structure while OFS does not affect the number of authorized shares.
  • Only the companies with a Market Capitalisation of Rs 1000 crores and above can use the OFS route to raise funds while all the listed companies can use the FPO option.
  • Ever since SEBI has introduced OFS, FPO issues have come down, and companies prefer to choose the OFS route to raise funds


  1. Suraj S Jagtap says:

    Excellent Efforts on clearing the contents… Thank You So Much….

  2. Ash says:

    Is there a feature in Kite to see the price action of an underlying for a particular day in the past by choosing a date? It is very tedious to scroll all the way back by pulling the cursor.

  3. Sabarivasan A says:

    Hi Karthik,
    The modules are informative and useful for someone like me who is new to the share market. I am holding 1890 shares of Rana sugars and bought it for 10.20 per share and did not put a stoploss( I was not aware about it). Now the share price is 7.70 Rs as of today. Please let me know the future of the shares

    • Karthik Rangappa says:

      Happy learning, Sabarivasan πŸ™‚

      As a business, we do not advise clients on individual shares. So I’m afraid I cannot help you with this.

  4. Shivam Bhatia says:

    The content was excellent..but i have one confusion..if compnay has done IPO so it will again go for OFS…it can issue additional shares as a bonus also..

    • Once the company is listed on the exchange by means of an IPO, it can choose to raise additional capital through OFS(or FPO or Rights Issue)- Cash inflow
      Bonus issue is different where the company chooses to reward the shareholders by giving additional shares using its reserves- Cash outflow

  5. Chakradhar Reddy says:

    Hi karthik,
    I need a small clarification on how the stock price is fixed .. I have given few examples as per my understanding…please clarify me on this:


    A company ABC is trading at Rs.325 at a particular time
    1)Two persons have placed an order: one for a buy with bid 324 and another for a sell with ask 326.
    Assuming these are the only two persons trading for that company at that time.
    What happens in this situation. (I think the trading value will remain same!)

    A company ABC is trading at Rs.325 at a particular time
    2)Now there are three bids and four asks
    Bid: 325; quantity -2
    Bid: 324; quantity -10
    Bid: 323; quantity -6

    Ask: CMP(325); quantity -2
    Ask: 326; quantity -8
    Ask: 327; quantity -4
    Ask: 328; quantity -2
    In this case, after the shares are traded at 325, the trading price will still remain same at 325…Am i right?

    3) How is the open price of a day decided?
    4)How is the listing price of an IPO decided?

    • Karthik Rangappa says:

      1) Since the bid-ask does not match, no trade happens. One of them will have to change the price to match the counterparty.
      2) Yes, because the top bid-ask does not match. However, if a new guy comes and places a market order, the transaction will go through (for either buying or selling)
      3) Based on the bid-ask order book build during the pre-open
      4) Book building process

      • Chakradhar says:

        Regarding 3, I would like to quote another example… please do tell me if I am right
        Day 1: closing price of a stock ABC is Rs200
        Day 2:
        As soon as the trading starts company hits UC(240)
        MY query is stock price keeps increasing only when there is a buy at any price… But before the market opened no one would have placed a bid for 240 or 230( i think so because no one exactly knows that it will exactly increase by that much percentage) then how will it reach that price as soon as the market opens.
        And regarding 4 I was asking how the listing price of an IPO sometimes opens at a higher price…how is this decided.
        Example: DMART
        I think if i get an answer for 3, probably 4 will also be answered

        • Stock ABC will only hit upper circuit if a trade occurs at Rs 240(A buyer willing to buy at 240 and a matching seller). At Pre-market between 9:00 and 9:15AM there is buying interest for this to occur. Once a non-F&O stock hits 20% limit, buying is not allowed anymore.
          For IPO, Pre-open session runs between 9.00 AM and 9.45 AM where orders are accepted. Between 9.45 AM and 10.00 AM, the orders are matched and the listing price is decided at 10.00 AM when it commences for normal trading

          • Chakradhar says:

            Hi faisal,
            I still lack some clarity.
            day 0 : closing price of abc is 200
            day1 : open is 240(UC)

            So between 9 and 9:15 am of day1, there should be a bid placed at 240 with an ask at the same price..
            But during that pre open session, no one knows how many bids are placed, right?
            Why would someone want to place an order at such a price… ( This point is where I am not getting)

          • Although you are not able to see the bid and ask during pre-open, the exchange does order matching and that’s how the open price is determined. In your hypothetical case, I’m assuming there’s a lot of demand for the script, and there are buyers willing to pay β‚Ή240. You can read more here.

          • Chakradhar says:

            Thanks faisal

        • Karthik Rangappa says:

          Regarding 3 – this really depends on the kind of buying or selling pressure in the market. The best way to think about this is by thinking about it as a pressure cooker πŸ™‚
          When there is excessive bullishness, price tends to gap up. Likewise with gap downs.

          • Chakradhar says:

            Thanks karthik… Btw the documentation is too good

          • Karthik Rangappa says:


          • Anuraag says:

            Hi Karthik,

            1 query. If the closing price of stock was 200. And suppose in the pre open session there’s a single bid of 250 and a single ask of 250 and it has matched. So does this mean the stock will open at 250..?

          • Karthik Rangappa says:

            Maybe, if its an F&O stock. F&O stocks do not have upper lower circuits. For everything else, there are circuit restrictions.

  6. Soni says:

    Sir, is there any virtual simulator available for commodity(MCX) and equity trading so that we can try out our strategies without using real money

  7. Vaibhav says:


    It was great content.

    I Just have a doubt. How does an Offer for sale helps the company to fund itself when the shares which promoters holds are offered in the market. When promoters sells shares the amount received must be accrued to the promoter itself and not to the company.

    • Karthik Rangappa says:

      It depends on who is offering the shares. If the company is tendering the shares, then the proceeds will go to the company. If it is the promoter or some other investors tendering the shares, the proceeds will go to them.

  8. Ram says:

    Seriously great content.. I always read this google chrome… When I search zerodha in chrome.. 1st link will be anglebrokering.Com offering zero interest 2nd link will be shown as zerodha.
    I request your software team to make zerodha appear 1st when searched about it.

  9. Rakesh Hansalia says:

    This 14th chapter( Supplementary Note) is not included in Module-1 download PDF, please add it as well !

  10. Atul Tormad says:

    Hi please help me with this.. Is shorting and btst the same? And also is Intraday and shorting same? N is shorting illigal? Please help

    • Karthik Rangappa says:

      Intraday trade is when you buy and sell on the same day. The position is not carried forward to the next day.
      Shorting is when you sell first and buy later, shorting in stocks can be done only on an intraday basis.
      BTST is when you buy today and sell tomorrow. You cannot sell today and buy tomorrow, remember shorting can be done only on an intraday basis.
      Shorting is not illegal.

  11. Frank says:

    Karthik if you could please upload some material on Trading in pre market and after market as well. It will be your utmost kindness.

  12. Vinay says:

    Well that was a exhaustive read !!! Kudos to the writer/team,well thought out articles…good points to start off…

  13. Nilesh says:

    Very useful knowledge.
    Thanks !

  14. Arun says:

    Hi Karthik and the Zerodha Team,

    I am feeling great to finish this unit without a lag, it was so interesting reading like a novel and a good flow of information. Congrats and keep up the good work! Also thank you for the quick response on my question.

    I must say that you should publish this in a form of book with selected Q&A from the portal at end of every chapter, if it is not already done! And one more thing, well I understand your intention is knowledge sharing! but If you actually include an assessment (and certificate at the end of the course) every module, it would look more academic and motivating for many people to learn this. And will be big value add to the resume of people who may have no formal financial academic background (like me).

    Once again thank you for such a wonderful effort and I am excited to start the next unit, I can’t wait until tomorrow!


    • Karthik Rangappa says:

      Happy to note this and thanks for the encouraging words, Arun. Yes, everything that you’ve suggested is in the pipeline. We will make this happen this year πŸ™‚

  15. Anil dhiman says:


  16. R G Ratnawat says:

    The content is relevant,adequate,and well structured. Kudos

  17. Hardik Italiya says:

    As I am a bigginer I can say it is vary good module. I have just one query.
    How does Bonus Issue, Stock- Split and Rights Issue affect the market

  18. Vaibhav says:

    Hi Zerodha Team,

    For a beginner like me, who did not even know the ABC of stock market, it looked like a cake walk. Though Learning every aspect in detail would be long & tough journey, the content has helped me to build the confidence that I can go ahead.

    Thank you so much for the content & the beauty lies in the way it presented!

  19. Vikas says:


    Awesome content on stock market basics. It was very helpful to understand the terms and concepts of stock market. It was explained very well with great example. Thanks team zerodha.

    I have one query regarding UC(upper circuit)
    Since UC is fixed at max of 20%, how did some stock trade more than UC in a day? Recent example was RCOM in last week of Dec 2017 when it gained more then 35% in a single day . Another example is PNB which gained about 50% in Oct 2017 when FM announced more funds for PSU banks.

    • Vikas, stocks that trade in the derivative segment have no circuit limits. RCom, PSU banks are traded in the F&O segment

    • Karthik Rangappa says:

      Glad you liked the content, Vikas.

      The circuit limits are not the same across all stocks. For example, Stock A can have a 20% limit and Stock B can have 10%. Also, stocks which have a derivative contract does not have any circuit limits at all (like PNB).

  20. Kiran Shetty says:

    I can’t open the varsity pdf on adobe reader or any other files or else i get the popup to download the Dropbox to view the files can you please help me why it is not supporting on any other reader apart from Dropbox

  21. Chandrajit says:

    I wanted to know what is public shareholding requirement? Does it vary company to company?

  22. Ishan Choubey says:

    Hello Karthik,
    I have a ques relating to UC,
    Suppose XYZ stock is trading at Rs. 200 a share and i purchased 1000 shares, Now i want to profit from this by trying to manipulate the stock , so i decided to buy just one share the next day after market opens ( assume the opening price as 200), i placed an buy order of just 1 share for Rs. 210 and i asked my friend to place to place an sell order of just 1 share at Rs. 210.
    what do you think will happen,
    will my order go through and match my friends order and will the price jump to 210,
    i mean is it possible to manipulate the stock with this case.

    • Ishan Choubey says:

      also assume that my friend which is selling the stock already has some shares of this compny.

    • Ishan Choubey says:

      Stock also trades in the derivative segment so its free from UC boundations

    • Karthik Rangappa says:

      No, it does not work that way πŸ™‚

      The order book works on price-time priority – always the best buy (the one willing to pay the highest price) matches with the best sell (one willing to sell at the lowest). Besides, there is also an exchange surveillance system which keeps an eye out on all these orders trying to game the system.

  23. Ishan Choubey says:

    also assume that my friend which is selling the stock already has some shares of this compny.

  24. abhishek says:

    Lets say I hold 1fut contract(LS=400) of xyz ltd.(price = 1000/share) and this company falls under physical settlement according to SEDI circular released recently. After i exited my position i made a profit of say 1500.

    now how will this be physically settled? I will get 1 share of the underlining @1000 but what will happen to Rs 500 that is left out?

  25. Hemant Chaturvedi says:

    I completed the first module and 2nd (TA) is in line.
    Notes are great and easy to understand, illustrated by real examples.
    I would like to suggest why not Zerodha makes a system and certify the registrants who complete(reading) all the modules.
    Many people including finance students like me would be happy to get certified through this platform and they can also be converted as a customer of Zerodha.
    Just a thought.
    Thanks for the notes.
    Hemant Chaturvedi

  26. niharika rajput says:

    I was really exhausted in finding a fully furnished course to learn share market. I Really got tired finding a good material at one place. I am really thankful to varsity that they are providing this educational content FOC and I must say the ways of explaining things and the simplicity of language is really very good and helpful.

  27. shashi says:

    Thanks for providing here such precious information in an organised manner. It is easier to understand the topics here on varsity than from any other website.

  28. AJAY GUPTA says:

    Excellent content. Great for a beginner.

  29. Hitesh says:

    Firstly, let me thank you for the wonderful idea & intent behind “Varsity”.
    The content is presented with such an ease for learning that nothing looks like a jargon. All read so far only inspires further learning……..!

    Secondly, regarding trading on kite, request you to review the possibility and work to integrate the margin calculators with kite so that margins can be seen along selected stocks respectively. That would be a big value addition to kite!


    • Karthik Rangappa says:

      Thanks for the kind words, Hitesh.
      Btw, the margin calculator bit is on the list of things to do. We will do that sometime soon. Thanks.

  30. Arun says:

    Dear karthik,
    “A rights issue leads to creation of new shares that are offered to the shareholders, which in turn, dilutes the value of the previous held shares.”. Can u plz karthik explain the meaning of above line.

    • Karthik Rangappa says:

      Consider this – there are 10 shares before the rights issue and the PAT is 1. The earning per share is 10% (1/10). Now post rights issue, the number of shares increase to 12, but the PAT remains at 1. The new EPS is reduced to 8.33%. Hence dilution.

  31. Hitesh says:

    Hi Karthik

    I am thinking to build a personal stock screener from where real-time stock price data gets fetched into excel sheet automatically. And then using SQL to extract data out of it by using certain filters.
    Can you please help me with the link/website from where I can get real-time data.


  32. hitesh mittal says:

    sir , thanks for your wonderful work on varsity .
    i wanted to know the reaction of the stock when there are either only buyers or only sellers for a stock.

  33. Shrikanth says:

    Sir,read the pdf there awesome,do zerodha have teaching classes or institutes in bangalore?.if,plz send the adress

  34. Chanu says:

    Please tell about Margin On Zerodha. I m unable to find detail on it. What is the requirement to get Margin on Zerodha and all other information? Please Reply with detail and link if possible. Thank You

  35. Chanu says:

    what is the difference when the same stock is shown in NSE & BSE. Currently, I was watching JMTA Share and It was showing 4.60rs in BSE & 4.65rs In NSE? Why is this so?
    time 11:34am

    • Karthik Rangappa says:

      These are two different markets, so sometimes such small difference can occur.

      • Chanu says:

        so if I purchase a share in Zerodha trading a/ c, in which exchange did zerodha places order? ( please correct me if i m worng, i m in learning stage) thanks for solving doubt.

        • Karthik Rangappa says:

          You can choose the exchange that you’d want. If you dont, then the orders are sent to NSE.

  36. Shashwat Bansal says:

    What a great module it is!

  37. Ayush Agarwal says:

    Great Content !
    Thank you for this πŸ™‚

  38. Vinod Narayan says:

    I am a newbie to stock market and completed Module 1. I find the contents crisp with detailed examples. I want to dig deeper.

  39. Divakar says:

    Hello Karthink,
    Appreciate your efforts in sharing the knowledge in a crisp and constructive way. I have visited several websites and blogs, where we get only partial information. Varsity is the only place where all aspects are covered in detail and easy to understand even if the person is not having any finance background. Is there any plan to cover Volatility based trading aspects in the near future ?

  40. Sanjeet says:

    It’s very useful for beginners.

  41. Venkatesh Prasad says:

    Mr. Karthik Rangappa,

    Firstly let me complement you on the series of articles which explains complex things in a manner that a novice can understand and actually start to get interested in investing. Great Job, Sir.

    Would be great if you can similarly discuss about the role of analytics in decision making w.r.t understanding whether its a good mutual fund to invest or not. We see analytics like Cumulative Return, Annualized Return, Standard Deviation, Sharpe Ratio, Jensen Alpha, Beta, Tracking Error, Information Ratio, etc. and how these numbers corresponding to a mutual fund should be interpreted.

    Also there is the Returns based Style Analysis (RBSA) which is useful to understand the Manager’s Style and if explained in a manner how Style Maps and Asset Allocation output of RBSA needs to be interpreted, it would be great.

    Looking forward to your response to the above,

    Thanks & Regards

    Venkatesh Prasad B.K.

    • Karthik Rangappa says:

      Venkatesh, I’m glad you liked the contents in Varsity. A module on MFs is long overdue. I will write about all these factors and more in that module πŸ™‚

  42. Ravi says:

    Hi sir,
    I truly thank you for sharing the knowledge and this module helps a lot,where u always try to keep the things practical.I want to know can a normal person like me having reasonable knowledge can earn 5k daily by investing,i am not asking guarantee just i want to know.Thanks in advance.😊

    • Karthik Rangappa says:

      Ravi, I have seen very few people who can consistently do that. It may be possible, but requires a lot of practice and discipline.

  43. Hemant kumar says:

    Firstly, I would say thank you so much sir for sharing your knowledge and also thanks to zerodha for such a great initiative step taken by them.
    For a long time, I was searching systematic process of knowledge and content which could cover basics of stock market for beginners.

    In first module i learned many new thing and i think remaining module will also help a lot to learn and explore stock market knowledge with zerodha. once aganin thanks sir….

  44. Rajan says:

    Hi Karthik sir,
    I have a query regarding the material.
    Is it necessary to stick with the order in which the modules are there
    I mean I’ve completed 1st module now, should i stick with the order (next chap is TA)
    or can i start with FA(3rd module) ?
    and Thank you for the material to Karthik sir and team.

    • Karthik Rangappa says:

      The module order is not really required, Rajan. You can move to any module that interests you. All modules assume you are starting fresh and takes you through from basics. Good luck.

  45. Ankush Pundkar says:

    From last 8 months I m reading chapters publish with varsity zerodha and feeling like studying basics. The language pattern which is used is very clear to grasp easily. Efforts made to cover every part of basics are really good. It shows that zerodha wants to provide typical investors and traders to the stock market. Thank you.

  46. jogendra desai says:

    Hi ! Karthik . wish you happy and prosperous new year 2019.
    would like to have full knowledge on option and futures derivities.
    i am member of zerodha & would like to trend in the market please help me.

  47. Aman yadav says:

    Thank you varsity for this highly valuable information. Lately i have been researching on stock market and this is the best resource i have stumbled upon.😊

  48. Abhay says:

    First of all let me appreciate you and the entire team of Zerodha for this splendid initiative.
    I want to know more about futures and options market. Which chapter deals with that topic?
    (I’m very new to stock market and is trying to make an understanding of the same)

  49. shreyansh says:

    I just completed first module. Can’t wait to start the next one. I’m sure it’ll help me to be an smart investor, rather just following stupid suggestions on TV and other so called investors.

  50. Dhiraj Chandra says:

    Best material to begin with and proceed to expert level in the field of stock market .

  51. Amine says:

    Clear and concise, thank you !

  52. Jatin says:


  53. Vibhu Agarwal says:

    Nice concept by zerodha.. but please also help us to understand commodities better

  54. Divesh says:


    When a company decides to raise money through OFS or Right issues, shares offered are from company’s reserved authorised shares or from promoters share holding stakes?

  55. Puneet tandon says:

    Excellant explaination of concepts!!!

  56. Hebakalam says:

    Thanks!!! I learned many new thngs

  57. S. Gupta says:


    I hold a zerodha account and am planning to move to US for work. As of now, I don’t know how long I will be there – a year or a few years. Hence, I want to know :
    1. if I can continue holding the zerodha account in India . Is there a time limit?
    2. Can I remit money from US to my Indian bank account and keep trading in my zerodha account?

    I wasn’t sure under which topic to put the query, hence asking here.
    Thanks for your help!


    • Karthik Rangappa says:

      The onus of getting his residential status changed vests on the client. If you become an NRI, you have to inform us and trade through PIS. Otherwise, yes, you can continue to hold the account. Yes, you can remit the money to your local bank account and continue to trade with us (as long as his residential status doesn’t change). We just need to receive money from the mapped account.

  58. Parth says:

    I am not able to understand much about OFS and FPO. Will it be covered in further modules? And I have some in-general doubts regarding trading. I am student and will be starting a job in 6 months. So, will I be able to earn more by following guidelines and learning the modules or it also depends more on luck factor. Earlier, I had lost much money on crypto-currency because I did not have any knowledge and was trading on random people’s guidelines. Hoping to learn some good techniques in this modules and earn like professionals.

    • Karthik Rangappa says:

      No more modules on FPO and OFS. Is there anything, in particular, you did not understand, I will be happy to explain. Good luck for your job and happy reading πŸ™‚

  59. venu diddi says:

    Thanks to the team Zerodha . Very useful info and i have been using the zerodha account from last 2 years but never been through this content. Thanks so much.

  60. Kartheek says:

    Hi Karthik,

    As FPO is about issuing fresh shares, how will they issue without reducing the promoters shares?
    If they do then it will be like OFS only.
    Once they issue within the existing shares, is it like stock split?
    How exactly they can FPO without reducing the existing ones?
    Please explain

    • Karthik Rangappa says:

      FPO dilutes the shareholding of existing shareholders. The stock split is different when you look at it from a balance sheet perspective.

  61. Niraj Singh says:

    What is V-Wap trade, Over the day trade, Volume trade, Limit order, CD order & execution of this types of trades and criteria on various exchanges. Karthik plz help me out plz reply and i have a interview based on this question

    • Karthik Rangappa says:

      Niraj, have explained all these and more across various chapters, suggest you read through them. Good luck with your interview.

  62. SSS says:

    Hello Karthick,

    Can you please provide me some clearance about Short Selling. I know we can go Short in Interday and in F&O but I need to know whether there is an option available to Sell now and buy back the shares later. Fox Example, I like to sell Yesbank Shares now and buy back them after few months, This is possible if I rent the shares and give back with a premium, but I am not sure how to implement this with broker. When I try to sell them without buy , the message I get is ‘I don’t have Yes bank shares in my demat’.


  63. krutuparna says:

    few thing are missing from the pdf version (ex: upper circuit/lower circuit) of this module,also page numbering is also not proper.

  64. Mani says:

    what is NISM series 8 examination?

  65. Mani says:

    Thank you sir.

  66. Vd says:

    I have been looking forward to understand the basics for a long time and have gone through various videos on youtube. One of my friend recommended Zerodha Varsity and I must acknowledge, the content is simply fab. It is indeed explained in a manner that any layman can understand the basics and enter the market. Thanks to entire Zerodha team for putting this together and helping people like me take the steps.

  67. Abhishek says:

    Hi Sir,

    Could you also explain the difference between Direct listing & IPO? for ex; Spotify opted for direct listing.

  68. Satheesh says:

    Thanks Zerodha for excellent effort and your contribution.
    Can you please provide some light on Valuation of company after Rights issue or OFS options.

  69. Ashwani says:

    how can we claim a very old debenture(say 20 years old) of a company /communicate to company .
    thanking you

  70. Aniruddha Chourasia says:

    Asking this just to confirm! The face value of a share decreases after Rights issue, right?

  71. Aniruddha Chourasia says:

    Hi Karthik,
    Here you wrote the cut-off price is the price decided after the book building process and within the IPO chapter you told me cut-off price is the upper price of the price band so what exactly is cut-off price?

    • Karthik Rangappa says:

      Ah, sorry if I confused you. It is the price at which the shares will be issued, if the stock is oversubscribed, it is usually at the upper end of the price band.

  72. Sanjeev says:

    Not enough idea about how FPO is traded in markets, its just a question for clarification.
    Coming to YES Bank FPO, current market price of Yes Bank is around Rs.25. FPO is offering at Rs.12/13. Will this affect the value of the share for existing investors who brought at higher rates. Is it loss to existing investors.
    Ex: Assuming my current average buy price of this share is Rs.40, market price is today is Rs.25. I am at loss of Rs.15 per share.

    • Karthik Rangappa says:

      No, it is just that you get to buy it at a lower price at a time when the stock is trading at a higher price in the market.

  73. Ashok kumar S says:

    Can you please explain FPO process little more with example.
    Lets take an example of YES bank. I am seeing bid price range is 12 to 13.
    What happens if i bid share price as 12 ?
    what happens if i bid share prices as 13 cutoff price?
    Please explain in detail.

    Ashok S

  74. Sumit Gujar says:

    What will happen if FPO is not fully subscribed?

  75. Amit says:

    Dear sir,
    M&M has announced rights issue to the ratio of one share per one share held.

    The board has fixed the record date for the purpose of determining the shareholders of the company who will be eligible to receive rights entitlements in the issue, as of July 23.

    Today is July 20. If I buy shares today, they will be in my demat account by July 22.

    So will I be eligible for rights issue?

    • Karthik Rangappa says:

      You will get it by 22nd evening. Technically you should be eligible, but its a touch and go kind of situation.

  76. Amit says:

    And sir if I do get eligible, how will I be able to access that rights issue?
    Is there any kind of window or something on the terminal?
    P.S. I use Zerodha’s Kite.

  77. Rakesh Gusain says:

    Hello sir. I would like to know about right issue, why reliance right issue listed on exchange separately & price also not decreases and other side M&M finance share price reduces after right issue amd and not listed separately… Hope for your kind reply..

  78. Niku says:

    Sir With respect to concept of Ex Div date and record date in conjunction

    Scenario 1: 11th I buy stock, 11th is Ex Div date and 12th is record date = Am I eligible for dividend
    As stock is deducted from seller account and is with broker for credit to buyer, is broker receives dividend if not buyer or seller.

    Scenario 2: 11th I buy stock, 11th is Ex Div date and 13th is record date = Am I eligible for dividend.

    Here buy means buy date, but settlement of shares occurs on T+2 , So I am not holding share in my demat account on buy date.

    Scenario 3: 10th I buy stock, 11th is Ex Div date and 12th is record date = Am I eligible for dividend.

    Scenario 4: 12th I buy stock,11th is Ex Div date and 13th is record date = Am I eligible for dividend.

    Scenario 5: 10th I buy stock,11th is Ex Div date and 12th is record date = Am I eligible for dividend.

    can you tell me in above scenarios what happens.

  79. Vivek Kaplingat says:

    Is it purely because of the lengthy documentation process that FPOs are not widely used? On the contrary, if applying for an OFS is allowed only if the promoters want to reduce their holding/the company needs a min public shareholding, then how is OFS more popular than FPO? Most companies applying for an OFS may be doing it just for the sake of creating more capital, right? Why is OFS more popular?

    • Karthik Rangappa says:

      Perhaps, OFS is a simpler process since it deals with existing shareholders and not new ones. Yes, OFS is to raise capital.

  80. roopam says:

    there is one question irking me regarding bonus
    so if a company announces 1:2(one share for every two shares held), then how will a person holding a single share be rewarded
    and there is some issue, I am not receiving mail for the answers which you feed. I have checked inbox junk as well as trash
    thank you

    • Karthik Rangappa says:

      The one share guy will be compensated in cash on a pro rata basis. Btw, there is no email notification for responses. You will have to manually check for the response, I know it not the most user friendly way, but there is int much we can do as the notifications soon turn to spam as more comments pour in.

  81. Shashank Pendyala says:

    Few questions-
    1. For Rights issue, you mentioned previously held share value is diluted. When Reliance announced rights issue, the share value didn’t dilute moreover market was bullish leading to increased value. So I didn’t understand why share value would be diluted?
    2. For OFS, is there any cut off price above floor price for the bids? Like IPO/FPO, where we have price band to quote the value.
    3. What do you mean when you say dilution of shares in FPO? Dilution of shares happen only in stock split right?
    4. In case of OFS, shares made public should be exclusively held by Promoters whereas for FPO, the shares offered to public can be from Promoters/organization shares (which doesn’t belong to anyone) etc. right?

    • Karthik Rangappa says:

      1) I think there was a dilution of 7% equity. You may want to re check this
      2) OFS is usually a fixed price
      3) Dilution happens when new shares are issued
      4) OFS can also include shares from large existing share holders.

  82. Rishi Ganguly says:

    So it is mentioned that on order to take the FPO route the shares need to be diluted so that fresh shares are published. How exactly does one happen to dilute their shares?

    • Karthik Rangappa says:

      Assume you have 100% of shares, you give 10% to an external investor against some funds, then you are said to dilute the shares to the extent of 10%.

  83. Rishi Ganguly says:

    Ok. That makes sense. Thanks a lot.

  84. Spk says:

    Excellent content. Thanks for all your efforts.

    Could you please clarify these?
    1) “An OFS is used to offload the shares of Promoters while an FPO is used to fund new project.”
    OFS also is a fund raising activity isn’t it ? OFS also offloads promoter shares right?

    2)”Dilution of shares is allowed in an FPO leading to change in Shareholding structure while OFS does not affect the number of authorized shares.”

    What does it mean when you say it doesnt affect authorized shares?

    • Karthik Rangappa says:

      1) Yes
      2) In FPO, new shares are introduced, but in OFS, the existing shares are sold, hence there is no dilution.

  85. Tushar Mittal says:

    Sir, I heared about OFS is that, “company sold its shares to the intermediary and then the intermediary sold that shares at a price higher than that company sold to them.”….Is it true? sr…..
    Sr, I have an another question about ASBA portal..what it is??

  86. Parth Shah says:

    Dear Karthik,
    First of all thank you so much for providing the material in very systemic way.
    i have few queries
    1. what do you mean by “Shares can be diluted and fresh shares can be created and offered in an FPO”. for introducing new share in FPO does company have extra unallocated share?
    2. What are the circuit restrictions for the non f&o stock.

    Thanks and Regards

  87. Pradeep says:

    Dont you update data and information etc of topics on regular basis.when you have last updated.plz let me know kindly.reply awaited

  88. Ajay Kumar Sharma says:

    Could you please explain Cashing out of Early Investors…..

  89. Sivakumar J says:

    Hey Karthik,

    Excellent efforts..

    Do you think it’s appropriate to discuss about QIP along with these topics.

  90. avadh says:

    Is during dilution of shares, there is necessarily increase in authorised share of the company?

  91. avadh says:

    If a company releases new shares in the market from its own corpus of shares(without increasing Authorised shares), then how could it affect percent of ownership of existing shareholders? Is not it is a simple transfer of some percentage of ownership of company to new shareholder?please clear it with a example. Thanks.

  92. Megh Bhatele says:

    Great content!

  93. Priyanka says:

    Its was little hard to understand need more examples in simple manner.

  94. Ketan says:

    Hello Sir,

    Lets say a company X has a promoter holding of 30% and the rest is with DII/FII.
    What happens to said promoter holding in the following scenarios?

    1) Buyback promoter holding increases correct?

    2) Rights??

    3) ESOPS??

    4) Bonus??

    • Karthik Rangappa says:

      All of this depends on the company’s capital structure. Fresh capital can be raised by inducing new equity as well.

  95. Shubam says:

    Hello Sir,

    1) When a company announces a rights issue are they providing the payment from their reserves or surplus?
    2) Now that the company rights are traded in the market, If I were to purchase said rights from the market, could essentially profit by purchasing rights at a lower price while the CMP is substantially higher?

  96. Suhanshu says:

    Hello Sir,

    A bonus essentially just dilutes the number of shares in the market by increasing the quantity of shares while reducing the price of each share by the appropriate amount correct?

    A split reduces the face value of a share but eventually has the same result on the share price and share quantity.
    Companies do this if their share price is very high and would like to create more liquidity in the market.

    Why would a company choose a bonus from a split or vice versa?

    • Karthik Rangappa says:

      Yes, thats correct. Bonus has a balance sheet impact – money goes from reserves to share capital. This is not the case with split. In the longer term, bonus probably is more rewarding to share holders.

  97. Suhanshu says:

    Hello Sir,

    Why is a bonus more rewarding than a split?

  98. Adhi says:

    But nobody explained what FPO stands for…

  99. shubham says:

    Why promoters go for Offer For Sale when they can sell the share directly in stock market from their zerodha kite app like retail investors sell? Why so much fancy drama?

    • Karthik Rangappa says:

      Promoters selling becomes a personal affair. They do this when the intention is to raise funds for the company.

  100. Chandan says:

    Hello Sir,

    When a Promoter sells shares of his company, does the promoter reinvest that money into the company as a loan or just decides to use it for his own personal use?

  101. SHUBHAM says:

    But why can’t they simply sell in the stock market directly ? Why offer for sale? Why to even give a discount of Rs 1?

  102. Urvashi Mitro says:

    Thank you, this really helps as im so clueless

  103. Siddhesh says:

    I registered for the 12th February 2022 Quiz which was posted on the Zerodha Varsity Instagram handle.
    Will all the modules be tested or just this one or any other one specifically? I’ve started revising the modules, can you please clarify what will be tested so one can prepare accordingly?
    Thank You.

  104. Ghafil Dehalvi says:

    What about QIP ? Any reason that isn’t mentioned

  105. Mayank Kansal says:

    In OFS, promoter dilutes THEIR stake & there is no issue of fresh capital for the company . Whatever the proceed will be from diluting the stake will belong to the promoter.
    So how OFS help the company to raise the funds?

    • Karthik Rangappa says:

      OFS is basically an offer for sale, usually, its the company’s promoters/shareholders offloading shares. So does not always lead to company raising funds.

  106. Chandrapalan says:

    Excellant example of Pressure cooker for this Upper/Lower circuit.

  107. Gopi pillai says:

    I strongly recommend creating hyperlinks like wiki do…especially for abbreviations and technical terms.

  108. venkatesh says:

    1. what is dilution of shares(in relation to ofs,fpo)
    2. what are authorized shares
    3. what are outstanding shares

    • Karthik Rangappa says:

      1) Shares that are offered for fulfilling a corporate action.
      2) Shares which are subscribed by investors
      3) Shares that are available to trade in the market.

  109. Himanshu says:

    >> Dilution of shares is allowed in an FPO leading to change in Shareholding structure while OFS does not affect the number of authorized* shares.
    I think it should be outstanding* shares?

  110. ARUN says:

    Only the top 200 companies by Market Capitalisation can use the OFS route to raise funds while all listed companies can use FPO option.


  111. Saravana says:

    Hi Sir,
    when retail investors can start trading? Is it after IPO? since ipo comes in lots, when it will be available to trade small quantity?


  112. sabby says:

    Please add this supplementary material to the module pdf..

  113. narendra says:

    can you explain me about OFS with one more example

  114. keshav says:

    Hi Karthik,

    I am not entirely clear on how a Rights Issue leads to share dilution.

    If the total number of shares is being increased from say 1000 to 2000, does that mean every shareholder’s investment value will be halved? Or will the number of shares being held by each investor automatically double in order to conserve their investment value?

    Thank you.

    • Karthik Rangappa says:

      Value will remain the same, but the future earnings will be divided across more shareholders, Keshav. So, the dilution.

  115. Saddam shaikh says:

    Noice learning!! Thank you for clearing the concepts

  116. Jayesh Agrawal says:

    Hello Karthik,
    Nice Explanation
    I have a major doubt, regarding dilution of shares and it’s value when a company goes for IPO/OFS/Rights issue/FPO
    And what does Fresh issue mean? Is there an alternate to fresh issue?

  117. Shivam says:

    Sir i have a question, does company offers OFS cheaper than the CMP or at CMP ?

  118. Rajat says:

    I am curious to know when a company makes an IPO and now shares are trading on an exchange. But now when they make an fpo at what price are the shares going to be offered in and FPO whether CMP/IPO PRICE or any other price.

    Thank you

  119. Satyam says:

    I am grateful to Zerodha for providing good presentation of concepts related to finance and stock market. Stock market concepts which looked monotonous and laborious to me earlier, were very well simplified in your videos and modules

  120. Snandan says:

    In the starting it was mentioned that the main purpose of OFS & FPO is the procurement of capital after the company is listed in secondary markets. But in case of OFS, the money goes in the hands of promoters so how does OFS benefits the company in capital procurement process ? Doesn’t it benefits the promoters only ?

    • Karthik Rangappa says:

      Depends, there could be an OFS just to gain some liquidity from promoters. So it really depends. Do read the reasons for OFS, that will give you a perspective.

  121. Manoj says:

    Hii Karthik, great content

    Can you clarify this.
    IPO is basically book biding process to find the right price for the listing
    And whereas secondary market starts ones it listed in stock market at the price decided right?

  122. sanvi kumar says:

    What is ASBA Portal

  123. Dhruv says:

    I have shares of a company, their price is 13 rupees and the company has come with FPO with the price of 11 rupees, I applied in fpo, shares are allotted, in the price of 11 rupees, now on the day of listing,my question is (the script of fpo shares is listed separately ? or it happen that the shares before by at 13 will fall in the average price of 12 rupees and after the FPO share 11 price alloted?

  124. suhas askdui says:

    I just graduated from Bristol Business School in the UK after completing my Masters in Finance and Accounting. I have taken this up to learn about Stock markets in details as I am yet to get a job after my masters. I hope I can take this professionally and get a job, through the knowledge I have gained through Varsity.

Post a comment