Every Nepali investor knows what an IPO is — it is the moment a company sells shares to the public for the first time, and applying for it is practically a national hobby. But when a company that is already listed announces an FPO, many investors are less sure what it means, whether it is worth applying for, and how it differs from an IPO.
The distinction matters. IPOs and FPOs have different purposes, different pricing, different allotment dynamics, and often different outcomes for investors. This guide breaks down both, compares them head-to-head, and helps you decide where to put your application money.
What Is an IPO?
IPO (Initial Public Offering) is the first time a company sells its shares to the general public. Before an IPO, the company is privately held. After the IPO, its shares trade on NEPSE.
Why Companies Do IPOs
- Raise capital for expansion, projects, or debt repayment
- Provide an exit for early investors and promoters
- Gain access to the public capital markets for future funding
- Improve visibility and credibility
Key Features of an IPO
- The company is unlisted before the IPO — it is new to the exchange
- Shares are issued at a fixed price (often NPR 100 face value, possibly with a premium)
- The issue is subject to SEBON approval
- Listing typically follows a few weeks after allotment
- There is no trading history — the listing price is discovered by the market
What Is an FPO?
FPO (Follow-on Public Offering) is a subsequent public issue of shares by a company that is already listed on NEPSE. The company is already trading; the FPO adds more shares to the public float.
Why Companies Do FPOs
- Raise additional capital for expansion or new projects
- Meet regulatory requirements (e.g., minimum public shareholding, promoter holding limits)
- Fund acquisitions or debt restructuring
- Improve liquidity by increasing the public float
Key Features of an FPO
- The company is already listed with an existing share price
- The FPO price is usually linked to the market price (often at a discount to attract investors)
- The shares are issued to the public, but the company's ownership structure changes as public shareholding increases
- The stock already has a trading history — you can see how it has performed before applying
The Head-to-Head Comparison
| Factor | IPO | FPO |
|---|---|---|
| Meaning | First public issue of shares | Subsequent issue by listed company |
| Company status | Previously unlisted | Already listed on NEPSE |
| Purpose | Initial listing, raise capital, exit for promoters | Raise more capital, meet regulations, increase float |
| Price | Fixed (often at face value NPR 100) | Linked to market price (often a discount) |
| Trading history | None | Available — you can see past performance |
| Risk | Higher (no track record of public trading) | Lower to moderate (known company, known price) |
| Listing timeline | Weeks after allotment | Usually faster (already listed) |
| Allotment | Lottery (retail) | Lottery or proportional |
| Typical investor view | "New opportunity" | "Cheaper than market price?" |
How Pricing Differs
IPO Pricing
Most Nepali IPOs are issued at face value (NPR 100) or with a small premium. The issue price is set by the company and approved by SEBON, based on:
- Book value
- Earnings and valuation
- Comparable listed companies
Because the price is fixed before any market trading, the "listing gain" depends on how the market values the company once it trades. This is why IPOs can list at a premium (popular issue) or at a discount (unpopular or overpriced issue).
FPO Pricing
An FPO is priced relative to the current market price of the already-listed shares. The issue price is typically set at a discount to the market price (often 5-15%) to make the FPO attractive.
Example:
- Company XYZ trades at NPR 400 on NEPSE
- The FPO is priced at NPR 350 (a 12.5% discount)
- If you apply and get allotted, your shares are immediately "cheaper" than the market price
This discount is the FPO's main attraction — but there is a catch: after the FPO allotment, the new supply of shares can put pressure on the market price. The discount is partly compensation for that.
Allotment and Application Differences
Application Process
Both IPOs and FPOs are applied for through Mero Share using the ASBA system. The process is identical:
- Log in to Mero Share
- Select the issue
- Enter the number of shares
- Authorize with your PIN
- Your bank account blocks the application amount
Allotment Rules
- Retail investors: both IPOs and FPOs reserve a portion for retail applicants (typically 10% for ordinary and up to 10% for mutual funds), allocated by lottery when oversubscribed.
- Oversubscription: both can be heavily oversubscribed — in hot IPOs, applications reach 10-50x the shares on offer, so allotment is a small fraction (or zero) for most applicants.
- Non-retail (institutional): a significant portion of FPOs and IPOs is reserved for institutions, which are allocated proportionally.
Which Is a Better Opportunity?
There is no universal answer — it depends on the specific issue. But here is a framework for evaluating both.
When an IPO Is Attractive
- Strong fundamentals: the company has real earnings, a solid balance sheet, and a good business
- Fair pricing: the issue price is reasonable relative to book value and earnings (not inflated)
- Sector tailwinds: the sector is in favor (investors are chasing it)
- Small float: limited shares available can drive listing premiums
The risk: IPOs of weak companies, or IPOs priced too aggressively, can list below the issue price — and the "listing gain" myth leads many to lose money.
When an FPO Is Attractive
- Quality company at a discount: the company is fundamentally sound, and the FPO price is a genuine discount to a reasonable market price
- Healthy sector: the sector is not in a downtrend (new supply in a falling sector amplifies the fall)
- Clear use of proceeds: the company is raising money for a credible purpose that should increase future earnings
The risk: an FPO in a weak stock is a trap — the discount looks appealing, but the market price can fall below the FPO price after the new supply arrives.
The Decision Framework
| Question | IPO | FPO |
|---|---|---|
| Is the company fundamentally sound? | Research the prospectus carefully | Easier — you can see the trading record |
| Is the price reasonable? | Compare to book value and peers | Compare to market price and the discount |
| Is the sector in favor? | Both matter — hot sectors list higher | Both matter — weak sectors drag FPOs down |
| What is the likely listing/allotment outcome? | Could list at premium or discount | Market price already exists; watch the discount vs. post-allotment supply |
Common Misconceptions
"IPO always lists at a premium — free money"
Not true. While many Nepali IPOs have listed at a premium (especially in bull markets), IPOs of weak companies can and do list below the issue price. The 2021 bull market created an illusion of "IPO = guaranteed profit" that ended painfully for many.
"FPO is just a cheaper version of the same stock — always apply"
The discount exists for a reason. When new shares hit the market, supply increases. In a weak market, the stock price can fall through the FPO price. Evaluate the discount against the fundamentals, not just the number.
"If an IPO is oversubscribed, I will definitely get shares"
Oversubscription is the norm for good issues — and the more oversubscribed, the lower your lottery odds. Hot IPOs allocate single-digit percentages to most retail applicants, or nothing at all.
Practical Tips for Applying
For IPOs
- Read the prospectus — the company's business, financials, and risks are all there
- Check the valuation — compare the issue price to book value and to listed peers in the same sector
- Apply early in the window — avoid the last-day rush
- Do not chase every issue — selectivity beats blanket applications, especially for companies with weak fundamentals
- Check the issue size and float — smaller floats often list higher
For FPOs
- Compare the FPO price to the market price — how real is the discount?
- Check the stock's trend — an FPO in a falling stock is a warning sign
- Understand the dilution — more shares outstanding means EPS dilution unless the raised capital earns a return
- Watch the sector — new supply in a strong sector is absorbed easily; in a weak sector it amplifies declines
After Allotment
- Check results on Mero Share or with OneClickResult's bulk IPO Result Checker
- Decide your holding strategy before listing: are you a short-term listing-gain trader or a long-term holder? Decide before the shares credit to your DMAT, not after the price moves.
The Bottom Line
IPO and FPO are two sides of the same primary market, but they answer different questions:
- An IPO asks: "Is this company, at this price, worth owning?"
- An FPO asks: "Is this already-listed company, at this discount to its market price, worth owning?"
The discipline is the same for both: evaluate the fundamentals, check the price, judge the sector, and apply based on analysis — not on the crowd's enthusiasm. The investors who treat every issue as a decision to be made, rather than a lottery ticket to be bought, are the ones who profit from both IPOs and FPOs over the long run.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Specific issue terms and regulatory rules are subject to change. Always read the prospectus and consult a licensed advisor before investing.