Understanding fast track FPO: How does it simplify fundraising for companies

This streamlined process eliminates a significant step in the traditional FPO process, allowing companies to expedite their fundraising efforts and access capital more swiftly.

Capital is the essential ingredient that transforms business potential into business productivity. In markets, companies have multiple avenues to raise funds, be it IPO or FPO. However, one lesser-known method is the fast track FPO. So, what exactly is an FPO?

A fast track FPO is a mechanism that enables eligible listed companies to raise additional capital through a public offer without the requirement of filing a draft offer document with the Securities and Exchange Board of India (SEBI) for prior approval. This streamlined process eliminates a significant step in the traditional FPO process, allowing companies to expedite their fundraising efforts and access capital more swiftly.

Which companies are eligibility for fast track FPO:

1. Listing Track Record: The company's equity shares must have been listed on a recognized stock exchange with nationwide trading terminals for at least three years preceding the offer date.

2. Market Capitalization: The average market capitalization of the public shareholding of the company should be at least Rs 1,000 crore in case of a public issue (fresh issue of shares).

3. Trading Turnover: The annualized trading turnover of the company's equity shares during the six calendar months immediately preceding the month of the reference date should be at least 2 per cent of the weighted average number of equity shares listed during such six months period.

4. Investor Complaints: Issuer has redressed at least 95 per cent of the complaints received from the investors till the end of the quarter immediately preceding the month of the reference date.

5. No Show-Cause Notices: No show-cause notices have been issued or prosecution proceedings have been initiated by the SEBI and pending against the issuer or its promoters or whole-time directors as on the reference date.

You might wonder why the introduction of fast track FPOs was necessary when traditional FPOs were already in place. Well, the answer is simple: Unlike traditional FPOs, which require companies to file a draft offer document with SEBI for prior approval, the fast track FPO route eliminates this step. This reduction in regulatory requirements saves time and resources, allowing companies to access capital more quickly and deploy it into growth initiatives. In essence, fast track FPOs provide a more expedited pathway for companies to raise additional funds, supporting their growth aspirations in a dynamic market environment.

In summary, established listed companies with a strong track record and good market standing stand to benefit from fast track FPOs, as they provide a faster and more cost-effective means of accessing capital. Moreover, investors can also reap the rewards of faster fundraising, as it enables companies to pursue growth initiatives more promptly.

Disclaimer: The article is for informational purposes only and not investment advice.