A follow-on public offering (FPO) is the issuance of shares following the company's listing on the bourses. The refund process for an FPO is similar to that of an Initial Public Offering (IPO).
There are two major instances in which investors may have to claim refunds for an FPO. One is when the document verification process is not passed, and second, in case of oversubscription of an issue.
When FPO applications are made, they are sent to the registrar by stock exchanges. Applications are then sent to Central Depository Securities Ltd (CDSL) and National Securities Depository Ltd (NSDL) for checking documents. If the verification process is not passed, the investors will not be allotted shares.
Similarly, when the public issue is heavily oversubscribed, one has to follow the process of allotment. The process of allotment of shares is handled by the registrar who decides who should be allotted shares and how many shares should be allotted.
When you apply for an FPO, your account is blocked with an amount – depending on how many shares you bid for. Depending on the number of shares you are allotted, the amount is then debited from your account.
For example: If you've applied for shares worth ₹1 lakh and get allotted shares worth ₹70,000, the same amount will be debited from your account while the remaining ₹30,000 will be released.
There is no physical refund of an FPO. In extremely rare circumstances, such as when there is a disagreement regarding blocking and unblocking or other similar problems, the physical refund will take place.
Adani FPO refund
In the case of the FPO of Adani Enterprises Ltd, since the company has withdrawn the offer, the entire amount will be unblocked. Adani Enterprises decided to cancel the FPO following a sharp fall in the stock price after the Hindenburg Research report that alleged stock manipulation and accounting fraud by the Adani Group.
What happens if you don't receive the refund?
Investors can call or write to the registrar and merchant bankers if refunds are not received. Typically, when investors get in touch with the registrant, they first get in touch with the bank, which then releases the money.
Investors must receive compensation if the unblocking is not completed within a particular period of time.