LG Electronics India Files for IPO, Aims to Raise $1.5 Billion
LG Electronics' Indian subsidiary has filed for an initial public offering (IPO) with the Securities and Exchange Board of India (SEBI). This move marks the second South Korean conglomerate to list its shares in India, following Hyundai Motor Co. in October.
IPO Details and Valuation
The IPO comprises the sale of 101.8 million shares by the Korean parent company, representing about 15% of LG Electronics India's post-offer paid-up equity share capital. The expected issue size is approximately $1.8 billion (₹ 15,237 crore) with a face value of ₹ 10 per share. The IPO aims to raise between $1 billion to $1.5 billion, potentially giving the Indian arm a valuation of around $13 billion.
Reasons for Listing and Use of Proceeds
The listing is expected to address the "Korea discount" experienced by South Korean companies listed in their home market, where their shares are often undervalued compared to foreign peers. By listing in India, LG Electronics aims to improve shareholder returns and potentially reduce this discount. Additionally, the IPO proceeds, generated entirely from the offer for sale (OFS), will go back to the parent company. This allows LG Electronics Inc. to monetize a portion of its investment in the Indian subsidiary.
LG Electronics India's Performance and Competition
Established in 1997, LG Electronics India operates in two primary revenue segments: home appliances and air solution division, and home entertainment division. The company reported revenue of ₹ 21,353.4 crore in FY24, an increase from ₹ 19,870.3 crore in FY23. Their profit for FY24 was ₹ 1,511.0 crore, compared to ₹ 1,344.9 crore in FY23. LG Electronics India faces competition from the Indian units of Samsung and Whirlpool.
IPO Management and Other Filings
The IPO will be managed by Morgan Stanley, JP Morgan, Axis Capital, BofA Securities, and Citi. Other companies that have filed for IPOs in India include Sagility India, Niva Bupa Health Insurance Co., Hexaware Technologies, Carraro India, International Gemmological Institute India, BMW Ventures, Afcons Infrastructure, and Rubicon Research.
Advantages of Listing in India for Foreign Companies
Experts highlight several benefits for foreign companies listing in India, including strong brand recognition among Indian consumers, lower cost of capital compared to transferring funds from overseas, and reduced capital gains taxes after listing, which aids future monetization. The article also mentions examples of prominent foreign companies already listed on Indian stock exchanges, such as Maruti Suzuki India Ltd, Hindustan Unilever Ltd, Nestle India Ltd, and Colgate-Palmolive (India) Ltd.