LG Electronics’ India arm readies for IPO, files draft papers with SEBI | Stock Market News

The Indian arm of LG Electronics on Friday filed for an initial public offering (IPO), becoming the second South Korean conglomerate to sell its shares in the country after automobile giant Hyundai Motor Co.

The Korean parent will sell 101.8 million shares, accounting for about 15% of the post-offer paid-up equity share capital of LG Electronics India Pvt. Ltd, the company’s draft IPO papers showed. Morgan Stanley, JP Morgan, Axis Capital, BofA Securities and Citi will manage the IPO, which will be a pure offer for sale (OFS).

The issue size is expected to be about $1.8 billion or ₹15,237 crore, a Moneycontrol report said. The face value of each share is ₹10.

LG Electronics India, which sells washing machines, TVs, air conditioners and refrigerators, among other electronic goods, competes with the Indian units of Samsung and Whirlpool. The IPO does not have a fresh capital issue, and the proceeds are expected to entirely go back to the parent entity, as per the filing.

South Korean companies listed in their home market have long struggled with the so-called Korea discount, where investors value their shares at a discount to their foreign peers. The discount is often attributed to the tightly held structure of its conglomerates and the country’s standoff with its nuclear-armed northern rival. The Korean government has been encouraging conglomerates operating abroad to reduce the discount by listing shares and increasing shareholder returns.

LG Electronics India reported revenue of ₹21,353.4 crore in FY24, up from ₹19,870.3 crore in FY23, and profit of ₹1,511.0 crore as compared to ₹1,344.9 crore during the same period. Established in 1997, the Indian arm has two primary revenue segments—Home appliances and air solution division, and home entertainment division.

The IPO will allow LG Electronics Inc. to monetize part of its investment in the Indian subsidiary while offering investors an opportunity to participate in a well-established consumer brand with a robust market presence.

The development comes after Hyundai Motor listed its Indian arm in October. The Hyundai IPO of ₹27,870 crore was India’s biggest, exceeding state-run Life Insurance Corp. of India’s (LIC) ₹21,000 crore in 2022. It had fixed a price band of ₹1,865-1,960 per share. On Friday, the company’s shares closed at ₹1857.20 on Friday.

Among companies which have filed for IPOs include Sagility India (formerly Conduent), Niva Bupa Health Insurance Co. (formerly Max Bupa), Hexaware Technologies, Carraro India, International Gemmological Institute India, BMW Ventures, Afcons Infrastructure and Rubicon Research. Some of the more prominent foreign companies listed in Indian markets include Japanese automaker Suzuki Motor Corporation (unit Maruti Suzuki India Ltd), British consumer goods company Unilever (Hindustan Unilever Ltd), Swiss food and beverage maker Nestle (Nestle India Ltd), and Colgate-Palmolive (India) Ltd, the unit of US oral hygiene company Colgate-Palmolive.

Experts have noted that a strong brand recall with Indian consumers, lower cost of capital as opposed to transferring funds from overseas markets, and lower taxes on capital gains after listing for future monetization are crucial benefits for foreign companies to consider a domestic listing.