LG Electronics India Files for IPO: A New Chapter in the Indian Market
In a significant move that underscores the growing interest of global companies in the Indian market, LG Electronics India has filed its draft red herring prospectus (DRHP) with the market regulator, signaling its intention to launch an initial public offering (IPO). This announcement comes just two months after Hyundai Motor India Limited made headlines with its own IPO, which was the largest ever in India, raising $3.3 billion.
The IPO Details
LG Electronics India plans to raise approximately Rs 15,237 crore (around $1.8 billion) through this IPO, which will be entirely an offer for sale. The promoter, LG Electronics Inc., intends to offload 10.18 crore shares as part of this process. The company has enlisted a group of prominent financial institutions as Book Running Lead Managers (BRLMs) for the offering, including Morgan Stanley, JP Morgan, Axis Capital, BofA Securities, and Citigroup. KFin Technologies Limited will serve as the registrar for the IPO.
The timing of LG’s IPO is particularly noteworthy, as it follows Hyundai’s recent market entry. Hyundai’s shares were listed on October 22, 2024, at a slight discount of 1.3% and have since experienced fluctuations, currently trading 5% lower than the issue price of Rs 160. This backdrop sets the stage for LG Electronics India as it seeks to capture investor interest in a rapidly evolving market.
Strategic Investments and Future Plans
The decision to go public aligns with LG Electronics’ broader strategy to expand its footprint in India. The global chief executive of LG Electronics had previously indicated in August that the company was evaluating a share sale of its wholly-owned subsidiary in India. This move is part of a larger plan that includes the establishment of a third manufacturing facility in the country, with an investment of Rs 5,000 crore.
Moreover, LG is looking to enhance its supply chain by encouraging its South Korean and Chinese component suppliers to set up local manufacturing plants. Industry executives suggest that a portion of the proceeds from the IPO may be allocated to support the development of this new factory, further solidifying LG’s commitment to the Indian market.
Financial Performance
LG Electronics India has demonstrated robust financial performance in recent quarters. For the quarter ending June 30, 2024, the company reported a revenue of Rs 6,409 crore. This positive trend continued into the financial year ending March 31, 2024, with total revenue reaching Rs 21,352 crore, an increase from Rs 19,868 crore in the previous year.
The company’s profit after tax (PAT) also showed significant growth, with a reported PAT of Rs 680 crore for the June quarter. For the entire financial year 2024, the PAT stood at Rs 1,511 crore, up from Rs 1,345 crore in the previous year. These figures reflect LG Electronics India’s strong market position and operational efficiency, making it an attractive prospect for potential investors.
Ownership Structure
As of the latest filings, LG Electronics Inc. holds 100% equity in LG Electronics India, representing over 67.87 crore shares. The weighted average cost of acquisition per equity share is reported at Rs 1.66, indicating a favorable valuation for the parent company as it prepares to divest a portion of its stake through the IPO.
Conclusion
The filing of the DRHP by LG Electronics India marks a pivotal moment in the company’s journey and the broader landscape of foreign investments in India. With a solid financial foundation, strategic expansion plans, and a commitment to local manufacturing, LG Electronics India is poised to attract significant investor interest. As the IPO process unfolds, all eyes will be on how this move impacts the company’s growth trajectory and its role in the competitive Indian electronics market.