LG Electronics India's IPO bid hits its stride

Shareholder concerns over discount remain unaddressed

By Nam Hyun-woo

LG Electronics' push to list its Indian unit on the local stock exchange is gaining momentum, with authorities recently granting provisional approval for a 150-billion rupee ($1.72 billion) initial public offering (IPO).

According to Indian news outlets, the Securities and Exchange Board of India approved LG Electronics India’s draft red herring prospectus filed in December last year.

The IPO is aimed at raising 150 billion rupees ($1.73 billion) with parent company LG Electronics selling its 15 percent stake in the Indian unit, without issuing new rights. To complete the IPO, the Indian unit must determine the offering price through a book-building process and receive regulatory approval for the final prospectus.

Industry officials assume that the Indian unit will likely complete this process and debut in May. The funds secured through the IPO will be directed to LG Electronics headquarters.

LG Electronics has yet to clarify its plans for the funds, but analysts expect the company will likely use them as resources for buying back its own shares or a merger and acquisition (M&A) for a heating, ventilation and air conditioning (HVAC) business.

“LG Electronics will be able to raise at least 3 trillion won through the IPO, and the funds are estimated to be used for buying back its own shares and M&A for HVAC business,” KB Securities analyst Kim Dong-won said.

“If the company uses 20 percent of the 3 trillion won raised to buy back treasury shares, their value will reach 600 billion won, accounting for 4.6 percent of the company’s total shares.”

Kim raised his price target for LG Electronics to 130,000 won from 120,000, adding that the company’s operating profit will reach 4.1 trillion won, the highest since 2021, buoyed by robust profits in household appliances.

“The company's HVAC division performance is improving, driven by surging sales of premium home appliances in Asian markets such as India, Indonesia and Malaysia,” Kim said.

LG Electronics recently stressed its commitment to the Indian market. Earlier this month, LG Group Chairman Koo Kwang-mo visited LG Electronics’ manufacturing facilities in the country, where he said, “The next few years will be crucial in determining how we can differentiate ourselves in the Indian market and stay ahead of our competitors.”

While LG Electronics operates manufacturing facilities in the Indian cities of Noida and Pune, it is planning to establish a new production site in the Indian state of Andhra Pradesh to meet increasing market demand.

Despite its smooth progress, it remains uncertain whether the IPO will benefit LG Electronics' stock price in the long term, given the previous case.

LG Electronics India’s IPO is the second case of a Korean company listing its local subsidiary following Hyundai Motor India (HMI) in October 2024. At the time, analysts expected that HMI’s IPO would boost the stock price of Hyundai Motor, with Eugene Investment & Securities predicting an 18.8 percent increase in the parent company’s stock price.

However, Hyundai Motor’s share price slid 14.3 percent from 234,500 won on Oct. 22 to 201,000 won on March 13, when HMI debuted on the Indian stock exchange. During the same period, HMI also suffered a 9.6 percent decline.