LG Electronics’ Indian subsidiary, LG Electronics India Limited (LGEIL), is on the brink of a significant milestone as it prepares for an initial public offering (IPO) on the Indian stock market. The Securities and Exchange Board of India (SEBI) granted approval for the IPO plan on March 13, following the submission of the Draft Red Herring Prospectus (DRHP) on Dec. 6 of last year. This approval marks a crucial step in the process, bringing the company closer to its anticipated listing as early as May.
The IPO is set to raise approximately 2.5 trillion won by selling about 15% of LG Electronics’ holdings in its Indian subsidiary, amounting to 101.8 million shares. This move is part of LG Electronics’ broader strategy to leverage the dynamic Indian market, one of the largest and most vibrant globally. The funds raised are expected to be channeled into future growth areas such as heating, ventilation, and air conditioning (HVAC) systems and research and development (R&D), although specific plans have not yet been disclosed.
The journey towards this IPO began with the submission of the DRHP, a critical document in the IPO process that outlines the company’s business operations, financials, and the purpose of the funds to be raised. Following SEBI’s approval, LGEIL received preliminary approval from the local stock exchange, signaling that the final stages of the IPO process are underway. An investment banking industry official noted, “Given the approval from the local exchange, the listing could be completed around May.”
The Indian stock market, with its major exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), is a key player in the global financial landscape. The listing of LGEIL is not only a testament to the growing economic ties between South Korea and India but also highlights the increasing trend of foreign companies seeking capital in India. This trend was exemplified by Hyundai Motor’s Indian subsidiary entering the NSE in Mumbai last October, and reports suggest that Lotte Wellfood is also considering a local listing.
Market reactions to LGEIL’s impending IPO are mixed. There are concerns that spinning off a core overseas business for a duplicate listing could negatively impact the parent company’s stock price. However, some investors see the IPO as a strategic move that could benefit the entire group’s business. A senior industry official commented, “How duplicate listings are interpreted is crucial. If the IPO funds benefit the entire group’s business, it could also be advantageous for the parent company’s shareholders.”
LG Electronics has been a significant player in the Indian market since establishing its subsidiary in 1997, primarily focusing on producing and supplying home appliances. The company is also considering expanding its manufacturing capabilities by building a factory in Sri City, Andhra Pradesh, a prominent industrial hub in southern India.
As the IPO process progresses, LG Electronics must finalize the offering price through demand forecasting and secure final approval for the Red Herring Prospectus (RHP). The successful completion of these steps will pave the way for LGEIL’s entry into the Indian stock market, potentially setting a precedent for other multinational corporations eyeing similar opportunities in India.