LG Electronics Inc. is mulling putting off an initial public offering of its wholly owned subsidiary in India amid growing volatility in the global financial market due to concerns over US tariff-triggered economic downturn, industry sources said on Wednesday.
The South Korean electronics giant initially planned to list LG Electronics India Pvt. on the local market in early May after getting a nod for its preliminary IPO plan from the Securities and Exchange Board of India in mid-March.
The company is supposed to submit its final IPO prospectus and schedule book-building sessions to decide the IPO price to list the Indian unit within a year after the preliminary approval.
But industry sources said LG Electronics is weighing the timing of filing the final document for the IPO of its Indian unit as it is concerned that the latest rocky moves in the global financial market could make it difficult to secure a fair valuation for the stock.
In response to speculations of a potential delay in its Indian unit’s listing, an LG Electronics official said the company will make “the final decision on the IPO of the Indian unit based on market conditions and other factors.”
“No decisions have been finalized,” said the official.
BLOCKBUSTER IPO IN INDIA
The IPO of LG Electronics’ Indian unit has been highly anticipated as a local blockbuster listing due to its position in the market.
As India’s No. 1 home appliance brand, the valuation of LG Electronics’ Indian unit is estimated at about $13 billion, much bigger than its Korean parent’s total market capitalization of 11.67 trillion won ($8.2 billion) in Seoul.
The Korean household name plans to raise up to $1.5 billion by offering a 15% stake in the Indian unit through the IPO.
The public offering comes at a time when LG Electronics is seeking to build an overseas manufacturing hub in South Asia as an alternative to China amid escalating trade rows between the world’s two largest economies – the US and China.
But its India IPO plan has hit a stumbling block as the Trump administration’s steep tariffs on nearly all imported foreign goods have dampened investor appetite for risk assets like stocks, amid growing recession fears and a deepening global trade war, which is rattling financial markets worldwide.
Citing the current market rout, many LG Electronics officials were said to have called for a change in the timing of the Indian unit’s listing to avoid unfavorable valuation.
NO NEED TO HURRY
Considering the steady increase in LG Electronics India’s sales and profit in recent years, there is no need to rush its IPO, said market analysts.
The preliminary IPO prospectus got the green light based on the company’s financial statements for last year.
As LG Electronics is seeking a higher valuation for its Indian unit, it may be better to wait for updated financial statements for this year reflecting improved performance, according to market analysts.
The Indian unit posted its largest-ever sales of 3.79 trillion won last year, up 14.8% from the previous year. Its net profit surged 43.4% on-year to 331.8 billion won.
If it makes a trading debut in India, it will become the second Korean company to float on the South Asian country’s stock market.
Last October, Hyundai Motor India raised $3.3 billion in India’s largest IPO and the carmaker’s first offshore stock market listing.
LG Electronics is slated to break ground on its third consumer electronics plant in India this year, which is estimated to cost at least $500 million.
It will also use the IPO proceeds to develop and market home appliances tailored to Indian and other Southwest Asian countries, as well as for mergers and acquisitions.
The Korean home appliance giant pins high hopes on the growing middle class, young population and strong economic growth in the world’s most populous country.
By Eui-Myung Park
uimyung@hankyung.com
Sookyung Seo edited this article.
