LG Electronics India eclipses South Korean parent in blockbuster $13 billion trading debut
LG Electronics India soared 53.4 per cent in its trading debut on Tuesday, overtaking its South Korean parent's market value, as investors bet big on its manufacturing and retail ambitions in the country, fuelled by a surge in consumer demand.
Policy support, including India's recent tax cuts on consumer goods such as refrigerators and televisions, and a dovish central bank stance are expected to lift near-term growth for appliance makers.
The listing - the strongest for a billion-dollar IPO in India since 2021 - coincides not only with India's festive season, when spending peaks, but also comes amid a busy primary market, where favourable policies are driving a fundraising boom set to surpass last year's record $20.5 billion.
Consumption is "where LG has gotten a better response compared to other IPOs that are currently in the market", said Deven Choksey, managing director at DRChoksey FinServ.
The blockbuster $1.3 billion offering opened for bids around the same time as the year's largest IPO Tata Capital and office working space major WeWork India's listing.
However, while LG's IPO was fully subscribed within hours of opening, attracting bids worth nearly $50 billion, both Tata Capital and WeWork logged muted demand across investor segments.
On listing day, the former rose only 1.4 per cent, while the latter fell 3 per cent.
"After a long time, we're seeing a genuinely strong IPO in the consumer space — solid fundamentals, reasonable valuations and sector-leading growth prospects," said Dhiraj Relli, managing director and CEO of HDFC Securities.
The country's second-biggest appliance maker has begun construction of its $600 million-manufacturing facility - its third in India - with plans to convert India into a global export hub, hugely underpinning the investor enthusiasm.
LG Electronics India's shares closed 48.2 per cent higher at 1,689.9 rupees, after listing at 1,710.10 rupees - well above the issue price of 1,140 rupees.
The company notched a valuation of around $13 billion, surpassing its $8.73 billion target and the roughly $9 billion market value of its parent LG Electronics.
The IPO was a pure offer-for-sale, with the parent offloading 15 per cent of its stake as it defends its margins in its core TV and appliance businesses from fierce Chinese competition.
Qualified institutional buyers had bid 166.5-fold their quota, while non-institutional and retail investors had subscribed 22.4 times and 3.54 times, respectively.
Institutional investors are unlikely to be satisfied with the current 5 billion–6 billion rupee allocation, Relli said, adding that they will be forced to participate aggressively beyond the listing to achieve reasonable sizing.
At least five brokerages initiated coverage on the firm, with price targets between 1,700 to 1,800 rupees.
($1 = 88.7680 Indian rupees)
