LG Electronics is moving forward with the initial public offering (IPO) of its Indian subsidiary, LG Electronics India Ltd., and expects to complete the process as early as next month. As part of this IPO, the South Korean company's board has approved the sale of a 15% stake in the Indian unit. The IPO is estimated to be worth around 1.8 trillion won (approximately $1.28 billion).

Details of the IPO

LG Electronics will be selling 101,815,859 shares, which constitute 15% of its stake in the Indian subsidiary. The IPO will be an offer for sale (OFS), meaning that no new shares will be issued, and the proceeds will go to the parent company, LG Electronics Inc. Following the IPO, LG Electronics will retain an 85% stake in LG Electronics India. The funds raised are intended to bolster the company's financial position and secure funding for future growth.

While the exact date of the sale and pricing details are yet to be disclosed, LG Electronics plans to submit its final securities report to the Securities and Exchange Board of India (SEBI) and expects the offering to close once it receives final approval from SEBI. Preliminary approval from SEBI was already granted in March.

Financials and Market Valuation

Industry analysts anticipate that the IPO will significantly improve LG Electronics' financial soundness by enabling large-scale cash procurement without incurring financial risks such as interest expenses. The offering size is expected to be around 115 billion rupees (approximately 1.8 trillion won), which exceeds LG Electronics' cash and cash equivalents of 1.1 trillion won as of the end of the second quarter.

The market expects the corporate value of LG Electronics' Indian subsidiary to exceed 12 trillion Korean won. For comparison, Voltas Ltd., an Indian consumer electronics affiliate of the Tata Group, has a valuation of around 7.2 trillion won, while Whirlpool India has a market capitalization of about 2.4 trillion won. However, recent reports suggest a valuation of around $9 billion, lower than the $15 billion expected when the initial papers were filed in December 2024.

India's Growing Market

LG Electronics' decision to list its Indian subsidiary reflects the growing interest from global companies in the Indian stock market, driven by India's increasing demand for consumer durables. Last year, Hyundai Motor raised a record $3.3 billion through its India listing.

LG Electronics has been stepping up its investments in India, with plans to invest approximately $600 million over four years in a new factory in Andhra Pradesh, which will be its third in the country.

Advisors

Axis Bank Ltd., along with the Indian units of Morgan Stanley, JPMorgan Chase & Co, BofA Securities Inc. and Citigroup Inc., are acting as advisors for the share sale.