Asia Pacific IPO: LG Electronics India’s Rs116bn IPO
Record setter
LG Electronics India seized a market window to bring a record-breaking Rs116bn (US$1.31bn) IPO that pleased investors.
The IPO journey of the Indian unit of South Korea’s LG Electronics was not all plain sailing. In April, the company, a leader in the household appliance sector, gauged investors’ interest for the float but did not take the deal forward because of volatile market conditions.
However, the cut in goods and services tax announced in September for several products dramatically changed the outlook for the consumer durables sector. It also lifted sentiment in the stock market, which had been under pressure after the US in August imposed punitive tariffs on Indian goods.
LG Electronics India took advantage of the change in sentiment and launched the deal in October, setting terms that gave an investor-friendly valuation. The offer of 101.8m secondary shares, or a 15% stake, by parent LG Electronics, was marketed at Rs1,080–Rs1,140 per share.
Top-end pricing implied a P/E multiple of 34.7 for the financial year that ends in March 2026, compared with an industry average of 44.8 times.
Attracting local mutual funds in force was important for the issuer as foreign investors had been net sellers of Indian shares for most of the year. With the top mutual funds agreeing to come in as anchor investors, the company then reached out to foreign investors who were willing to pay a premium.
As a result, the company was able to sell the IPO at a valuation of US$8.71bn, above the US$7bn–$8bn range that investors had indicated they were willing to pay during market sounding in April, before putting the plan on hold due to market volatility following US president Donald Trump's "liberation day" tariff announcements.
Local and international long-only institutions, sovereign wealth funds, domestic mutual funds and insurance companies participated in the transaction. Investors included the country’s top three mutual funds – SBI Mutual Fund, ICICI Prudential Mutual Fund and HDFC Mutual Fund.
Foreign investors included Singapore's GIC, Abu Dhabi Investment Authority, Fidelity Investments, Norway's Government Pension Fund Global and Qatar Investment Authority, which rarely invests in Indian IPOs but made an exception for this issue.
That helped the deal become the first US$1bn-plus Indian IPO to be covered on the first day of subscription since 2021.
The first-day coverage added considerable momentum to the deal, which was eventually 54 times covered – the highest for a billion-dollar issue in India since 2008.
The shares soared 48% on debut on October 14, the best performance for a jumbo Indian IPO and as of mid-November were 42% above the issue price. The stellar performance took the subsidiary’s market capitalisation to US$12.4bn, surpassing the parent’s US$10.3bn, and encouraging more multinational conglomerates to list their Indian businesses.
Axis Capital, Bank of America, Citigroup, JP Morgan and Morgan Stanley were bookrunners.