Slowdown Forces Lg To Defer Float

The stockmarket slowdown and a slump in the consumer durables market has forced LG Electronics India Ltd (LGEIL), the wholly owned subsidiary of consumer durables major LG Electronics, Korea, to once again postpone its initial public offer (IPO) plans.

The company was planning to hit the market with an IPO of 25 per cent shares around Diwali this year. To this effect, the company was talking to 2-3 merchant bankers.

However, it is learnt that merchant bankers have advised it to hold on to such plans till there is a revival in the stock market sentiment and an uptrend in the retail movement. Any move at this point in time to disinvest shareholding in favour of the public and institutions through the IPO route may not fetch the expected premium, sources pointed out.

In 1997, when LG applied to the government seeking approval to set up a wholly-owned subsidiary in the country it made a commitment to off-load 25 per cent shareholding to the Indian public and other resident holders within five years.

Hence, it is obligatory on the company to float its IPO by October 2002. However, though the company has been planning the IPO since the past two years, it has not been able to give it a final shape yet.

According to sources, the IPO was also expected to give the company a platform to offer stock options to its employees. With the IPO on hold, the stock option plan too is not under consideration at the moment, according to sources. The company has an employee turnover rate of 5.5-6 per cent which compares favourably with the industry average.

Meanwhile, the company has decided to hire people from the fast moving consumer goods and soft drinks sectors to infuse fresh ideas.

LG Electronics India has a per employee productivity of Rs 2.2 crore. It is sought to be raised by 35 per cent during 2001. "This will be achieved through a combination of increased turnover and outsourcing," sources said.