LG Electronics India poised to rise in trading debut after $1.3 bn IPO

By Rajesh Mascarenhas

 

LG Electronics India Ltd. appears to be poised to rise in its Mumbai trading debut on Tuesday after investors flocked to its initial public offering, making it the country’s most oversubscribed billion-dollar deal of its kind in 17 years. 

 

Shares of the home-appliance maker, a unit of South Korea’s LG Electronics Inc., traded about 30 per cent above the IPO price of ₹1,140 on the gray market on Monday, according to data from Investorgain.com and IPOcentral.in. Such a pop could make LG’s India unit boast a market value exceeding $11 billion, higher than that of its Korean parent.    

 

More broadly, an opening-day surge by LG would bode well for other Indian companies planning to go public, particularly in the wake of Tata Capital Ltd. only rising 1.4 per cent in its debut after the country’s biggest IPO of the year. India has become one of the busiest markets worldwide for companies going public over the past two years, drawing global investors eager to tap its fast-growing consumer economy. 

 

During the public offering, which raised ₹11,600 crore ($1.3 billion), bids for LG India’s stock were 54 times the number of shares on sale. 

 

“Given the strong demand during the book-building process, particularly from affluent investors, LG Electronics India looks set to light the Diwali fireworks with a stellar market debut,” said Sudip Bandyopadhyay, group chairman at Inditrade Capital Ltd., making reference to India’s biggest holiday of the year. “A solid listing could open the door for several companies waiting to tap the market in the coming weeks.”

 

LG India offers a “superior return profile” relative to competitors, according to SBI Securities, but not everyone agreed the stock warrants a surge. At 35 times last fiscal year’s earnings, the stock appears fairly valued at the IPO price, according to Sharekhan Ltd., a local broker. 

 

The prospect of getting a bargain helped with demand for LG. The sale drew a lineup of marquee names such as sovereign wealth funds from Abu Dhabi, Norway, and Singapore, as well as the likes of BlackRock Inc. and Fidelity International Ltd. as anchor investors. 

 

That’s a contrast to earlier this year, when LG suspended its IPO plans and scaled back expectations about how much the deal would raise.    

 

Meanwhile, October is shaping up to be India’s biggest month ever for IPOs — with proceeds expected to top $5 billion — LG and Tata’s deals have been closely watched as they’ve been seen as testing the strength of one of the world’s hottest IPO markets. 

 

The pair of offerings have pushed total IPO proceeds in the country beyond $15 billion this year, according to data compiled by Bloomberg. A rush of large deals in recent weeks has fueled optimism that proceeds could surpass last year’s record of almost $21 billion. Jefferies Financial Group earlier said India’s primary market is primed for a sharp rebound after a slow start to the year, with as much as $18 billion expected to be raised in the second half. 

 

Upcoming offerings in India include deals from Lenskart Solutions Ltd., Groww’s parent Billionbrains Garage Ventures Ltd. and ICICI Prudential Asset Management Co.