On the first day LG Electronics' India unit listed on the stock market, it rose 50% from the offer price. By contrast, in the domestic market the parent company LG Electronics' year-to-date return remains negative (-).
According to the National Stock Exchange of India (NSE) on the 14th, shares of LG Electronics' India unit traded at 1,710.1 rupees at 9:40 a.m. local time (1:10 p.m. Korea time). That was up 50.01% (570.1 rupees) from the offer price. LG Electronics' India unit debuted on the NSE and the Bombay Stock Exchange (BSE) that day.
This listing was carried out without a new share issuance, by selling 15% equity (101,815,859 shares) of the India unit held by LG Electronics as an offer for sale of existing shares. Strong demand had already been signaled during the initial public offering (IPO) process. The offer price for LG Electronics' India unit was set at 1,140 rupees, the top of the indicative range (band), and the subscription competition ratio reached 54 to 1. Among large IPOs of $1 billion (about 1.42 trillion won) or more in the Indian market, it was the highest subscription ratio since 2008.
Shares of LG Electronics were also up 1.7% (1,400 won) at 82,400 won as of 1:10 p.m. that day from the previous day. However, they are still about 1% lower than the opening price of 83,500 won at the start of the year. Considering that the KOSPI has risen by nearly 50% this year, LG Electronics' stock performance is very weak.
In the industry, there are also expectations that the share-price trajectory of LG Electronics' India unit will be similar to Hyundai Motor, which listed its India unit earlier. While Hyundai Motor's year-to-date share-price gain in the domestic market is only in the 5% range, Hyundai Motor's India unit is up 33% this year. Compared with the Sensex's year-to-date gain of about 5% in India, it showed a high excess return.
The reason the returns of the domestically listed parent and the India unit have diverged sharply is interpreted as the parent focusing on exports, while the India unit has a large share of domestic demand.
In Hyundai Motor's case, it has been affected by the aftermath of U.S. President Donald Trump's administration imposing high automobile tariffs on Korea, but Hyundai Motor's India unit has a high share of local production and sales. It is only natural that the stock trends of domestic and Indian shares differ.
LG Electronics' India unit also has a local production-and-sales structure. It is operating plants in Noida and Pune, and is building a third production base in the southern Sri City area. It also operates 51 regional offices and about 780 brand shops in India.
That said, as LG Electronics announced third-quarter (July–September) results this year that beat market expectations, securities firms expect a rebound. On a consolidation basis for the third quarter, LG Electronics provisionally tallied revenue of 21.87 trillion won and operating profit of 688.9 billion won. Those were 3% and 11.4% higher, respectively, than market forecasts.
Securities firms are also watching how LG Electronics will use the funds it secured through the India unit's listing. LG Electronics raised 1.8567 trillion won through the offer for sale of existing shares in the India unit and plans to use it for equity investments, mergers and acquisitions (M&A), and shareholder returns.
Lee Jong-uk, an analyst at Samsung Securities, said, "Although LG Electronics has not yet decided how to use the funds, both bolstering growth drivers and shareholder returns will have a positive effect on the company's return on equity (ROE)." Park Sang-hyun, an analyst at Korea Investment & Securities, also said, "It is positive in that it will be used to improve corporate value, such as shareholder returns or strengthening new businesses."