LG India Makes History with Blockbuster Listing
LG Electronics India Ltd. delivered a spectacular performance in its stock market debut on Tuesday, soaring 53.4% and surpassing the market capitalisation of its South Korean parent. Riding high on India’s booming consumer demand, LG’s initial public offering was bolstered by policy support, including recent tax cuts on appliances like refrigerators and televisions, as well as a dovish stance from the Reserve Bank of India, which is expected to keep growth conditions favourable for the near term.
Market Capitalisation Surpassed
The scrip closed 48.2% higher at Rs 1,689.9, after opening at Rs 1,710.1, well above the issue price of Rs 1,140. This surge gave the company a market valuation of about $13 billion, outpacing both its own $8.73 billion IPO target and the roughly $9 billion market value of its parent company. To understand the significance of this listing, let’s delve into the Indian stock market trends and how they impact investor decisions.
Booming Consumer Demand
Riding high on India’s booming consumer demand, LG’s initial public offering was bolstered by policy support, including recent tax cuts on appliances like refrigerators and televisions, as well as a dovish stance from the Reserve Bank of India, which is expected to keep growth conditions favourable for the near term. The impact of tax cuts on the Indian economy has been a topic of discussion among economists and investors alike, and LG’s success is a testament to the positive effects of such policies.
Strongest IPO Since 2021
The listing, hailed as the strongest for a billion-dollar IPO in India since 2021, coincides with the country’s festive season, notably a peak period for consumer spending, and comes amid a bullish primary market, where fundraising is on track to surpass last year’s record $20.5 billion. This is a significant development for Indian IPO market and indicates a positive trend for companies looking to raise capital.
Outshining Peers
LG’s IPO launched around the same time as two other high-profile listings — Tata Capital and WeWork India — but outshone both in demand and post-listing performance. While LG’s IPO was fully subscribed within hours, racking up bids worth nearly $50 billion, Tata Capital rose a modest 1.4% on debut, and WeWork India fell 3%. This highlights the importance of IPO investment strategies and how they can impact investor returns.
Fuel for Investor Optimism
Fuel for investor optimism is LG’s commitment to scale its India operations. The company has begun construction on its third manufacturing plant in the country, a $600 million facility that aims to transform India into a global export hub for the brand’s appliances. This move is expected to have a positive impact on the Indian economy and job creation, as it will not only generate employment opportunities but also contribute to the country’s GDP.
Investor Appetite
Investor appetite was strong across the board. Qualified institutional buyers subscribed to 166.5 times their quota, while non-institutional and retail investors subscribed 22.4 times and 3.54 times, respectively. This indicates a high level of interest in LG’s IPO and a positive sentiment towards the Indian stock market outlook.
Brokerage Coverage
Following the successful debut, at least five brokerages initiated coverage on LG Electronics India, with price targets ranging between Rs 1,700 and Rs 1,800. This will provide investors with more insights and analysis to make informed decisions about their investments in LG and the broader consumer goods sector.
