At least three foreign companies have made progress on the IPOs of their Indian businesses, undeterred by the poor post-listing performance of Hyundai Motor India since October.
LG Electronics India last week filed for a US$1.5bn–$2bn float, the biggest fundraising target among the three, and is aiming for a launch in the first half of 2025. Blackstone-owned gemstone certification company International Gemological Institute launched an IPO of up to Rs42.3bn (US$498m) while Travel Food Services, which is backed by London-listed SSP Group, filed for an IPO of up to Rs20bn with the launch targeted for the first quarter.
Other companies are firming up their plans. Oslo-listed investment firm Orkla is finalising the syndicate for a US$300m–$400m IPO of its packaged food business Orkla India and German car parts manufacturer Mahle is also considering a float of its Indian business and will soon start meeting banks, people with knowledge of the potential transaction said.
Global companies are looking at listing in India's buoyant IPO market as a way to improve their valuations, according to bankers.
India is expected to end the year as the world’s top IPO venue with total fundraising of US$17.3bn, passing Nasdaq's US$16.5bn and NYSE's US$15.9bn, according to a report by KPMG on Wednesday.
"Going by the current trend, 2025 is likely to be another bumper year for IPOs. The overall expectation is that listings will be positive," a Mumbai-based ECM banker said.
Patrick Coveney, CEO of SSP Group, which operates food outlets in airports and railway stations, said Travel Food Services' IPO will help boost the company's investments in India.
"India is an attractive and strategically important market for SSP, aligned to our prioritisation of high-growth geographies with the greatest long-term returns opportunities. ... An IPO will set up our investment in India for the next stage of growth," said Coveney.
Hyundai lessons
Bankers say issuers should learn the lessons of Hyundai Motor India's float and leave more on the table for investors. The local unit of South Korea's Hyundai Motor completed the country's largest ever IPO of Rs278.7bn, but the shares have remained below the issue price of Rs1,960 since listing in late October. The stock closed at Rs1,772 on Friday, still 9.6% below water.
However, a banker working on the LG Electronics India IPO said he does not expect the deal to be sold very cheaply.
"Issuers want to take advantage of India's juicy valuations. LG Electronics is a leader in India's consumer electronics space compared with Hyundai Motor India, which is a distant second after Maruti Suzuki in the car segment," he said.
LG Electronics India is one of the country's largest home appliance manufacturers and posted a net profit of Rs6.79bn on revenue of Rs64.7bn for the three months to June 30. The company did not provide figures for 2023.
Four India-listed rivals that bring in less revenue and profit than LG Electronics India trade at rich valuations. Havells India is on a forecast P/E multiple of 61.23, Voltas is at 54.7, Whirlpool of India as at 55.65 and Blue Star is at 57.48.
South Korean parent LG Electronics, which is selling 101.8m shares in the IPO, trades at a forward P/E multiple of 6.64 times with a market capitalisation of W15.2trn (US$10.6bn).
"Hyundai Motor India sold its IPO at a time when corporate earnings were weak in India and foreign investors were relentless sellers. The situation can change for the better six months down the line," a domestic fund manager said.
Axis Capital, Bank of America, Citigroup, JP Morgan and Morgan Stanley are bookrunners on the LG Electronics India IPO.
Investor friendly
While LG Electronics India may go high on valuation, International Gemological Institute has been more conservative. The top of the range implies a P/E multiple of 33 for the financial year that ends in March while domestic jewellery companies trade at an average of 60 times.
The company will use the IPO proceeds to buy IGI Belgium Group and IGI Netherlands Group from Blackstone.
Sixty-eight anchor investors on Thursday agreed to buy 45.6m shares at the top of the Rs397–Rs417 range. Singapore's GIC, Abu Dhabi Investment Authority, Fidelity, ICICI Prudential Mutual Fund, Quant Mutual Fund and Pinebridge Global Funds are among the investors.
The primary component has been raised to up to Rs14.8bn from Rs12.5bn while the secondary portion is unchanged at Rs27.5bn. Blackstone is the vendor.
Axis Capital, Kotak, Morgan Stanley and SBI Capital Markets are managing the IPO.