LG Electronics India has put its US$1.5bn–$2bn domestic IPO on hold because of volatile global and local stock markets, people with knowledge of the transaction said.

The Securities and Exchange Board of India approved the IPO in March and the company was aiming to launch it at the end of April or early May, subject to demand from investors. ECM sources in March had expected the IPO to come in at the lower end of the range. However, the recent global stock market volatility has led to uncertainty on the timing and size of the offer.

The company has not yet indicated an updated timetable for the IPO, the people said.

Market participants said the issuer’s valuation ask of US$10.5bn–$11bn was not finding enough investors. The Indian consumer electronics sector trades at an average forward price to earnings multiple of 45 and investors were valuing LG Electronics India at 30x–35x, one of the people with knowledge of the transaction said. "LG Electronics is the market leader by a mile and such a discount was not acceptable."

The company will attempt an IPO next year once festival-led revenue growth shows up in its earnings and the full impact of higher US tariffs on the Indian economy is understood, the person said. Typically, demand for consumer goods increases in India during the Hindu festival of Diwali in October–November.

"For the next two quarters investors will not be budging on valuations," said the person.

Earlier this month Korea Exchange-listed parent LG Electronics reiterated its plan to sell a 15% stake in the IPO, though it said a final listing would depend upon market conditions or the results of demand forecasts.

"In this market, deals can be done only if issuers are willing go easy on valuations and clearly that is not acceptable to LG Electronics," a banker away from the deal said.

Reflecting current market conditions, Indian electric scooter maker Ather Energy today launched a Rs30bn (US$350m) IPO, 33% lower than the Rs45bn issue it planned in September. The IPO translates into a 2025 price to revenue multiple of three, compared with rival Ola Electric which trades at 4x, an analyst said.

Bankers said LG Electronics India's decision to defer the IPO will scare away other issuers. "It is not the best outcome for the market. The Indian stock market has been making a comeback but LG has sent the message that the market is not ready for a big deal," a Mumbai-based ECM banker said.

The benchmark BSE Sensex is up 3.4% month to date and is among the better performing stock markets in Asia.

Bankers now expect only issuers needing growth capital to come to the market at investor friendly valuations.

Parent LG Electronics plans to sell up to 101.8m shares in the IPO, according to a draft prospectus. It is set to be the second South Korean company after Hyundai Motor to list its Indian business locally.

Axis Capital, Bank of America, Citigroup, JP Morgan and Morgan Stanley are the bookrunners.

LG Electronics India is one of the largest home appliance manufacturers in the country.

Net profit and revenue in the quarter ended June totalled Rs6.79bn and Rs64.7bn respectively. The company did not provide the comparable figures for 2023. Net profit and revenue in the financial year that ended in March 2024 was Rs15.1bn and Rs215.6bn respectively.

Source: IFR