Hyundai and LG are launching large IPOs in India, seeking growth beyond South Korea’s undervalued markets.

After Hyundai, another Korean giant, LG Electronics, is preparing to launch a $1.5 billion IPO in India at a staggering $13 billion valuation. While Hyundai’s IPO is all set to open next week, LG’s Chairperson hinted that tapping the Indian Stock Market might help them hit the target of $75 billion in electronics revenue by 2030.
But why are Korea’s top companies looking beyond their homeland for IPOs? Let’s explore the reasons behind this strategic shift.

Also Read: LG Electronics India Files DRHP for ₹15,000-Crore IPO

The Korean Discount Factor

The Korean Discount refers to the persistent undervaluation of South Korean companies, despite their global leadership in industries like semiconductors. According to the MSCI Korea Index, South Korean stocks trade at lower price-to-earnings (P/E) ratios of 12.8x and price-to-book (P/B) ratios of 1.1x compared to global averages. This undervaluation is driven by local factors such as restrictive market policies like short-selling bans, high corporate and dividend taxes (up to 25% and 50%, respectively), and complex corporate governance structures dominated by chaebols (family-owned conglomerates). These conglomerates prioritize family interests over shareholder value, creating concerns about transparency and governance, making South Korea less attractive for listings. As a result, many companies are looking to global markets like India for better valuations and growth opportunities.

India: The New IPO Hotspot

India has quickly emerged as a prime destination for companies aiming to raise capital, thanks to its favorable market conditions and attractive valuations. The Indian stock market has consistently seen IPOs yielding returns exceeding 100% on the first day, attracting global attention. Key factors behind this trend include India’s robust growth potential—unlike major economies like the U.S. and China, India remains in an expansive growth phase. Moreover, India’s capital markets are highly efficient, transparent, and liquid, offering companies access to a vast, engaged investor base. These factors make India an appealing alternative for global firms seeking better valuations.

Favorable Regulatory Environment

India’s regulatory environment is highly conducive to Initial Public Offerings (IPOs) compared to South Korea. In India, there are fewer restrictions on market activities such as short-selling, allowing for more flexible and dynamic trading. Short-selling bans in South Korea, especially during market volatility, restrict liquidity and investor participation. In contrast, India’s capital markets are less restrictive, providing companies with easier access to capital.
Additionally, India’s corporate tax structure is more favorable. South Korean companies face higher corporate taxes of up to 25%, and dividend taxes can reach 50%, discouraging investors. India offers relatively lower taxes, making it a more attractive destination for companies looking to go public. The streamlined regulatory framework in India ensures faster approvals, fewer bureaucratic hurdles, and transparency in the listing process, which further appeals to international firms seeking to capitalize on growth opportunities in a stable and investor-friendly market.

What is the Hyundai IPO about?

Hyundai India is a major player in the Indian automobile industry, being the second-largest car manufacturer in the country, with popular models such as the Creta, Verna, and the electric Ioniq 5.
They are launching their IPO on October 15, 2024, aiming to raise ₹27,855 crore (approximately $3.4 billion), making it the largest IPO in India’s stock market history.
The IPO is an offer for sale (OFS), meaning Hyundai’s South Korean parent company plans to sell 14.21 crore shares, but Hyundai India itself won’t directly receive any proceeds. Price Band is set between ₹1,865 and ₹1,960 each. The funds raised from this IPO will help the parent company, Hyundai Motor, to diversify its portfolio and meet global business goals​.

Read More: Hyundai Motor India IPO: Key Insights for Investors

LG India IPO Plans

With the prospectus been filed with SEBI already, LG Electronics is preparing for an IPO of its Indian unit, aiming to raise $1-1.5 billion, which could value the company around $13 billion. The South Korean company, seeking to capitalize on India’s vibrant stock market, has enlisted major banks like Bank of America, JPMorgan, Citigroup, and Morgan Stanley to oversee the process.
The IPO aligns with LG’s strategy to reach $75 billion in global annual revenue by 2030, up from $65 billion currently. LG Electronics India has shown strong financial performance, with a 14% revenue growth and a 27% rise in net income during the first two quarters of 2024.