LG Electronics India IPO Highlights Premium Valuations of Indian Subsidiaries
LG Electronics India's upcoming IPO reveals a trend where Indian subsidiaries of multinational corporations command higher valuations than their global parent companies. With ₹24,367 crore revenue, LG Electronics India aims to raise ₹11,607 crore, targeting a P/E ratio of 38 and a valuation of ₹77,380 crore. This contrasts with its Korean parent's lower P/E ratio of 14, despite higher revenue. Similar patterns are observed across other multinationals like Hindustan Unilever, Nestle India, and Maruti Suzuki. Factors contributing to this premium include investor confidence in India's economic growth, strong market positions, and higher growth potential compared to mature markets.
*this image is generated using AI for illustrative purposes only.
LG Electronics India's upcoming Initial Public Offering (IPO) has brought to light a fascinating trend in the Indian market: subsidiaries of multinational corporations are commanding significantly higher valuations compared to their global parent companies, despite having smaller revenues.
LG Electronics India's IPO Details
LG Electronics India, with a revenue of ₹24,367.00 crore, is seeking to raise ₹11,607.00 crore through its IPO. The company is aiming for a price-to-earnings (P/E) ratio of around 38, which would value the company at ₹77,380.00 crore. This valuation is particularly noteworthy when compared to its Korean parent company:
| Company | Revenue (₹ crore) | P/E Ratio | Market Cap (₹ crore) |
|---|---|---|---|
| LG Electronics India | 24,367.00 | ~38 (expected) | 77,380.00 |
| LG Electronics (Parent) | 82,500.00 | 14 | 82,492.00 |
Trend Across Multinational Subsidiaries
This valuation disparity is not unique to LG Electronics. The trend extends across several multinational corporations and their Indian subsidiaries:
| Company | Indian Subsidiary P/E | Parent Company P/E |
|---|---|---|
| Hindustan Unilever | 56.00 | 17.30 |
| Nestle India | 70.30 | 17.70 |
Other companies exhibiting similar patterns include Suzuki Motor, Hyundai, ABB, Colgate, Siemens, Cummins, Abbott Labs, Honeywell, Schaeffler, and Linde.
Exceptional Cases
In some instances, the Indian subsidiaries not only command higher P/E ratios but also surpass their parent companies in market capitalization, despite lower revenues. Notable examples include:
- Maruti Suzuki India
- Schaeffler India
Factors Behind the Premium Valuations
The significant valuation premium for Indian subsidiaries can be attributed to several factors:
- Investor confidence in India's faster economic growth prospects
- Strong market position of these subsidiaries in the Indian market
- Potential for higher growth rates compared to mature markets
This trend underscores the attractiveness of the Indian market for global investors and highlights the perceived growth potential of well-established multinational subsidiaries operating in India.
As LG Electronics India prepares for its IPO, it will be interesting to see if this valuation trend continues and how it might impact future listings of multinational subsidiaries in the Indian market.
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