The electronics industry is now speculating whether arch-rival Samsung Electronics might also consider an IPO for its Indian business. The three South Korean chaebols generally mirror each other in strategy, launch and production.
LG Global Chief Cho told Bloomberg in an interview that the chaebol is studying the Indian market and “pursuing similar industries and similar IPO cases.” He also said that LG has not yet calculated the potential valuation for its Indian unit and “nothing is confirmed yet.”
“Korean companies, especially LG and Samsung, follow each other in every business decision in India – from small to big,” said Yasho V Verma, who was an employee of LG Electronics India from day one and retired as chief operating officer. .
To be sure, Samsung has not yet said anything about the possibility of an IPO for its Indian unit. Executives said any evaluation would be done at headquarters in Seoul. Samsung India did not respond to queries.
Samsung entered India in the mid-90s and was soon followed by LG and Hyundai. All three have set up factories and R&D centers and localize products. They have similar organizational structure and sales strategy.
LG, Samsung, Hyundai and Kia also have parallel management structures in India where mid-to-senior Indian executives have a South Korean counterpart for every Indian who ultimately calls the shots. Kia is a part of the Hyundai Group.
Ravinder Zutshi, who was the first Indian employee at Samsung India and retired as its deputy managing director, said South Korean management maintains close control.
“The Koreans have become huge brands in India which they may want to cash in on, especially as retail investors in India are increasing and also putting money into IPOs of smaller companies,” Zutshi said. Indian origin instrument makers like Dixon and Ember have envisioned the high valuations they now command.”
Zutshi said the share sale could also be strategic in nature as imports could become more difficult and electronics companies would have to invest more in India, for which South Korean companies want to generate cash locally.
Hyundai India’s FY23 revenue at Rs. 60,307 crore, while Samsung India’s revenue was Rs. 98,924 and LG India’s Rs. 20,112 crore, according to a filing with the Registrar of Companies. Hyundai Rs. 4,709 crore in net profit, compared to Samsung’s Rs. 3,452 crore and LG’s Rs. 1,345 crores. FY24 numbers are not yet available.
Industry executives said LG has long been harboring plans to set up a third manufacturing plant in the south and has evaluated sites near Chennai, where Samsung already has a unit. Also, the company is also venturing into component manufacturing – last year, LG started manufacturing compressors.
Besides manufacturing TVs and appliances, Samsung already operates its largest mobile phone plant in India and has also set up a display production unit for mobile phones. Samsung has not brought its semiconductor business to India while LG does not have a display plant in the country.
After 28 years in India, Hyundai Motor is expanding capacity, and is set to open another plant in Maharashtra next year. The company’s first plant is located near Chennai.
A senior executive who has worked with Samsung and Hyundai said the companies now have deep roots in India. They are Indianizing all products, be it Hyundai, Kia, Samsung or LG.
Rakesh Srivastav, an auto industry expert and former managing director of Nissan India and former director of Hyundai Motor India, said the Indian market environment is progressive with strong fundamentals.
“For the last 10-12 years the investment and governance policy has been very supportive with continuity and consistency, stock markets have been performing high with strong valuations,” he said. “To be future ready requires investment in more products, new technologies, production capacity and this will require many companies to raise additional cash and for this will look for opportunities to sell shares in public offerings to generate cash for investment.”
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