Hyundai's IPO may inspire other MNCs to list in India for valuation gains
Mint spoke to lawyers and investment bankers who also alluded to the rise in MNCs evaluating such options. Besides South Korea’s Hyundai, which is preparing for a record ₹25,000 crore initial public offering, LG Electronics and Italy’s component maker Carraro are looking at similar moves, according to media reports.
However, this is not the first time an MNC has listed in the country. Previous examples include Japanese automaker Suzuki Motor Corporation (unit Maruti Suzuki India Ltd), British consumer goods company Unilever (Hindustan Unilever Ltd), Swiss food and beverage maker Nestle (Nestle India Ltd), and Colgate-Palmolive (India) Ltd, the unit of US oral hygiene company Colgate-Palmolive.
A strong brand recall with Indian consumers, lower cost of capital as opposed to transferring funds from overseas markets, and lower taxes on capital gains after listing for future monetization are crucial benefits for foreign companies to consider listing in the country, said Siddharth Shah, a senior partner at Khaitan & Co. The Indian markets offer much better valuation than other overseas markets, Shah said.
Sood also alluded to the uptick in valuations. “We have seen Indian-listed subsidiaries of foreign parents generally trading at almost three times the valuation of the parent," he said, adding that this has encouraged global groups to unlock value in India and ride the “growth story." Essentially, different markets have varying dynamics and growth drivers.
At times, subsidiary valuations may not get fully reflected in the parent valuation and listing would help unlock this, said BNP Paribas’ Ganeshan Murugaiyan. This could also be a useful currency for funding growth capex or as an acquisition tool in the domestic market, he
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