IPO proceeds should not be exported
Sebi should not have allowed LG OFS
It is a direct blow to AIF & RDI
LG opened an IPO with an Offer for sale to sell shares of Rs 11,000 crores. The proceeds of this ipo will be repatriated to Korea. There they will be used to develop ipr which will be used to export products to India.
In effect public savings from India are being used by Koreans to develop technology which will effectively promote imports. The IPO subscribers will only get 10% of the company giving Indians no control of any kind in the decisions of the company. They cannot even block and resolution or even file for malfeasance or mismanagement. In short the extent of dilution is too little to achieve any kind of safeguard for the Indisn shareholders.
Further Lg has not transferred any technology to India, has not made significant investments in India and has taken money from Indian banks (again public money) to finance imports and imported capital goods – supposedly purchased at highly inflated prices. In short their investment has been trivial compared to the IPO valuation. Past profits have been taken out as dividends. Local operations saved a lot of customs duty by importing kits instead of assembled goods.
Even companies like Suzuki have been trying to pay themselves preferential dividend in the form of royalty placing the Indian shares at a disadvantage.
Clearly the share price was highly inflated as the market cap of the Indian subsidiaries now more than that of the parent company which is absurd.
It sets a terrible precedent and all kinds of companies including Samsung and others are busy with mega plans to lay their hands on Indisn public savings to promote imports.
Public funds should be used for import substitution and export promotion.
Capital is scarce in India
Forex is even scarcer.
LG just exported 11,000 cr of forex
And funded it from savings
Or poor Indians
This also attacks the very foundation of initiatives like the RDI fund. Wonder what prof Abhay Karandikar would say to this blatant export of indian savings
The RDI fund will probably take ten years to disburse the target Rs 1,00,000 cr. LG and Hyundai have already exported rs 40,000 cr of indian taxpayers personal wealth to themselves.
RDI will disburse through AIFs wanting them to raise matching money. Why will foreign or even Indian investors put money into RDI supported AIFs if they can do a LG on the Indian taxpayers personal money.
Self respecting Indians should have ignored IPOs like LG and let them devolve. LG ipo is a case of market failure.
It is not sebi which failed.
This is not just public policy failure
But far greater
First Hyundai, now LG, next Samsung
Indian taxpayers funding import promotion
A few thousand Indian deeptech startups won’t make it because LG took their money. What has India got from LG to date ???? Only products that don’t last.
