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IPOs

Lotte Rental IPO to produce hefty return for NPS

Lotte Rental seeks to raise up to 851 billion won in August IPO on Kospi

By Jul 12, 2021 (Gmt+09:00)

Lotte Rental IPO to produce hefty return for NPS

The initial public offering of South Korea's Lotte Rental Co., set for next month, will likely produce high double-digit to low triple-digit returns to the National Pension Service (NPS) in six years of its investment.

Lotte Rental, the country's largest car rental and auto leasing company, will go public on the Korea Exchange to raise up to 851 billion won ($741 million), according to its securities report filed on Monday.

NPS is its No. 3 shareholder with a 19.61% stake. The South Korean pension scheme had acquired the stake in 2015 when it participated in the Lotte Group's 1-trillion-won purchase of Lotte Rental as a financial investor from KT Corp., the country's largest telecom services provider.

The world's third-largest pension fund will dispose of its shares in the company during the IPO, which will generate up to 340 billion won ($300 million) in proceeds, translating into 69% to 112% returns.

Lotte Rental, 47.06% held by Hotel Lotte, will price its shares at between 47,000 and 59,000 won for the IPO. The indicative price is based on its estimated enterprise value of 2.8 trillion won, more than double the 1 trillion won paid by the Lotte Group in 2015.

It controls 21.8% of the country's rental car market with 235,723 cars registered as of the end of March. SK Rent A Car Co. comes next with a 12.5% share and 135,448 vehicles.

Last year, Lotte Rental reported a 27% rise in operating profit to 160 billion won, with sales up 10% to 2.3 trillion won. It will expand car-sharing services with the IPO proceeds.

Other shareholders include Hotel Lotte Pusan Co. with a 28.43% stake and Lotte Non-Life Insurance Co. with 4.9%.

Korea Investment & Securities Co., NH Investment & Securities Co. and KB Securities Co. will manage Lotte Rental's IPO.

Including its listing, domestic IPOs in August are expected to surpass 7 trillion won in aggregate, which also count in Krafton Inc., the label behind the popular online game PUBG and Kakao Pay Corp., a mobile payment app.

Write to Jin-seong Kim at jskim1028@hankyung.com

Yeonhee Kim edited this article.

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