Lotte Rental Co.’s initial public offering scheme can add appeal as its car-sharing subsidiary Green Car expects to pool in 150 billion won ($135 million) funding from a private equity fund.

Elevation Equity Partners Korea (Elevation PE), a private equity fund unit of U.S.-based asset management firm The Rohatyn Group (TRS), is in the final stage to take over a 25 percent stake in Green Car from Lotte Group at 150 billion won, according to industry sources on Wednesday. Once the deal is closed, Elevation PE will become the second largest shareholder of Green Car after Lotte Rental. The private equity fund is pooling in financing from Korea’s major institutional investors for the deal.

Lotte Group reportedly promised the fund investors to have Green Car go public in three to five years.

The deal can double Green Car’s enterprise value to 700 billion won from 350 billion won estimated when it secured 35 billion won investment for a 10 percent stake from refiner GS Caltex Corp. in 2018.

Green Car, established in 2009, was the first to introduce car-sharing service in Korea. It launched a mobile app-based car sharing service in 2011, attracting young drivers with its simple and easy car rental system. It has 3.5 million subscribed members and runs a fleet of about 9,000 cars through some 3,200 parking spaces across the country.

Its operating profit amounted 3.6 billion won in 2020, up sharply from 180 million won made a year earlier. Its sales also soared 40 percent to 44.8 billion won over the same period.

Green Car reportedly plans to use the new funds on buying new cars to become more independent from its parent Lotte Rental. The company currently runs the car-sharing service mostly with Lotte Rental’s cars.

Market analysts anticipate Green Car’s appreciated value would brighten up the portfolio of parent Lotte Rental and its IPO prospects.

Lotte Rental is expected to begin its IPO process as early as next month. The company on Monday filed for a fast-track preliminary IPO review, which requires the stock market operator Korea Exchange to decide approval within 20 business days.

Analysts estimate Lotte Rental’s worth at minimum 2 trillion won based on its rival SK Rent A Car Co.’s price-earnings ratio and its last year`s net profit of 44.8 billion won. Lotte Rental registered an operating profit of 164.3 billion won on sales of 2.3 trillion won on a consolidated basis for full 2020.

Its value estimation could go as high as 3 trillion won on strong first-half earnings report.

According to market researcher IHC Automotive, the global car sharing market is projected to grow over 15 percent on average every year to reach $3 trillion in 2040.

The competition between the country’s top two car-sharing companies is also growing fierce. SoCar Inc., the largest car-sharing firm in Korea, has SK Group as its second largest shareholder and has attracted investments from private equity funds that estimated its worth at 1 trillion won.

By Kang Doo-soon, Park Chang-young, Kang Woo-seok and Cho Jeehyun

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