SK On's battery plant in Seosan, South Chungcheong Province / Courtesy of SK Innovation
By Park Jae-hyuk
SK On, the electric vehicle (EV) battery manufacturing subsidiary of SK Innovation, appears to be facing a setback in attracting investments for its pre-initial public offering (pre-IPO), arousing concerns over its failure to turn a profit, according to industry officials, Monday.
Among the nation's three largest EV battery makers, SK On is currently the only company that has yet to reach its break-even point.
The company initially sought to improve its profitability by building additional battery factories overseas. For this goal, it has tried to attract 4 trillion won ($3 billion) in investments from institutional investors including Carlyle, BlackRock, KKR and GIC, aiming for its valuation to reach 35 trillion won.
The global supply chain crisis in the wake of Russia's invasion of Ukraine and the rising interest rates, however, has led foreign institutional investors to be cautious about their investments in the Korean market.
"It has been difficult for domestic and foreign private equity firms (PEFs) to make big investments, due to the continuously rising interest rates," a local private equity industry insider said.
The abrupt resignation earlier this month of the Carlyle Group's CEO, Korean American Kewsong Lee, is also mentioned as another reason for the U.S. firm's reluctance to invest in the Korean firm.
"It is true that SK On's pre-IPO has been delayed," an SK Innovation official said during last month's conference call on the company's second-quarter earnings.
Amid the slow progress in talks with foreign investors, SK On decided to attract investments from domestic institutions preemptively by signing an agreement last week with a consortium comprised of Korea Investment Private Equity, EastBridge Partners and Stella Investment. The consortium is said to have lowered the battery maker's valuation to 22 trillion won, promising a 2-trillion-won investment. 
SK On CEO Jee Dong-seob
Some securities analysts gave optimistic reviews for SK On's plan to raise capital and improve profitability.
"Depending on its external growth during the second half of this year, SK On is expected to reduce its losses," Meritz Securities analyst Rho Woo-ho said in a report. "It seems likely to reach the break-even point during the third quarter of 2023, dispelling concerns about its profitability."
However, uncertainty remains about whether the consortium will succeed in raising the money from institutional investors, such as the National Pension Service (NPS), the Korean Federation of Community Credit Cooperatives and the Korea Teachers' Credit Union.
As a major shareholder of SK Innovation, the NPS previously opposed the oil refiner's plan to spin off its EV battery manufacturing unit, arguing that the plan would damage shareholder value.
