South Korean consumer durables giant LG Electronics has filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for the IPO of its Indian subsidiary, LG Electronics India. The IPO, structured as an offer for sale (OFS), marks another major debut on Indian bourses following Hyundai India’s record-breaking listing.

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The offer involves the sale of up to 101,815,859 equity shares, each with a face value of Rs 10, by the Seoul-based parent company, LG Electronics Inc. Pricing will be finalized in consultation with the book-running lead managers based on demand and market conditions.
Notably, the proceeds, post deductions, will go to LG Electronics Inc. LG Electronics India will not retain any funds raised. The shares are proposed to be listed on BSE and NSE.

Key stakeholders:

  • Book-running lead managers: Morgan Stanley India, JP Morgan India, Axis Capital, BofA Securities India, and Citigroup Global Markets India.
  • Registrar: KFin Technologies.

Financial performance

LG Electronics India reported strong financial growth in FY24, with revenue rising 7.48 percent to Rs 21,352 crore from Rs 19,864.59 crore in FY23. Profit after tax increased 12.35 percent to Rs 1,511.06 crore, compared to Rs 1,344.93 crore in the previous fiscal. Total expenses also rose 7.73 percent to Rs 19,520 crore in FY24.

Strengths

  1. Market leadership: LG Electronics India leads in the home appliances and consumer electronics segment in India, as noted in the DRHP.
  2. Global backing: The subsidiary benefits from the expertise and reputation of LG Electronics, the global leader in home appliances by revenue in CY 2023.
  3. Extensive network: A wide distribution network ensures robust after-sales service across India.
  4. Operational efficiency: Localized manufacturing and supply chain operations help maintain cost efficiency.
  5. Financial robustness: A capital-efficient business model contributes to steady growth and profitability.

Challenges

  1. Promoter dependency: Reliance on LG Electronics for exports and business support poses risks if the relationship is disrupted.
  2. Manufacturing concentration: Heavy dependence on manufacturing units in Noida and Pune could lead to operational issues if utilization levels drop.
  3. Intense competition: Evolving consumer preferences and competition in the home appliances market remain a challenge.
  4. Supply chain risks: Dependence on a few key suppliers exposes the company to potential disruptions in raw material availability.

Outlook

LG Electronics India’s IPO aims to capitalize on its market dominance and strong financials. However, challenges like reliance on the parent entity and operational concentration could influence investor sentiment. Detailed pricing and the IPO timeline will be announced in due course.