LG Electronics India IPO: Making “Life’s Good” for your portfolio? Everything you need to know about the $1 billion issue

The Indian IPO market is roaring up again, and LG Electronics India issue is among the key names making headlines. After pausing its much anticipated listing earlier this year, the South Korean consumer electronics behemoth is reportedly ready to open its IPO in the first half of October.

While there has been no official confirmation yet, there are multiple reports indicating that LG could be aiming to refile its prospectus by September, with a possible launch by the year-end. This is not the first time LG has considered tapping Indian capital markets. The company had already filed a draft red herring prospectus (DRHP) with market regulator SEBI in December 2024, only to hit pause in April amid market volatility.

If the IPO does hit the markets this year, it will definitely be one of the largest listings in 2025.

LG Electronics IPO details

In its initial DRHP, filed in December 2024, LG Electronics India had proposed a pure offer-for-sale (OFS) of 10.18 crore equity shares by its Korean parent. This accounts for 15% of LG Electronics India’s equity, with no fresh issue of shares involved.

The offer is expected to raise around $1.7 billion, making it one of the biggest IPOs of the year and a notable debut by a foreign multinational’s Indian subsidiary. This makes it the second largest offering by any Korean company in India after Hyundai.

LG Electronics India has received the green light from capital markets regulator SEBI to launch their IPO on March 13

LG Electronics IPO: Objective of the issue

The primary objective of this offering is to enable the listing of LG Electronics India’s equity shares on the stock exchanges. It is important to note that the company itself will not receive any proceeds from the IPO.

All funds raised after accounting for offer-related expenses and taxes – will go directly to the selling shareholder, LG Electronics Inc.

LG Electronics IPO: All about the India business

Back in 1997, when LG Electronics set foot in India, few could have predicted the scale at which it would grow. What started as a private limited company under the name LG Electronics India Pvt Ltd has now transformed into a major force in the country’s home appliances and consumer electronics space.

Today, LG Electronics India is best known for powering Indian homes with everything from washing machines and refrigerators to sleek smart TVs and air conditioners. Backed by its South Korean parent LG Electronics Inc., the company has cutting-edge tech, superior quality controls, and strong brand equity.

LG Electronics India IPO: Key services provided

LG Electronics India provides a range of services to both individual and business customers across the country. These include installation, repair, and maintenance of appliances, covering both in-warranty and out-of-warranty products. In FY24, the company handled over 6 million service requests, resolving all within the same fiscal year.

The company also offers Annual Maintenance Contracts (AMCs), particularly targeting HVAC systems for business. As of June 2024, LG had 949 authorized service centers across 594 cities, supported by 12,590 engineers. The company follows a “2-1-1” process, which allocates service requests within two hours, with engineer contact and scheduling soon after.

LG Electronics India IPO: Financial performance

As per the DRHP, for the quarter ending June 30, 2024, the company reported Rs 6,796 crore in revenue and a net profit of Rs 680 crore. For the full Fiscal Year 2024, revenue reached Rs 21,352 crore, marking a 7.5% growth over the previous year, while net profit stood at Rs 1,511 crore. The home appliances and air solution division made up nearly 79% of its operating revenue during the quarter. The company reported no borrowings as of June 2024 and maintains a lean working capital cycle of 15 days.

In terms of returns, LG India recorded a Return on Capital Employed (RoCE) of 45.3% and a Return on Net Worth (RoNW) of 40.45% for FY24. It ended June 2024 with over Rs 3,606 crore in cash and cash equivalents. However, a key financial item flagged in the filings is a contingent liability of Rs 6,743 crore related to royalty payments to its Korean parent, pending resolution under an Advance Pricing Agreement with Indian authorities. Royalty expenses for just one quarter stood at over Rs 121 crore. The company also paid interim dividends exceeding Rs 2,000 crore to its promoter during the fiscal.

LG Electronics IPO: Shareholder positions

Before its upcoming IPO, LG Electronics India was entirely owned by its South Korean parent, LG Electronics Inc. The promoter holds 100% of the company’s 67.87 crore equity shares, including six nominee shareholders listed on behalf of LG. The IPO, which is purely an Offer for Sale, will see the promoter offload around 10.18 crore shares, about 15% of the post-issue equity. The company will not raise any fresh capital, as all proceeds will go to the selling shareholder.

There have also been recent changes to the share capital. In October 2024, the authorized share capital was raised to Rs 1,500 crore, followed by a bonus issue in November at a 5:1 ratio, significantly increasing the equity base. All shares are in dematerialised form, and no other individuals from the promoter group, senior management, or key personnel hold any stake in the company, as per the draft prospectus.

LG Electronics IPO: Market position

LG Electronics India holds a strong position in the country’s home appliances and consumer electronics space. According to the Redseer Report, the company led the market by volume in the first half of 2024, excluding mobile phone sales. It has consistently maintained the top position in the offline retail channel for 13 straight years from 2011 to 2023, a segment that represents around 80% of the industry’s value.

The company leads in multiple product categories, such as washing machines, refrigerators, televisions, inverter ACs, and microwaves. In terms of network reach, LG Electronics India has over 36,000 retail touchpoints and nearly 950 authorised service centres, staffed by more than 12,000 engineers as of June 30, 2024, noted the company in the DRHP filing.

It also introduced transparent OLED displays and gaming monitors in its B2B offerings.

LG Electronics IPO: Risks involved

The company’s Draft Red Herring Prospectus (DRHP) filed in December 2024 has also disclosed several underlying risks that investors should not ignore.

LG Electronics India relies heavily on its South Korean parent for product development, branding, and other strategic functions. As stated in the DRHP:

“We are supported by LG Electronics, our Promoter, in various aspects of our business, and we pay royalties to them under the License Agreement. Any adverse change in our relationship with LG Electronics and the companies in the LG Group could have an adverse impact on our business, reputation, financial condition and results of operations.”

Competition concerns: There is also the possibility of LG Electronics Inc. entering the same line of business in India independently, which could create internal competition. The DRHP flags this concern:

“It is possible that the Promoter may engage in the same line of activity or business as that of our Company in India which could result in conflicts of interest with us.”

Raw material challenges: Like most manufacturers, LG India is vulnerable to raw material price hikes. A rise in input costs could weigh on profit margins. As the DRHP mentions:

“Increases in the prices of raw materials required for our operations could adversely affect our business and results of operations.”

Supplier concentration: Moreover, supplier concentration poses a risk to the stability of operations. The company highlighted that its top-five suppliers accounted for over 21% of total raw material purchases in the quarter ended June 2024.

“Any interruption in the availability of raw materials or supplier misconduct could adversely impact our business operations,” the document added.

The consumer electronics and appliances sector in India is not only price-sensitive but also fast-moving. Constant innovation and brand loyalty are crucial, and LG India recognises the challenge, “We may not be able to compete successfully in the highly competitive and fast-evolving home appliances and consumer electronics markets which could have an adverse impact on our operations.”