Set to raise more than ₹150 billion through an IPO, LG India is fueling expansion plans while raising concerns about future competition from its South Korean parent.
LG Electronics India has filed for an initial public offering (IPO) to raise ₹152.37 billion ($1.8 billion) by selling around 102 million shares (equivalent to 15% stake). The IPO is entirely an offer for sale, with the parent company, LG Electronics Inc., offloading its stake. This move comes just two months after Hyundai’s successful IPO in India.
The company had indicated in August that it was considering a share sale of its fully owned Indian subsidiary, tapping major banks in September for this, eyeing to raise $75 billion.
According to a notification from the Bombay Stock Exchange, LG Electronics submitted the draft red herring prospectus for its public offering of the Indian business to the capital market regulator SEBI on Friday.
The company has also appointed several global financial institutions, including Morgan Stanley, JP Morgan, Axis Capital, BofA Securities, and Citigroup, as Book Running Lead Managers (BRLMs) for the IPO. KFin Technologies Limited will act as the registrar for the offering.
As part of its future expansion plans, the company intends to invest ₹50 billion in its third factory in India, situated in Andhra Pradesh. Additionally, LG aims to localise its supply chain by encouraging its South Korean and Chinese component suppliers to set up plants in India. As per an Economic Times report, the IPO proceeds may partly fund these investments.
Financially, LG Electronics India has shown strong performance. For the quarter ending June 30, 2024, it reported a revenue of ₹64.09 billion. For the fiscal year ending March 31, 2024, the company saw revenue rise to ₹213.52 billion, up from ₹198.68 billion in the previous year. Profit After Tax (PAT) for the June quarter was ₹6.8 billion, while the FY24 PAT reached ₹15.11 billion, an increase from ₹13.45 billion in FY23.
LG Electronics India has also expressed concerns about potential competition from its South Korean parent company in the future. The draft prospectus notes that there is no exclusivity arrangement between the two, which could lead to conflicts of interest.
The company mentioned its concern over Hi-M Solutek India, a wholly-owned subsidiary providing services for LG commercial air conditioners. While Hi-M Solutek currently serves LG products, there is no exclusive agreement, and it could potentially expand into competition in the future.
Recently, LG India has launched an appliance rental service, which it plans to expand nationwide. The company aims to generate additional revenue by offering long-term appliance rentals, starting with premium consumers.
