LG Electronics India Files DRHP for ₹15,000 Crore IPO with SEBI

On Friday, the Indian arm of South Korean giant LG Electronics submitted its draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI), aiming to raise ₹15,000 crore through an initial public offering (IPO). This filing comes just two months after Hyundai’s Indian subsidiary launched a record-setting ₹27,870-crore IPO, marking the largest in India.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

LG Electronics India’s IPO, structured as an offer for sale, is expected to divest up to 101.8 million equity shares, representing a 15% stake in the company. If successful, this would become India’s fifth-largest IPO, following Coal India’s ₹15,200 crore issue in 2010. Despite being the largest IPO in India’s history, Hyundai Motor India’s October listing saw a modest investor response, securing only 2.4 times the subscription. Currently, Hyundai shares trade 4% below their issue price.

Similar to LG Electronics India, Hyundai’s IPO was entirely an offer for sale, with the Seoul-based parent selling a 17.5% stake in its Indian subsidiary.

This development occurs amidst political turbulence in South Korea, where President Yoon Suk Seol’s brief declaration of emergency martial law was reversed hours later.

The IPO will be managed by book-running lead managers including Morgan Stanley India, J.P. Morgan India, Axis Capital, BofA Securities India, and Citigroup Global Markets India.

In India, LG Electronics faces competition from global and domestic players such as Samsung, Sony, Voltas, Havells, Godrej, Blue Star, Haier, Whirlpool, and Philips. It holds the second position in the home appliances and consumer electronics market after Samsung India Electronics.

According to the company’s DRHP, LG Electronics India’s revenue for FY24 reached ₹21,352 crore, while Samsung India Electronics reported ₹99,541.6 crore in revenue for the previous fiscal year. Havells India and Godrej & Boyce Mfg Co rank third and fourth, respectively, in the Indian consumer electronics and home appliances market.

The company highlighted its market leadership in major home appliances and consumer electronics (excluding mobile phones) by volume for the quarter ending June 30, 2024, as noted in the Redseer Report. LG also stated it has maintained the top spot in this industry for 13 consecutive years (2011–2023) in terms of offline value market share.

The DRHP further outlined the growth trajectory of India’s appliances and electronics market, which expanded at an annual rate of 7% over the past five years. This growth is projected to accelerate to 12% annually over the next five years, driven by rising incomes, increasing urbanization, and greater penetration of appliances in both urban and rural areas.

However, LG Electronics India raised concerns about future competition from its South Korean parent company. In the draft prospectus, the company noted the absence of an exclusivity agreement, which could allow the parent company to enter competing markets in India. "Although our promoter currently refrains from competing with us in India, this could change, potentially leading to conflicts of interest and impacting our operations and financial outcomes," the DRHP stated.

LG India also expressed concerns regarding Hi-M Solutek India, a wholly-owned subsidiary of its South Korean parent, which specializes in services related to LG commercial air conditioners. While the subsidiary presently works exclusively with LG products, the company acknowledged the possibility of it expanding its services to include competitors’ offerings in the future.

To support its growth, LG India announced plans to establish a new manufacturing facility in Sri City, Andhra Pradesh, with an investment of ₹5,000 crore. This will be the company’s third plant in India, complementing its existing units in Greater Noida and Pune. Additionally, the company has been increasing its reliance on domestic suppliers, with locally sourced components rising from 45% in 2022 to 58.3% by mid-2024.