Amid intensified competition in the consumer durables segment, LG Electronics India maintains healthy profit margins of 10.42% in the year ending FY24. This surpasses its counterparts in this industry which includes Samsung India, Voltas, Blue Star, Whirlpool of India, and Haier Appliances. The company believes that this performance is due to high operating efficiency from extensive home appliances and electronics production capacity within the company.
A Redseer report captures LG as the market leader in volume for the key home appliances and electronics products (excluding mobile phones) in India for the period ending June 30, 2024.
IPO Details & Structure
LG Electronics India has submitted the DRHP with SEBI to launch its IPO in the market in the near future. The offering, which is completely based on Offer for Sale structure, comprises LG Electronics Inc offering 10.18 crore shares to mobilize ₹15,237 crore ($1.8 billion).
The IPO includes 50% of the issue size for QIBs, 35% for the retail category, and 15% for NIIs. Many of the major firms like Morgan Stanley, JP Morgan, etc. are selected as Book Running Lead Managers (BRLMs).
The proposed LG India IPO seems to have attractive characteristics offset by some significant risks within the industry. In assessing its performance metrics and the conditions of the market, investors are advised to be cautious.
Industry Outlook & Financial Highlights
India’s total appliances and electronics market size (Total addressable market) is at ₹3,23,000 crore for H1, 2024 and it is predicted to grow at 15% CAGR which makes the market size up to ₹5,69,000 crore by 2028.
LG India clocked a revenue of ₹21,352 crore for the financial year 2023-2024, as compared to ₹19,868 crore in the last financial year. PBT increased to ₹1,733 crore from ₹1,519 crore in the FY23 and PAT reached ₹1,511 crore from ₹1,345 crore in the preceding fiscal. The revenues in the June 2024 quarter of the financial year were ₹6,409 crore, and the PAT was at ₹680 crore.
Paying royalties to LG Electronics Inc., having contingent liabilities of ₹ 2,607.37 crores, and volatile raw material prices are threats to the company. Any change in its relationship with the parent company could also impact its operations.