Business Profile of the LG Electronics India Limited
LG Electronics India, a wholly owned subsidiary of LG Electronics, is the leading single-brand global player in household appliances. LG has been the industry's leading player for 13 years in a succession and is the market leader in a variety of product categories, such as microwaves, inverter AC, panel televisions, refrigerators, and washing machines. The company provides a comprehensive product line, distributes products to both B2C and B2B consumers in India and abroad, and provides installation, repair, and maintenance services for all products.
The company has acquired extensive understanding of the demands of Indian consumers and has developed products into their preferences over the course of 27 years. The company has the most extensive distribution network among the top home appliances and consumer electronics providers in India, and it operates in both urban and rural areas.
The company has one of the largest in-house production capacities among leading home appliances and consumer electronics players in India, with two advanced manufacturing units in Noida and Pune. The company's strong parentage, access to innovative technologies, and commitment to quality position it as a trusted brand in India.
LG Electronics India Limited IPO Objective
As per the draft red hearing prospects, the IPO issue consists only of offer for sale.
- The OFS consists of up to 101,815,859 Equity Shares aggregating up to Rs. XXXX million. Nothing from those proceeds of OFS will be allotted to company.
IPO Details of LG Electronics India Limited:
| IPO Open Date | N.A. |
| IPO Close Date | N.A. |
| Basis of Allotment | N.A. |
| Listing Date | N.A. |
| Face Value | ₹10 per share |
| Price | N.A. |
| Lot Size | N.A. |
| Total Issue Size | Up to 101,815,859 equity shares |
| aggregating up to ₹XXXX Cr | |
| Fresh Issue | NIL |
| NIL | |
| Offer For Sale | Up to 101,815,859 equity shares |
| aggregating up to ₹XXXX Cr | |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE & NSE |
| QIB Shares Offered | Not more than 50% of the Net Issue |
| Retail Shares Offered | Not less than 35% of the Net Issue |
| NII (HNI) Shares Offered | Not less than 15% of the Net Issue |
Issue Price & Size: LG Electronics India Limited IPO
The issue price of LG Electronics India Limited hasn’t been released yet. Upon releasing the dates, the investors can bid between those price ranges. The company only has offer for sale of up to 101,815,859 equity shares.
Launch Date of LG Electronics India Limited IPO
The IPO opening date of LG Electronics India hasn’t been officially announced yet, upon the declaration of dates investor can bid for IPO.
LG Electronics India Limited Financial Statements
| Particulars | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Continuing operations | ||||
| Income | ||||
| Revenue from operations | 64087.97 | 213520 | 198645.9 | 168342.1 |
| Other income | 580 | 2051 | 2439.91 | 2037.97 |
| Total income | 64667.97 | 215.571.18 | 201085.8 | 170380.1 |
| Expenses | ||||
| Cost of materials consumed | 34312.38 | 129160.5 | 123608.2 | 100322.1 |
| Purchases of stock-in- trade | 5638.68 | 19357.72 | 18787.63 | 14917.33 |
| Changes in inventories of finished goods, stock-in-trade and work-in-progress | 2872.58 | 783.57 | -2115.1 | 2766.27 |
| Employee benefits expense | 2408.62 | 8868.24 | 7991.56 | 7254.54 |
| Finance costs | 69.35 | 285.05 | 225.84 | 225.1 |
| Depreciation and amortisation expense | 967.21 | 3643.69 | 3003.93 | 2583.59 |
| Other expenses | 9275.05 | 33101.25 | 31380.49 | 25995.5 |
| Total expenses | 55543.87 | 195200 | 182882.6 | 154064.5 |
| Profit before tax from continuing operations | 9124.1 | 20371.17 | 18203.29 | 16315.63 |
| Profit for the period / year from continuing operations | 6796.46 | 155110.7 | 13480.2 | 12055.99 |
| Metric | Unit | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Revenue from operations | ₹ million | 64087.97 | 213520 | 198682.4 | 169657.3 |
| Revenue growth (y-o-y) | % | - | 7.47 | 17.11 | - |
| Revenue from Home Appliances and Air Solution | ₹ million | 50609.38 | 156797.5 | 150306.8 | 124182.3 |
| Revenue from Home Appliances and Air Solution as a % of revenue from operations | % | 78.97 | 73.43 | 75.65 | 73.2 |
| Revenue from Home Entertainment | ₹ million | 13478.59 | 56722.51 | 48338.15 | 44159.87 |
| Revenue from Home Appliances and Air Solution as a % of revenue from operations | % | 21.03 | 26.57 | 24.33 | 26.03 |
| EBITDA | ₹ million | 9580.66 | 22248.73 | 18951.15 | 16650.12 |
| EBITDA Margin | % | 14.95 | 10.42 | 9.54 | 9.81 |
| Profit for the period | ₹ million | 6796.46 | 15110.68 | 13449.3 | 11747.33 |
| Profit Margin | % | 10.51 | 7.01 | 6.69 | 6.84 |
| Return on Capital Employed | % | 18.04 | 45.31 | 34.38 | 24.44 |
| Return on Net Worth | % | 15.9 | 40.45 | 31.13 | 21.5 |
| Number of LG Brand Shops | # | 777 | 780 | 814 | 809 |
| Number of B2C touch points | # | 36401 | 35833 | 34874 | 32199 |
LG Electronics India Limited Promoters & Shareholding
As of date, there is only one promoter of the company i.e. LG Electronics Inc.
The promoter in aggregate holds 100% of the paid-up share capital of company.
| Name of Shareholder | Pre-offer No. of Shares held | Max No. of Shares offered |
| LG Electronics Inc. | 67,87,72,392 | Up to 101,815,859 equity shares |
Should You Subscribe to LG Electronics India Limited IPO or Not
While investing or subscribing to any IPO, consider the investment rationales related to the company. Hence, here you can find out the strength of the company that will be its growth factors. And also check the risk factors that can affect the growth and operational efficiency of the company.
Competitive Strengths of LG Electronics India Limited:
Leading single-brand global home appliances player
LG, a leading global home appliances player has managed to maintain its market leadership in India by leveraging its brand, offering premium service and consumer loyalty. Due to its product innovation, quality services, designs, the brand has been recognized as the most trusted brand for refrigerators, washing machines, air conditioners, and televisions for some past consecutive years. LG Electronics has a strong capital efficiency business with high growth and profitability, with a ROCE of 45.31% in FY24, the highest among leading home appliances and consumer electronics players.
Leading market share
LG with its strong brand familiarity and quality services, the company stands well positioned to gain market share from customers seeking new products. For many past years, the company has been the top player in the home appliances and consumer electronics industry. They dominate multiple product categories, including washing machines, refrigerators, televisions, inverter AC, and microwaves. Their market leadership extends across both volume and premium segments. They maintain a balanced product strategy, offering technologically advanced features in the premium segment and catering to the mass market's needs.
Pioneer of innovative technology
LG Electronics, a pioneer of innovative technology, has introduced many industry-first technologies in the home appliances and consumer electronics industry. They were the first to introduce OLED televisions in 2015 and were among the first to launch 4K and Smart televisions in 2011. LG also introduced microwaves in 1999 and transitioned to 100% inverter technology for air conditioners in 2017. They lead multiple technological innovations for B2B products in India, including transparent OLED-based information display solutions in 2020 and OLED gaming monitors in 2022. LG also leverages deep consumer insights to tailor products for Indian consumers, such as washer dryers, microwave ovens, and product designs.
Largest distribution and In-house production capacity
As of June 30, 2024, the company operates the largest distribution network among leading home appliances and consumer electronics players in India. It has an expansive sales network through 36,401 B2C touch points, online touch points, and traditional stores. The company caters to regional consumer preferences and maintains a consistent brand experience. It operates 97 sales offices and 949 authorized service centers, providing high-quality customer experiences. The company also exports products to 54 countries across Asia, Africa, and Europe.
The company has one of the largest in-house production capacities in India, with two manufacturing units in Noida and Pune. These units produce key components of their products, allowing them to control product development, quality, costs, and supply and delivery time. They employ automation technologies to increase efficiency and production capacity. The company has a large supplier network, committed to manufacturing and sourcing locally. They aim to increase the percentage of raw materials sourced from domestic suppliers and focus on supplier quality. They have developed significant supply chain advantages through supplier stickiness and implemented smart practices to track manufacturing output and enhance operational efficiency.
Future strategies
- Construct a third manufacturing unit in Andhra Pradesh
- Strengthen its supply chain and increase locally sourced raw materials.
- Deepen its reach across India by tailoring a distribution strategy for each region
- Introduce product equipped with new technologies backed by AI, with luxurious, sleek, and modern designs.
- Launch additional revenue streams such as subscription services that are long-term appliance rentals program.
- Strengthen its AMC offerings for B2C and B2B consumers
Risk Factors of LG Electronics India Limited:
Supported by Parent Co. lineage
LG Electronics, the Promoter, owns 100% of the of the company. The IPO issuing company has entered into a license agreement with LG Electronics for the use of the licensed brand, technology claimed in the licensed patents, and licensed technical know-how and other intellectual property rights for the Authorized Products. Subsequently, the license agreement requires the company to pay a amount of royalty of net sales for authorized products. Increase in the percentage of royalty on total revenue can directly hit company bottom line, affecting financial conditions.
| Particulars | 3-Mon ended June 30, 2024 | d | FY23 | FY22 |
| % of revenue from operations | ||||
| Royalty | 1.90% | 1.89% | 1.63% | 1.50% |
Prices of raw material
The company manufactures variety of precuts from fridge to Television. For that the company needs to source raw material for its manufacturing operations, including steel, copper, aluminum, polymers, and components like semiconductors, electromechanical parts, open cells, and packaging materials. The company sources these materials from both domestic and international suppliers. The company's ability to provide competitive prices is affected by global commodity prices, inflation, and effective negotiation with suppliers. Factors beyond the company's control, such as economic conditions, geopolitical tensions, and weather shocks, can affect the pricing and availability of commodities. Any changes in trade agreement, inflation, influence of war can increase material prices, directly patting pressure on products.
| Particulars | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Purchases of raw materials | 42917.24 | 152586.1 | 149158.1 | 121221.2 |
| Top-five suppliers as a % of purchases of raw materials | 21.45% | 26.09% | 22.85% | 27.35% |
| Top-10 suppliers as a % of purchases of raw materials | 31.44% | 36.78% | 35.78% | 40.78% |
| Purchases of raw materials sourced from related parties as a % of purchases of raw materials | 14.42% | 17.06% | 19.27% | 20.96% |
| Purchases of raw material as percentage of revenue | 66.97% | 71.46% | 75.07% | 71.45% |
LG Electronics relies on a limited number of suppliers for key raw materials. The company imports raw materials from countries like China and Korea, and faces risks such as damage, destruction, foreign currency fluctuations, geopolitical dynamics, transportation delays, and trade tariff developments. LG Electronics provides detailed specifications to suppliers, but risks of proprietary information disclosure and inability to protect intellectual property rights could also affect the company's operations.
Segment concentration
The company's Home Appliances and Air Solution division generates a significant portion of its revenue, primarily from products like refrigerators, washing machines, air conditioners, and microwave ovens. As can be seen from table below, the Home appliance and Air solution alone contribute to around 78% of revenue. This concentration brings up challenges like identifying and responding to evolving consumer tastes and preferences, offering attractive products, holding on to current market share, etc. From operation side, the company stands vulnerable to manufacturing disruptions and changing laws and regulations.
| Particulars | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| % of revenue from continuing operations | ||||
| Home Appliance and Air Solution division | 78.97% | 73.43% | 75.67% | 73.77% |
| Refrigerators | 33.71% | 27.09% | 29.23% | 29.40% |
| Washing machines | 18.36% | 21.04% | 21.25% | 21.48% |
| Air conditioner | 22.08% | 20.09% | 20.09% | 16.98% |
| Others | 4.82% | 5.10% | 5.21% | 5.91% |
| Home Entertainment division | 21.03% | 26.57% | 24.33% | 26.23% |
| Televisions | 16.31% | 21.35% | 19.79% | 21.79% |
| Others | 4.72% | 5.22% | 4.54% | 4.44% |
Manufacturing facility
The company manufactures products at two manufacturing units in Noida and Pune. The complex manufacturing processes require sophisticated equipment and can cause production difficulties. The manufacturing facility face operating risks such as planned shutdowns for preventive maintenance, equipment breakdowns, labor disputes, and supply chain disruptions. These disruptions could negatively impact the company's ability to meet consumer requirements and financial condition.
The table shows capacity utilization of manufacturing facility at Noida and Pune for given time. The increased capacity in Noida was driven by efficiency-enhancing initiatives, while the Pune unit experienced a decrease in capacity due to increased demand for larger televisions. The company plans to set up a new manufacturing unit in Andhra Pradesh and implement additional automation technologies.
| Manufacturing Unit | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| Capacity utilization | ||||
| Noida | 86.03% | 73.87% | 72.21% | 66.60% |
| Pune | 69.02% | 67.90% | 67.88% | 54.04% |
Distribution Channels & customer preference
The company distributes a significant portion of its products through third-party trade partners, sales team and B2B trade partners with expertise across industries. The share of top-10 trade partner’s sales value contribution for the time given has been constant near around 33% from past 3 years. However, if the company cannot meet customer demand and change its distribution strategies as per changing environment and behaviors of customers, the company can stand to lose its market share. The company's relationship with trade partners can be impacted if they fail to manage promotions or provide incentives effectively across various distribution channels. The quality standards set by trade partners can significantly impact consumers' perception of the company's products and brand.
| Particulars | 3-Mon ended June 30, 2024 | FY24 | FY23 | FY22 |
| LG BrandShops | 777 | 780 | 814 | 809 |
| Modern trade | 1266 | 1224 | 1034 | 851 |
| Online business | ||||
| LG website | 1 | 1 | 1 | 1 |
| E-commerce | 2 | 2 | 2 | 2 |
| Traditional channels | ||||
| Distributors and sub-dealers | 31666 | 31275 | 30563 | 28029 |
| Distributors | 355 | 407 | 429 | 396 |
| Sub-dealers | 31291 | 30858 | 30134 | 27633 |
| Multi-brand outlets | 1218 | 1272 | 1341 | 1638 |
| Regional specialty stores | 1471 | 1279 | 1119 | 869 |
| Top-10 trade partners volume | 33.50% | 36.91% | 34.64% | 29.08% |
The company's ability to develop and manufacture high-quality products depends on identifying consumer needs, addressing technological trends, and maintaining quality and safety controls. The company faces competition in the rapidly changing home appliances and consumer electronics markets, which require swift product development and adaptation to local consumer preferences. The company must anticipate and respond to emerging industry standards and consumer preferences, ensuring timely and cost-efficient product development.
LG Electronics India Limited Grey Market premium
Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.
Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable
However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share
According to various online sources, the Grey Market Premium or GMP of the LG Electronics India Limited is trading around Rs XX in the grey market. It means shares are trading at the upper band issue price of Rs XX with a premium in the grey market and may list around the same price.
