LG Electronics India filed an IPO in India, aiming to capitalize on the country's growing appliances and electronics market. However, concerns arise regarding potential conflicts of interest with other LG entities and the lack of exclusivity agreements.
LG Electronics India, the Indian arm of South Korea's LG Electronics, submitted draft documents to the Securities and Exchange Board of India (SEBI) for an IPO. This move marks a significant step as the offering is structured as an offer for sale (OFS), whereby the parent company plans to divest 101.8 billion equity shares. The transaction will see LG Electronics' stake in its Indian subsidiary reduced by 15%, holding onto 576.9 billion shares post-IPO. Notably, this offering will not generate new capital for LG Electronics India as it involves no fresh issuance of shares.
The process of bringing LG Electronics India to the stock market will be shepherded by prominent merchant banks, including Morgan Stanley India, JP Morgan India, Axis Capital, BofA Securities India, and Citigroup Global Markets India, according to reports from The Times of India. This strategy positions LG Electronics India to become only the second South Korean conglomerate, or chaebol, to enter Indian stock exchanges, following in the footsteps of Hyundai Motors India.
In the draft documents, LG Electronics India has claimed its market leadership in major home appliances and consumer electronics in India, with exclusions for the mobile phone segment through June 30, 2024. The company has proudly maintained this position for 13 consecutive years from 2011 through 2023 regarding volume and value market share within the offline channel.
India's burgeoning appliances and electronics sector has reportedly grown at an average rate of 7% over the past five years. Expecting a boost, LG Electronics India forecasts this growth to accelerate to approximately 12% over the next half-decade. This optimistic projection is underpinned by increased disposable incomes, accelerated urbanization, and deeper market penetration in urban and rural landscapes.
Despite the promising outlook, concerns loom, as reported by the Economic Times, citing anonymous sources within the company. LG Electronics India has flagged potential competitive risks if its parent company decides to establish independent ventures in the region, as no binding exclusivity agreement governs their mutual operations. Such developments could trigger conflicts of interest, significantly affecting LG Electronics India's business and financial status.
Further complicating the landscape is LG's fully-owned Indian subsidiary, Hi-M Solutek India, dedicated to maintaining LG's commercial air conditioning systems. While focused solely on LG products, Hi-M Solutek's mandate includes system construction, service and maintenance, and specialized engineering services. The lack of exclusivity raises the possibility that Hi-M Solutek might broaden its service offerings, compete directly with LG Electronics India, or cater to other brands, adding another layer of complexity to the already competitive business environment.
