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LG Electronics Eyes Potential IPO in India

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Published Date: 05 Sep 2024Updated Date: 13 Sep 20246 mins readBy MOFSL
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LG Electronics is considering a potential stock market debut in India, a crucial and rapidly expanding market where the South Korean tech giant has been solidifying its presence for nearly two decades. In a recent interview LG Electronics CEO Cho Joo-wan hinted at the possibility of an initial public offering (IPO) for the company’s Indian division. He emphasized that the company is closely monitoring the Indian market as it strives to achieve its ambitious sales target of 100 trillion won (approximately $74.6 billion) by 2030.

The Broader Context: Korean Companies Increasing Investments in India

Cho’s comments come at a time when Korean companies are significantly ramping up their investments in India, driven by the shifting dynamics of global supply chains amid the intensifying US-China rivalry. For instance, Hyundai Motor’s Indian subsidiary has already filed for an IPO. If successful, this could become India’s largest-ever listing by the end of the year.

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LG’s Strong Foundation in India

LG Electronics has a well-established foundation in India, having entered the market in 1997 with the establishment of a factory in Noida. This was followed by a second plant in Pune in 2006. Today, the company operates a "locally adapted business structure," which includes sales, production, and research and development centres spread across the country.

During his visit to India last year, CEO Cho reaffirmed LG’s commitment to the fast-growing Indian market, which ranks as the fifth largest globally. “In India, a market of considerable scale and growth potential, our goal is to strengthen LG Electronics' leadership position and strategically expand and advance our business in the future,” he stated.

LG’s IPO Plans: A Move to Strengthen Market Leadership

A potential IPO of LG's Indian subsidiary could raise over $500 million, boosting the company’s competitiveness and fuelling business expansion. LG is exploring strategies to enhance its corporate value and growth trajectory, with the Indian unit's operations as a key focus. Despite competition from Samsung, LG remains a leader in air conditioners and OLED TVs. Additionally, it invested 2 billion rupees to expand the side-by-side refrigerator production line at its Pune plant, with a capacity of over 100,000 units annually.

Strategic Expansions and Future Plans

This year, LG also launched a new business-to-business sales hub, the Business Innovation Centre, in Chennai. This is the company’s fourth hub in India, following those in Noida, Mumbai, and Bengaluru.

To explore the possibility of a share sale, LG Electronics has engaged investment banks JP Morgan and Morgan Stanley as advisors. With India’s attractive market multiples and a broader trend among South Korean conglomerates to monetize their global investments, this process, while in its early stages, holds significant potential. If approved, LG Electronics India could aim to raise over $500 million.

Upcoming IPOs to watch: Apply and invest in the future!

In FY23, LG Electronics India reported a 17 percent increase in total income, reaching Rs 20,111 crore, with profit after tax rising by 14 percent to Rs 1,345 crore. According to a report from the Economic Times, refrigerators contributed 29% of sales in FY23, followed by washing machines at 21%, air conditioners at 20%, and televisions at 19%. The home appliances segment alone generated over ₹14,000 crore in sales for the company.

A Focus on Emerging Markets

In January, LG Electronics Inc. reiterated its focus on emerging markets, stating, “This year, the company will focus on overcoming challenges to maximize its business potential. With guidance from the newly established Overseas Sales & Marketing Company, LG aims to achieve further growth and broaden its product reach, especially in emerging markets with greater growth opportunities.”

As LG Electronics continues to explore its options in India, the potential IPO could mark a significant milestone in the company’s ongoing efforts to strengthen its presence in one of the world’s most dynamic and rapidly growing markets.

 

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