LG India’s Future Hangs 'Uncertain' Ahead of IPO - Here's Why

LG Electronics India is uncertain about the continuity of its business with the South Korean parent company, LG Electronics Inc. The Indian home appliances maker ahead of its Rs 15,000 crore initial public offering (IPO), mentioned in a draft prospectus with the securities and exchange board of India (Sebi) that the parent company might start separate businesses in India in the future. 

The separate business is likely to compete with LG Electronics, as there is no agreement over exclusivity between the two. The company pointed out that if its South Korean parent starts another venture, it is bound to affect its business and financial health. 

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“Currently, Hi-M Solutek India only provides services for our products. However, we do not have an exclusive contractual arrangement with them and there is no assurance that Hi-M Solutek India will not expand their business in the future to compete with ours or to provide services for our competitors,” said LG India. “The promoter may in the future engage in businesses that compete with ours because we do not have any exclusivity arrangement with them,” the company added. The company said in the statement that the situation might lead to conflicts of interest, and it is likely to affect business operations and financial health.

LG Electronics India IPO 

The D-street debut has come after LG’s CEO William Cho had earlier in August said the company is eyeing to revive its consumer electronics ventures. The parent company has planned a 15 per cent stake sale in the Indian subsidiary to raise nearly Rs 15,000 crore. 

LG Electronics India is eyeing a public issue; a draft red herring prospectus (DRHP) filed by the company with the market regulator stated. The appliance maker has plans of selling 101.8 million shares. The entire public issue will be an offer-for-sale (OFS). 

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The LG India IPO is managed by Morgan Stanley, J.P. Morgan, Axis Capital, BofA Securities, and Citigroup Global Markets. 

“We plan to roll this out across or distribution network, which we believe will enable us to offer differentiated services, enhance consumer satisfaction and drive sales to consumers,” said the company.