LG concerned about potential competition from parent company

LG Electronics India is gearing up for a major Rs 15,000 crore initial public offering (IPO), which is expected to rank as the fifth-largest IPO in India’s history, following giants like Life Insurance Corporation, Hyundai Motor, Paytm, and Coal India. However, as part of its preparations for the listing, LG Electronics India has raised concerns about the potential risks it faces from future competition with its South Korean parent company, LG Corporation.

In its draft prospectus, LG Electronics India highlighted the lack of an exclusivity agreement with LG Corporation. While the South Korean parent is not currently operating in the Indian market, the company retains the option to enter the market and potentially compete with its Indian subsidiary. This could lead to conflicts of interest that may have adverse effects on LG India's business, its financial position, and operational results in the long term.

The prospectus also outlined concerns surrounding Hi-M Solutek India, a wholly-owned subsidiary of LG, which provides services for LG’s commercial air conditioning products. Although Hi-M currently focuses on servicing LG products, the absence of a formal exclusivity agreement means there is no guarantee that Hi-M Solutek India will not expand its services to competitors or directly compete with LG India in the future.

“We do not have any exclusivity arrangement with our promoter or Hi-M Solutek India, and there is no assurance that Hi-M Solutek India will not expand its business to compete with us or serve our competitors,” the draft document stated, emphasizing the potential risks involved.

Beyond these concerns, LG India has outlined ambitious plans for its future growth. The company intends to establish a new manufacturing facility in Andhra Pradesh, its third in India, alongside existing plants in Greater Noida and Pune. LG India also aims to strengthen its local supply chain, increasing its component sourcing from Indian suppliers. This figure has already risen from 45% in 2022 to 58.3% in mid-2024, underscoring LG's commitment to enhancing its domestic footprint and reducing dependency on foreign suppliers.

With these efforts, LG Electronics India seeks to maintain its competitive edge in the Indian market while navigating potential challenges posed by both internal and external factors, including the possible actions of its parent company. Despite the concerns raised, the IPO remains on track to enhance the company’s capital base and fund further expansion initiatives in the rapidly growing Indian consumer electronics sector.