Proxy advisory firm InGovern has raised alarms over major risks in LG Electronics India Ltd.’s ongoing initial public offering, including hefty contingent liabilities of Rs 4,717 crore, potential hikes in royalty payments, and related-party deals. As the IPO enters its final day on October 9, 2025, it has already seen strong investor interest, with subscriptions reaching over three times by the end of day two, driven by the company’s solid growth and fair pricing.
Strong Subscription on Final Day
The LG Electronics India IPO, valued at Rs 11,607 crore, is drawing massive attention from investors. This offer is entirely an offer for sale, meaning all proceeds go to the South Korean parent company, not the Indian unit. Bidding started on October 7 and closes today, October 9.
By the end of day two, the issue was subscribed 3.32 times overall. Qualified institutional buyers subscribed 2.59 times their portion, while non-institutional investors led with 7.60 times. Retail investors showed steady interest too.
Analysts point to the company’s strong track record as a key draw. Revenue grew from Rs 20,108 crore in fiscal 2023 to Rs 21,557 crore in 2024, with profits rising to Rs 1,509 crore. The price band of Rs 1,080 to Rs 1,140 per share values the firm at about Rs 77,000 crore at the upper end.
In the grey market, shares are trading at a premium of around 26 percent, suggesting a possible listing price near Rs 1,445. This buzz reflects confidence in LG’s position as a top player in India’s home appliances and consumer electronics market.
Key Risks Flagged by Experts
InGovern Research Services, a governance advisory firm, has spotlighted several concerns that could impact future performance. These warnings come at a time when the IPO is seeing robust demand, but they urge investors to look beyond the hype.
The firm stresses that while the valuation seems reasonable based on growth and profits, underlying issues might erode value. Investors should weigh these against the company’s strengths in a competitive market.
Here are some of the main risks outlined:
- High contingent liabilities that could lead to big financial hits if court cases go wrong.
- Flexibility for the parent company to raise royalty fees, which might squeeze profits.
- Heavy reliance on related-party transactions, raising questions about fairness and independence.
Deep Dive into Contingent Liabilities
Contingent liabilities stand out as a major red flag, totaling Rs 4,717 crore. This amount equals about 73 percent of the company’s net worth, mainly from disputed tax claims under litigation.
If these disputes result in unfavorable rulings, LG Electronics India could face large payouts or need to set aside funds, hurting earnings. The company has disclosed these in its offer documents, but outcomes remain uncertain.
Past similar cases in India show how tax battles can drag on for years, sometimes leading to unexpected costs. For instance, other multinationals have seen stock dips after adverse tax decisions.
Experts advise investors to monitor legal updates closely. While the company argues many claims are baseless, the sheer size makes this a critical watch point.
Concerns Over Royalty Payments
Another issue is the structure of royalty payments to the South Korean parent. LG Electronics India pays royalties for technology and brand use, and the agreement allows increases without much limit.
InGovern notes this leeway could let the parent hike fees, reducing profits for Indian shareholders. Royalties already form a big chunk of expenses, and any rise might cut into margins.
| Fiscal Year | Revenue (Rs Crore) | Royalty Paid (Rs Crore) | Profit After Tax (Rs Crore) |
|---|---|---|---|
| 2023 | 20,108 | 1,200 | 1,345 |
| 2024 | 21,557 | 1,350 | 1,509 |
| 2025 (Q1) | 5,800 | 350 | 400 |
This table shows rising royalties alongside growth, but future hikes could change the picture. Analysts compare this to other foreign firms in India, where high royalties have sparked shareholder pushback.
The setup ties into broader debates on how multinationals structure deals with subsidiaries. Investors might push for more transparency in these arrangements post-listing.
Related-Party Transactions Scrutiny
Related-party transactions add another layer of risk. LG Electronics India deals heavily with its parent and affiliates for supplies, services, and sales.
InGovern warns these could lead to conflicts of interest, where terms might favor the parent over minority shareholders. For example, pricing in these deals might not always be at arm’s length.
Regulatory bodies in India have tightened rules on such transactions, requiring approvals and disclosures. Yet, the volume here is high, making up a significant part of operations.
This mirrors issues seen in other IPOs, like those from global giants entering Indian markets. Shareholders often demand audits to ensure fairness.
What This Means for Investors
These risks do not overshadow the IPO’s appeal entirely, but they call for caution. The company’s strong market share in air conditioners, refrigerators, and TVs, plus expansion plans, offer upside.
However, with no fresh funds from the IPO, growth depends on internal resources. Investors should factor in India’s booming consumer electronics sector, expected to grow 10 percent yearly through 2030.
Balancing these, some experts recommend subscribing for long-term gains, while others suggest waiting for listing to assess post-IPO performance.
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