LG Electronics IPO – A Quick Overview
The LG Electronics India IPO opened to a stellar response, getting fully subscribed on its very first day. On Day 2, subscription figures surged further, reflecting investor confidence in the company’s growth, profitability, and strong brand recognition. However, analysts warn that some red flags in the financial disclosures could impact long-term valuations.
This IPO is a pure offer for sale (OFS), meaning no new funds will flow into the company. Instead, existing shareholders will sell part of their holdings to the public. The issue closes today, with the listing expected soon after allotment finalization.
Contingent Liabilities: The ₹4,717 Crore Overhang
According to InGovern Research, LG Electronics India has disclosed contingent liabilities totaling ₹4,717 crore, which represents nearly 73% of its net worth. Most of these liabilities stem from disputed tax claims, including income tax, excise, and service tax matters that are currently under litigation.
The firm warned that an unfavorable outcome in these disputes could “significantly erode future earnings or require provisions,” creating a major drag on profitability. The company’s red herring prospectus (RHP) notes that these cases are still pending and no provisions have been made, based on legal advice and ongoing appeals.
Royalty Payments Under Scrutiny
One of the biggest concerns raised by analysts involves royalty and technical service payments made to the parent company, LG Electronics Korea. The RHP reveals a fixed royalty rate of 2.3% of net sales for most products and 2.4% for LCD TVs and monitors, with total royalty outflows accounting for 1.6–1.9% of revenue over FY23–FY25.
However, the promoter retains the flexibility to increase royalty payments up to 5% of annual turnover without needing shareholder approval, as permitted under SEBI Listing Regulations. InGovern cautioned that this could affect profit margins and limit minority investor oversight.
Additionally, the firm noted a contingent liability of ₹315 crore related to royalty payments to the promoter. Cross-border tax scrutiny remains a concern, as future audits by South Korean tax authorities could raise similar objections and impact financial performance.
Investor Takeaway: Balanced Growth vs. Governance Risks
The LG Electronics IPO presents a classic case of high-quality business fundamentals weighed against potential governance and compliance risks. While the company’s growth story and profitability are attractive, the magnitude of contingent liabilities, potential royalty escalations, and high promoter control could introduce volatility in the long term.
Analysts suggest that investors should evaluate the LG Electronics IPO review from both risk and return perspectives before subscribing. The key question remains whether the market’s optimism will outweigh the structural risks flagged by InGovern once the company lists on the stock exchanges.
The LG Electronics India IPO has strong fundamentals and brand equity, but investors must not ignore the governance warnings. As the issue closes today and the listing draws near, market sentiment — including the LG Electronics IPO GMP trend — will likely determine the immediate
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