LG Electronics IPO — Should You Subscribe To This 11,600-Crore Offer? Read Dolat Capital's Report

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Dolat Capital Report

LG Electronics India Ltd., a wholly owned subsidiary of LG Electronics Inc. of the Republic of Korea will launch its initial public offering on Oct. 7 and closes on Oct. 9.

The company has fixed the price band between Rs 1,080 to Rs 1,140 per equity share. The market value at the upper end of the price band is 77,800-crore.

The Rs 11,600-crore issue is an entirely offer-for-sale of 10.02 crore equity shares with a face value of 10 each.

Investors can place bids starting from a minimum of 13 shares and in multiples thereafter which means the minimum amount of investment required by a retail investor is Rs 14,820 based on the upper price band.

The shares of LG will list on the BSE and NSE on Oct. 14.

Morgan Stanley, J.P. Morgan, Axis Capital, BofA Securities, Citigroup Global Markets are the book-running lead managers for the public issue.

Object of the Issue

1. To carry out offer for sale by the promoter (LG Electronics, South Korea), hence the company itself will not receive any proceeds from the issue.

2. achieve the benefits of listing the equity Shares on the Stock Exchanges, which will enhance visibility and provide liquidity.

Valuation and View

LG focuses on-

1. expansion of production capacity,

2. diversifying and innovating the product portfolio,

3. strengthening distribution,

4. scale-up of B2B business.

Penetration of home appliance in India is low, providing headroom for growth. LG enjoys #1 market share across key home appliance categories, maintaining competitive edge in the premium category.

The company’s diversified product mix helps it to manage the impact of seasonality on sales. It has the highest margins (10%+) among leading consumer home appliance and electronics players.

The company is well poised to benefit from the recent GST rate rationalization in AC,TV, Dishwashers which will increase affordability.

Amidst stiff competition from other global and Indian players in this space, market share retention remains a challenge.

At the upper price band, LG is valued at a P/E of 35x to its FY25 earnings, which is at ~30% discount to peers.

We believe that the IPO is attractively priced and recommend a ‘Subscribe’ rating to the IPO.

Key Risks

• Royalty and Promoter Dependence Risk.

• Potential risk of contingent liabilities.

• Highly volatile commodity prices/forex fluctuation may impact margins.

• Stiff Competition Impacting Market Shares.

• Regulatory Risks.

• Adapting to rapid technological advancements.

Click on the attachment to read the full IPO report:

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