LG Electronics (LG), the market leader in several categories of home appliances in India, is coming with a ₹11,607-crore IPO (entirely OFS) that will be open from October 7 till October 9. At the higher end of the IPO price band (₹1,140), the company is valued at ₹77,380 crore or 35 times FY25 earnings. Peer valuations are much higher and in the range of 42-65 times FY25 earnings.
In this context, four factors work in favour of the IPO — one, LG’s dominant position in the Indian market; two, growth opportunity in the Indian market, as demand for consumer durables in India is expected to strengthen with rising incomes; three, solid track record of execution over the last two-and-a-half decades; and four, reasonable valuation. Hence, investors with a long-term perspective can subscribe to the IPO.
Market leader
LG Electronics India is a fully-held subsidiary of Korean appliances multinational LG Electronics and was established in 1997. In the 28 years, the company has built strong operational base in India. The company has a wide portfolio and is a leader in most segments it operates. This is significant when compared with peers, which have a specialised presence in some verticals and in the process of expanding the product base like in the case of Havells or Voltas.
The company operates two revenue segments: Home Appliances, consisting of refrigerators, washing machines, RACs (room air conditioners) and other small appliances; and Home entertainment, consisting of televisions and audio devices. It is a market leader with leading position in washing machines (33.5 per cent market share in 6MCY25), refrigerators (29.9 per cent), panel televisions (27.5 per cent) and RACs (18 per cent). The company will now look to expand into B2B segment with HVAC (Heating, ventilation, and air conditioning) and information display solutions.
The company operates from two facilities in Noida and Pune and is adding a third in Andhra Pradesh which is expected to double the existing capacity at a total outlay of ₹5,000 crore. The facility will be developed phase wise and by Diwali next year, the company expects to start RAC production and extend to most other segments by 2029.
The MNC-backed company has relied on new product/feature launches (inverter ACs and OLEDs being prime examples) along with a robust domestic supplier/distributor network to secure its leadership position. In FY25, the company sourced 54 per cent/22 per cent/11 per cent of its raw material from India/Korea/China and aims to increase domestic sourcing by 2-3 per cent per year in the medium term.
Durable growth
As per Redseer research in the RHP, Indian appliances market has grown at 7 per cent CAGR in FY19-24 and is expected to grow at 11 per cent CAGR in FY25-29. Rising income, urbanisation and smaller nuclear families, small base of market with low penetration, improved infrastructure and strong digital access are factors that can structurally support a high growth expectation in the long term. Compared to 70 – 100 per cent penetration in USA and China for refrigerators, televisions, and washing machines, India has a penetration of 35/78/22 per cent respectively and the fast growing RAC segment has 13 per cent penetration as per the Redseer report.
The medium-term expectations are also buoyed by recent measures. GST rates have decreased from 28 per cent to 18 per cent for RACs, TVs and dishwashers. Apart from direct cuts, the GST rationalisation across product categories should add to the spending power. This will take hold in H2FY26 in addition to the income-tax rationalisation carried out in this year’s Budget. Customers can also benefit from lending rates, which are about 100 bps lower in the last one year due to repo rate cuts. A better-than-average monsoon and a rural economy recovering from demand weakness should also spell a favourable market for the consumer durables sector.
While macro and short-term support are positive, the industry and LG Electronics have reported a weak Q1FY26 with sales decline of 2.3 per cent with weakness across segments. RAC growth was impacted by weather patterns while other segments were impacted by geopolitical events and only a temporary slump. The GST cut is already showing signs of strong growth returning to durables sector.
Financials
During FY23-25, the company reported revenue growth of 11 per cent CAGR which is lower than competitors as shown in the table. This can be attributed to RAC focussed portfolio of competitors where the company also reported strong growth. The company is debt free owing to strong parent backing.
But the significant discount in valuations in the offer price more than makes up for the stable growth of the industry leader, which is reflected in LG’s superior margins as well. The company, being a leader across categories with a wide reach, should leverage the strong growth outlook in durables sector, despite increasing competition. The low penetration from RACs to television will benefit from the competition translating to market expansion benefiting the industry. The manufacturing capacity expansion at ₹5,000 crore should leverage the established operations of LG Electronics especially in the Southern markets.
LG has paid royalty in the range of 1.6-1.9 per cent in the last three years to its parent and is expected to continue with a similar rate.
Published on October 4, 2025
