LG considers India IPO to facilitate its growth trajectory

• South Korean giant stands ready to turn its ambitious vision into reality, setting the stage for continued success in the coming decade.
• Company is venturing into subscription services for home appliances—an innovative model that caters to evolving consumer preferences for affordability and convenience.

In the dynamic landscape of global consumer electronics, LG Electronics Inc. stands at a critical juncture, contemplating a strategic initial public offering (IPO) for its India business.

The potential move is not merely a financial manoeuvre; it embodies a broader strategy to reinvigorate its decades-old consumer electronics sector and align with ambitious revenue targets in an increasingly competitive environment.

Under the leadership of Chief Executive Officer William Cho, who has been at the helm since 2021, LG has set a formidable objective of achieving staggering annual revenue of 100 trillion won (approximately $75 billion) by the year 2030, compared to about $65 billion in 2023.

India: A fertile ground

India, with its burgeoning economy and expanding middle class, presents a fertile ground for consumer electronics growth. Recent developments indicate that LG’s revenue from its Indian operations surged 14 per cent in the first half of the year, reaching a record 2.87 trillion won.

Furthermore, the net income rose impressively by 27 per cent to 198.2 billion won.

Such robust growth metrics reflect LG’s successful penetration into the Indian market and bolster the case for an IPO, which would potentially attract a diverse range of global investors.

As highlighted by Cho, the increased interest among investors—particularly in light of India’s lively capital markets—positions the company favourably within the current economic climate. The Indian IPO landscape is already bustling, with numerous companies aiming to raise substantial funds, indicating a propitious climate for new listings.

Strategic considerations for IPO

Recognising the IPO as one of several strategic pathways to not only raise capital but also enhance visibility and market confidence, Cho told Bloomberg Television, “It is one of many options we can consider.”

The emphasis on exploring this route is rooted in a meticulous observation of the Indian market’s ongoing vibrancy and the recent influx of IPO activities within the region.

About 189 companies aim to sell shares to raise $5.6 billion this year, making it one of the busiest markets in this space.

At least 30 IPOs joined the pipeline as demand powered by domestic money pushes companies to explore listings.

Korean peer Hyundai Motor Co. is preparing to raise as much as $3.5 billion in an Indian IPO.

As the demand for shares intensifies, buoyed by domestic investments, LG’s consideration of an Indian debut signals an ambition to leverage the booming stock market to facilitate its growth trajectory.

The company’s revenue aspirations hinge not just on consumer sales but also on a calculated pivot towards enterprise clients, targeting a substantial increase in sales from businesses—from 35 per cent currently to 45 per cent by the decade’s end.

The diversification reflects a growing acknowledgment that success in consumer electronics is increasingly intertwined with commercial partnerships and initiatives. To this end, LG has identified potential revenue streams in various business units, reinforcing its commitment to innovation and adaptability.

Diversifying business models

In the context of its expansion aspirations, LG is not limiting its growth strategies to geographical diversification through an IPO. Rather, it is actively nurturing new business lines that can each yield significant revenue.

Notably, heavy investments in heating, ventilation, and air-conditioning (HVAC) signify LG’s intent to tap into emerging market demands, particularly those associated with artificial intelligence and data centre infrastructure. The impressive 40 per cent annual growth in overseas sales of LG’s chillers attests to this proactive approach.

Moreover, the company is venturing into subscription services for home appliances—an innovative model that caters to evolving consumer preferences for affordability and convenience. By offering rental options for essential products, LG is enhancing accessibility while potentially capturing a larger customer base.

This model, currently thriving in South Korea, is poised for expansion into Southeast Asian markets and beyond, reflecting the company’s forward-thinking approach to consumer engagement.

The company recently began offering subscriptions in Malaysia and plans to roll that model out to customers in Thailand, Taiwan and India starting this year, and potentially the US and Europe in the future. LG expects revenue from the subscription business to grow 60 per cent to about $1.3 billion in 2024.

Additionally, LG is enhancing its digital ecosystem through investments in its streaming services, with plans to invest approximately one trillion won in developing its webOS-based advertising and content business by 2027.

The diversification into digital content and services aligns perfectly with global market trends favoring integrated entertainment solutions alongside traditional product offerings.

Vision for the future

At the heart of these initiatives is Cho’s multifaceted leadership philosophy, honed over a distinguished career that spans continents and cultures. With half of his career spent outside Korea, he brings a global perspective to LG’s strategic pursuits, emphasising the importance of understanding diverse consumer landscapes.

His vision extends beyond the immediate financial targets to encompass a broader ambition: crafting innovative business models that resonate with modern consumers while establishing LG as a leader in integrated technology solutions.