LG Electronics India IPO: Bargain pricing surprises street; industry leader seeks listing at steep discount to peers

LG Electronics India Ltd’s Rs 11,607-crore initial public offering has drawn unusual unanimity from analysts for one simple reason -- attractive valuation. Despite its dominance across India’s consumer-durables categories, superior profitability metrics and industry-leading margins, the company is seeking to list at a clear discount to peers such as Havells India, Blue Star and Voltas.

At the upper end of the price band of Rs 1,140 per share, the IPO values LG Electronics India at about 35 times its FY25 earnings and around 25 times EV/EBITDA, implying a post-issue market capitalisation of roughly Rs 77,400 crore.

By comparison, Havells, Voltas and Blue Star trade at 63-68 times their trailing earnings, while Whirlpool of India is in the 40-plus range, according to brokerage estimates.

Industry leader at a lower multiple

Analysts at SBI Securities note that LG’s financial strength justifies a richer multiple. Between FY23 and FY25, revenue grew at a compound annual rate of 10.8 percent, while EBITDA and PAT expanded 28 percent and 27.8 percent, respectively. In FY25, the company reported revenue of Rs 24,367 crore, EBITDA of Rs 3,110 crore, and net profit of Rs 2,203 crore, translating into a 12.8 percent operating margin and 9 percent net margin.

Those margins outshine most peers:Havells’ EBITDA margin was about 9.8 percent, Blue Star’s ~7.3 percent, Voltas’ ~7.2 percent, and Whirlpool’s ~7 percent in FY25. LG’s balance sheet is virtually debt-free, with return on capital employed at 42-50 percent -- significantly higher than the peers’ 10-25 percent. LG’s return on equity was near 37 percent, compared with an industry average of 10-20 percent in FY25.

Brokerages therefore see the valuation as conservative. Elara Securities described the issue as “highly attractively priced,” implying a 50 percent discount to peers despite stronger profitability and working-capital efficiency. Geojit and Choice Broking similarly cited LG’s superior ROE, ROCE and cash-flow profile for their ‘Subscribe’ ratings.

Elara adds that LG’s margin advantage stems from a higher contribution of premium products, describing the company as “a premium brand in the durables industry due to its advanced technological features.” It expects further improvement in margins as localisation deepens and premium share rises.

Operational scale and efficiency

LG Electronics India’s operating structure is among the most extensive in the industry. The company has 1.45 crore-unit annual production capacity across its Noida and Pune plants, running at about 84 percent utilisation, according to Anand Rathi. It also operates the largest distribution and service network in the sector -- over 35,000 B2C touchpoints, 1,006 service centres, and a 13,000-strong technical team.

The company’s raw-material cost has hovered around 75 percent of revenue -- 75.1, 71.5, 75.3 and 74.2 percent over FY23 to 1QFY26, as per SBI Securities. Several brokerages flagged this as a key risk. “Increases in the prices of raw materials could adversely affect business,” warned Geojit, while Choice Broking cited “raw-material price volatility risk.” SBI Securities similarly cautioned that any sudden spike could compress margins.

Premium product mix and market leadership

The company’s revenue mix -- about 75 percent from home appliances and air-solutions and 25 percent from home entertainment -- reflects its wide presence across categories. It leads in offline market share for washing machines (33.5 percent), refrigerators (29.9 percent), panel televisions (27.5 percent), inverter air-conditioners (20.6 percent), and microwaves (51.4 percent). Analysts note that this dominance, combined with premium positioning, underpins its margin edge and resilience.

Valuation takeaway

Despite scale, profitability and returns superior to peers, LG Electronics India is listing at 35x FY25 earnings, a steep discount to the sector’s 60x average. For investors, the offer presents exposure to India’s largest consumer-durables brand with visible earnings growth and low financial risk.

That explains why brokerages including SBI Securities, Geojit, Elara, Choice and Anand Rathi have recommended ‘subscribe’ or even ‘must subscribe’ for LG Electronics India’s public issue. Their shared view: a market leader with premium margins and a strong balance sheet, offered at half the peer valuation, is an opportunity the market is unlikely to ignore.

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