Investor Alert: LG Electronics India's Controversial Contingent Liabilities
Ingovern advises caution for LG Electronics India's upcoming IPO, highlighting significant contingent liabilities over disputed tax claims and potential royalty payment issues. The IPO, entirely an offer for sale, does not provide fresh capital for expansion. Investors should closely monitor potential regulatory impacts and shareholder influence limitations.
- Country:
- India
The proxy advisory firm Ingovern has issued a cautionary note to investors of LG Electronics India (LGEI), highlighting substantial contingent liabilities amounting to Rs 4,717 crore. These liabilities, primarily disputed tax claims, could severely affect future earnings if resolved unfavorably.
LGEI's Rs 11,607-crore IPO, which is currently oversubscribed by 13 times, concludes on Thursday. The IPO, purely an Offer for Sale, directs capital benefits to the South Korean promoter, LG Electronics Inc., without fresh funding for expansion.
The advisory underlines concerns about the potential for minority shareholder influence limitation due to the parent company's dominant 85% stake post-IPO. Additionally, ongoing royalty payments to the parent entity could face further scrutiny, posing risks to operational margins and corporate governance.
(With inputs from agencies.)
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