LG Electronics IPO: InGovern flags Rs 4,717-crore contingent liabilities, royalty payments, related-party transactions as key risks
- Team InGovern
- Oct 9
- 1 min read
InGovern Research Services has cautioned investors about key governance and compliance risks in the LG Electronics India Ltd. IPO, even as the issue witnessed a strong investor response, being subscribed three times on Day 2. The proxy advisory firm highlighted contingent liabilities of ₹4,717 crore, constituting 73% of the company’s net worth, arising from disputed tax and transfer pricing matters. It also noted that the promoter retains the flexibility to increase royalty payments up to 5% of turnover without shareholder approval and will continue to hold 85% ownership post-listing, potentially limiting minority investor oversight on related-party transactions.
InGovern highlighted that the promoter can increase royalty fees up to 5% of the annual consolidated turnover of domestically manufactured products (including OEM output) without requiring shareholder approval, as per the SEBI Listing Regulations. This provision could affect margins without minority investor oversight. The advisory firm also noted that high contingent liabilities and concentrated promoter control are key considerations that could impact long-term shareholder value without adequate governance measures.
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