IPO News: Did you invest in LG's IPO? Bad news arrives before allotment; the issue is worth ₹4,717 crore.

News Topical, Digital Desk : Today is the last day of LG Electronics' IPO . One can apply for this IPO till 5 pm on Thursday. This IPO is also getting a good response. By around 3:30 pm, the IPO has been subscribed more than 36 times.
Even before the IPO allotment, some bad news has come related to LG. In fact, proxy advisory firm InGovern has warned the investors of LG Electronics and has expressed concern over contingent liabilities of Rs 4,717 crore including disputed tax claims. The firm has said that a negative outcome could "significantly reduce" the future income of this leading company in the equipment and consumer electronics sector.

Liabilities are 73% of net worth

InGovern said LG's total outstanding contingent liabilities of ₹4,717 crore represent 73% of its net worth. These liabilities arise from disputed income tax, excise, and service tax claims. The consulting firm said the company has not made provisions for these proceedings, citing legal advice and ongoing appeals before the appellate forum.

Royalty fees may also increase.

InGovern also noted that LG's Korean parent company could raise royalty fees from domestic manufacturing to 5% of annual consolidated turnover without shareholder approval. Royalty outflows have ranged between 1.63% and 1.90% of revenue over the past three years, a pattern that could impact margins without the oversight of small investors.

Another warning from InGovern

InGovern issued another warning, stating that LG Electronics' termination of the perpetual license agreement with six months' notice or any modifications to it would result in the company's right to manufacture and sell products under the LG brand, potentially causing significant disruption to the company's operations.

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