| L G Electronics India Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank facilities of L G Electronics India Private Limited (LG India).
In fiscal 2023, revenue of LG India grew ~18%, driven by volume and sale of high-end products. Despite healthy growth in operating income, the operating margin remained at ~10% because of rise in input cost. The margin is expected to improve by 1-2% in fiscal 2024 as a result of softening raw material prices.
CRISIL Ratings notes that LG India paid dividend of ~Rs 2,500 crore to the parent, LG Korea (rated ‘BBB/Stable’ by S&P Global), in fiscal 2023. Nevertheless, the financial risk profile remained strong, as indicated by nil debt and liquid surplus of Rs 2700 crore as on March 31, 2023. LG India will likely maintain adequate liquidity after payment of dividend.
The ratings continue to reflect the company’s leading position across diversified product portfolio, robust financial risk profile, strong operating capabilities and operational and technological links with LG Korea. These strengths are partially offset by exposure to intense competition in the consumer durables segment and susceptibility to volatility in raw material prices and foreign exchange (forex) rates. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of LG India. |
Key Rating Drivers & Detailed Description Strengths: Leading position in major product categories: LG India is a leading player in the domestic consumer durables industry. The company has sustained market leadership in the washing machine and refrigerator segments and enjoys strong position in the panel television (TV) and air conditioner (AC) segments.
Robust financial risk profile: Networth was strong at Rs 4,300 crore as on March 31, 2023, against nil debt. The company is expected to generate healthy gross cash accrual (excluding dividend payout) of above Rs 1,800 crore per annum over the medium term driven by its leading market position across segments. The financial risk profile should remain healthy aided by adequate cash accrual and moderate capital expenditure (capex).
Strong operating capabilities: The company has manufacturing facilities in Greater Noida and Pune, and a pan-India distribution and after-sales service network. Expansion of capacity has led to logistical benefits, reduced delivery time and better geographical coverage.
Operational and technical linkages with the parent: LG India benefits from the parent’s strong international brand and technological capabilities. It sources raw materials and components for its high-end products from the parent. With India being a key growth market, contributing 4-5% to the revenue of LG Korea, LG India should continue to benefit from its strong linkages with the parent.
Susceptibility to volatility in raw material prices and forex rates: Raw materials, such as copper, aluminium and steel (including compressors), account for around 70% of the production cost, and 35-40% of raw materials are imported. Though LG India partially hedges its forex exposure, profitability remains susceptible to volatility in raw material prices and forex rates.
Exposure to intense competition: The company faces intense competition from other multinational corporations, such as Samsung India Electronics Ltd, Whirlpool of India Ltd ('CRISIL AA+/Stable/CRISIL A1+') and Sony India Pvt Ltd ('CRISIL AA+/Stable'), and Indian players, such as Voltas Ltd. Ability to maintain market leadership amid intense competition be a key monitorable. |
Liquidity: Superior LG India had cash and bank balance of ~Rs 2,700 crore as on March 31, 2023. Healthy gross cash accrual (excluding dividend payout) of above Rs 1,800 crore per annum in fiscals 2024 and 2025 against nil term debt obligation will cushion the liquidity. Unutilised working capital limit also enhances liquidity. The company has no major capex plan over the medium term apart from regular capex, which will be funded through internal cash accrual. |
Outlook: Stable CRISIL Ratings believes LG India will maintain its healthy business risk profile backed by strong market position. The financial risk profile will be supported by healthy cash accrual and nil debt. |
Rating Sensitivity Factors Downward Factors
|
About the Company LG India was incorporated in 1997 as a wholly owned subsidiary of LG Korea. The company has one of the widest product portfolios among consumer durables players in India. It manufactures various products, such as panel displays, refrigerators, washing machines, ACs (room and commercial), microwave ovens, personal computer monitors, water purifiers and air purifiers, and has a leading market position in most of these segments. It began operations by trading goods imported from the parent. Manufacturing facilities were set up in Greater Noida in 1998 and in Pune in 2004 |
Key Financial Indicators
Note: These are CRISIL Ratings-adjusted figures *Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
&Interchangeable with bank guarantee, working capital demand loan and overdraft ^Interchangeable with cash credit facility @Interchangeable with bank guarantee !Interchangeable with working capital demand line, bank guarantee and letter of credit ~Interchangeable with bank guarantee and working capital demand loan %%Interchangeable with Bank Guarantee and letter of credit $$Interchangeable with overdraft ##Interchangeable with bank guarantee ^^Note –HSBC limits is 10 Million USD, calculated based on latest conversion rate ($1= Rs 82.2) |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
&Interchangeable with bank guarantee, working capital demand loan and overdraft
^Interchangeable with cash credit facility
@Interchangeable with bank guarantee
!Interchangeable with working capital demand line, bank guarantee and letter of credit
~Interchangeable with bank guarantee and working capital demand loan
%%Interchangeable with Bank Guarantee and letter of credit
$$Interchangeable with overdraft
##Interchangeable with bank guarantee
^^Note –HSBC limits is 10 Million USD, calculated based on latest conversion rate ($1= Rs 82.2)
Criteria Details
|