| L G Electronics India Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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). Also, CRISIL Ratings has withdrawn its rating on the proposed bank facility of Rs.29.23 crore at the company’s request, in line with the CRISIL Ratings policy on withdrawal of ratings.
In fiscal 2022, revenue is estimated to have grown by 10-12% driven by strong pent up demand, waning impact of the pandemic and low base of fiscal 2021. Despite healthy growth in operating income, the operating margin is estimated to have declined by 250-300 basis points because of rise in input cost, but remained healthy at 11-12%.
CRISIL Ratings notes that LG India has paid dividend of Rs 2,200-2,300 crore to the parent, LG Korea (rated ‘BBB/Positive’ by S&P Global), in fiscal 2022. Nevertheless, the financial risk profile remained strong, as indicated by nil debt and liquid surplus of Rs 3,500-4,000 crore as on March 31, 2022. Going forward also, company maintains 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. |
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: Estimated networth was strong at Rs 5,500 crore as on March 31, 2022, against nil debt. The company is expected to generate healthy gross cash accrual of around Rs 1,500 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: The company 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 to 4-5% of 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 Cash and bank balance is estimated at Rs 3,500-4,000 crore as on March 31, 2022. Healthy gross cash accrual of over Rs 1,500 crore per annum in fiscals 2023 and 2024 against nil term debt obligation will cushion the liquidity. Unutilised working capital limit further supports the 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
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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 *Includes only interest on lease liabilities as per Ind AS-116 |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
^Interchangeable with bank guarantee, working capital demand loan and overdraft (OD till INR 55 cr) @Interchangeable with cash credit facility *Interchangeable with bank guarantee $Interchangeable with bank guarantee and letter of credit %Interchangeable with working capital demand line, bank guarantee and letter of credit **Interchangeable with bank guarantee and working capital demand loan #Interchangeable with overdraft |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 37.5 | Bank of America N.A. | CRISIL A1+ |
| Bank Guarantee | 50 | Shinhan Bank | CRISIL A1+ |
| Letter of Credit^ | 130 | ICICI Bank Limited | CRISIL A1+ |
| Overdraft Facility* | 30.07 | Citibank N. A. | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | DBS Bank Limited | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | HDFC Bank Limited | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | JP Morgan Chase Bank N.A. | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | Kookmin Securities Private Limited | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | Kotak Mahindra Bank Limited | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | Mizuho Bank Limited | CRISIL AAA/Stable |
| Overdraft Facility% | 50 | Standard Chartered Bank Limited | CRISIL AAA/Stable |
| Overdraft Facility** | 27.8 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL AAA/Stable |
| Overdraft Facility@ | 0.1 | Woori Bank | CRISIL AAA/Stable |
| Proposed Long Term Bank Loan Facility | 29.23 | Not Applicable | Withdrawn |
| Proposed Long Term Bank Loan Facility | 50 | Not Applicable | CRISIL AAA/Stable |
| Short Term Loan | 50 | Shinhan Bank | CRISIL A1+ |
| Working Capital Demand Loan# | 40 | Bank of America N.A. | CRISIL AAA/Stable |
| Working Capital Demand Loan | 30 | Citibank N. A. | CRISIL AAA/Stable |
| Working Capital Demand Loan$ | 75 | Standard Chartered Bank Limited | CRISIL AAA/Stable |
| Working Capital Demand Loan* | 47.2 | The Hongkong and Shanghai Banking Corporation Limited | CRISIL AAA/Stable |
This Annexure has been updated on 19-Aug-22 in line with the lender-wise facility details as on 22-Jul-22 received from the rated entity.
^Interchangeable with bank guarantee, working capital demand loan and overdraft (OD till INR 55 cr)
@Interchangeable with cash credit facility
*Interchangeable with bank guarantee
$Interchangeable with bank guarantee and letter of credit
%Interchangeable with working capital demand line, bank guarantee and letter of credit
**Interchangeable with bank guarantee and working capital demand loan
#Interchangeable with overdraft
Criteria Details
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