LG rewires strategy before hitting IPO switch
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Kolkata: Ahead of its public issue planned for the year-end, India's largest home appliance manufacturer, LG Electronics , has started tightening its belt in the face of a decline in revenue in the first half of calendar 2025.Cost-cutting has started, with LG in the process of reducing the number of in-store sales promoters in retail outlets and a message to the sales team to either perform or leave, three industry executives aware of the developments said.Sales have taken a hit due to a cooler summer and an overall slump in consumption, which impacted demand in categories such as air-conditioners, refrigerators, and televisions. Last year's record sales also meant the base was high, affecting comparisons.While weak demand in the market has hurt all companies in these segments, LG India is under pressure also to present a robust balance sheet ahead of the upcoming initial public offering to ensure good investor response, the industry executives said.LG India's AC sales are down 15-20% so far in the January-June period of this year compared with last year, they said. Sales in other categories are largely flat.Since ACs and refrigerators are the sales drivers in the first half for the company, overall sales have slumped by double digits compared with last year."There is a fear that poor sales and profit growth may impact investor sentiment ahead of the IPO," one of the executives said.In response to an email seeking comment, an LG India spokesperson said during January to April, the company improved its leadership market share across its product portfolio. "This is a strong testament to our continued leadership in the category and reflects strong market confidence in us," he said.The spokesperson said there has been no reduction in the number of sales promoters as of date. The company is focusing on optimising productivity of the sales promoters by moving high-performing promoters to high-performance stores, he added.Industry executives said there have been 4-5 exits of executives at branch and regional levels, such as the branch and regional managers in the East, amid pressure for a better sales performance and leaner cost structure. The company did not comment on the sales decline and sales team exits.Sales review meetings are often extending till late night. Two chief executives in rival companies said they are flooded with resumes of LG executives.LG's expected '15,000 crore IPO for the India unit was originally scheduled for the April-May period, but was postponed due to volatility in the share market and an uncertain macroeconomic landscape.The company has now targeted October-November for the IPO and wants to file a revised draft red herring prospectus (DRHP) by July-August with updated financials, a person aware of the plans said. LG's South Korean parent wants to dilute about 15% of its stake in the Indian unit.The LG spokesperson said it continues to be a market leader in India across categories in the January to April period, including products like refrigerators, washing machines, microwave ovens and televisions. It competes with Samsung, Haier, Whirlpool , Godrej and Voltas To be sure, lower-than-normal temperatures and intermittent rains in the summer season this year have affected the sales of all AC manufacturers, including Voltas, Blue Star , Daikin and Lloyd, with industry sales volume falling by 50-60% compared with last year when there were record sales amid intense heatwave conditions.The industry was expecting 10-15% growth in sales based on initial weather bureau forecasts for intense heat this summer.As retail stores are still saddled with unsold stock, primary sales (from company to retail) for all companies dipped in the April-June period. Companies have cut down on AC and refrigerator production to tackle the situation, industry executives said."The sales performance pressure is higher in Korean companies like LG and Samsung. In the case of LG India, the dip in sales was flagged by the headquarters as it is preparing for the IPO," said the head of a rival company. "The company came up with a strict carrot and stick policy for its sales people. There is cost tightening too to improve profit to make up for the sales loss."The LG spokesperson said the company expects the good monsoon to positively impact macro-economic growth across the country which is likely to have a positive impact on the sector in coming months.
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