LG Electronics India is planning to establish a new manufacturing facility in Andhra Pradesh to bolster its production capacity, as outlined in its Draft Red Herring Prospectus (DHRP) filed with the Securities and Exchange Board of India (SEBI). This move underscores the company's commitment to strengthening its foothold in the Indian market amidst growing demand and competitive pressures.
In addition to expanding its manufacturing base, LG Electronics India is focusing on increasing the sourcing of raw materials from local suppliers. This initiative has helped the company better address consumer demands, reduce inventory-related costs, and competitively price its products. Despite these efforts, the company acknowledges a significant dependence on foreign components and finished products, particularly for its premium product range. These imports predominantly come from China, South Korea, and Japan, reflecting a strategic emphasis on advanced product quality and technological innovations.
The company’s reliance on a small pool of suppliers is another critical factor. Its top-five and top-10 suppliers accounted for 21.45% and 31.44%, respectively, of its total procurement of raw materials and components during April-June 2024. LG Electronics India noted potential risks to its operations due to supply chain interruptions or supplier misconduct, which could disrupt its business operations.
The Indian subsidiary benefits from the support of its South Korean parent entity, LG Electronics, across various aspects, including product innovation, design, manufacturing technologies, branding, and technical know-how. However, the company warned that any negative developments in its relationship with the parent company or other entities within the LG Group could adversely affect its business, reputation, and financial performance.
This strategic expansion aligns with LG Electronics India’s broader goal to strengthen its operational capabilities while navigating challenges tied to localization and global supply chain dependencies.