LG Electronics India's ambitious Initial Public Offering (IPO) of Rs 11,607 crore is facing intense scrutiny following a report by InGovern Research Services. The report highlights significant tax disputes and ongoing royalty payment concerns that could potentially impact investor sentiment.

Key Concerns Highlighted

1. Tax Disputes: The company is embroiled in tax disputes amounting to Rs 4,717.00 crore, which represents 73% of its net worth. These disputes span across income tax, excise, and service tax claims.

2. Royalty Payments: A significant portion of the tax disputes relates to transfer pricing on royalty and technical service payments to the Korean parent company.

3. Contingent Liabilities: The company faces Rs 315.00 crore in contingent liability from royalty payments alone.

4. Lack of Provisions: LG Electronics India has not made provisions for these ongoing proceedings, raising concerns about potential financial impacts.

IPO Structure and Financial Overview

Royalty Payment Concerns

The Korean parent company has the authority to increase royalty fees up to 5% of annual consolidated turnover without shareholder approval. Historical payments have ranged from 1.63% to 1.90% of revenue.

Governance and Related-Party Dealings

InGovern Research Services has raised concerns about:

1. Governance around related-party dealings
2. Lack of independent benchmarking studies for royalty payments

Investor Considerations

Potential investors should carefully weigh the following factors:

1. The significant contingent liabilities and their potential impact on the company's financials
2. The structure of the IPO, with all proceeds going to the parent company
3. The ongoing royalty payment arrangement and its implications for future profitability
4. The governance concerns raised by InGovern Research Services

While LG Electronics India demonstrates strong financial performance with a debt-free balance sheet, the highlighted issues warrant careful consideration by prospective investors. As the IPO moves forward, it will be crucial to monitor how the company addresses these concerns and provides clarity to the market.

Two major Initial Public Offerings (IPOs) are approaching their listing dates with notably different grey market performances, capturing the attention of investors and market watchers alike.

Tata Capital IPO: Modest Grey Market Premium

Tata Capital's IPO, valued at Rs 15,511.87 crore, has closed with a 1.95 times oversubscription. The grey market is showing a modest premium for this offering:

It's worth noting that the current grey market premium represents a decline from the earlier premium of Rs 12.50. The share allotment for Tata Capital is expected on October 9, with the listing scheduled for October 13.

LG Electronics India IPO: Strong Grey Market Performance

In contrast, LG Electronics India's IPO, valued at Rs 11,607.01 crore, is demonstrating a more robust performance in the grey market:

The share allotment for LG Electronics is anticipated on October 10, followed by the listing on October 14.

Comparative Analysis

The contrasting grey market performance of these two IPOs provides an interesting snapshot of investor sentiment:

While both IPOs have garnered significant interest, LG Electronics India appears to be generating more excitement in the grey market, with a substantially higher premium and oversubscription rate compared to Tata Capital.

Investors should note that grey market premiums are unofficial and subject to change. They should base their investment decisions on thorough research and official information provided in the IPO prospectuses.