LG Electronics India Limited has achieved a significant milestone in its tax compliance journey by concluding an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT) on January 5, 2026. The agreement, which covers a comprehensive 9-year period from April 1, 2014 to March 31, 2023, represents the culmination of a process that began with the company's APA application filed on March 29, 2018.

Financial Impact of APA Settlement

The conclusion of the APA brings substantial financial clarity to LG Electronics India Limited, with the most significant benefit being the elimination of contingent liabilities. The comprehensive resolution addresses long-standing transfer pricing uncertainties that had been weighing on the company's financial position.

APA Settlement Details

The APA resolution encompasses multiple aspects of the company's transfer pricing arrangements. The elimination of ₹172.00 crore in direct tax contingent liabilities removes a significant overhang that had been affecting the company's financial statements. Additionally, the resolution of ₹315.00 crore in contingency amounts related to royalty payments to LG Electronics Inc., Korea, the company's promoter, provides clarity on inter-company transactions.

Under the terms of the agreement, LG Electronics India Limited will be required to fulfill specific payment obligations. The company faces a net tax expense of ₹17.71 crore, excluding applicable interest that will be computed based on the actual payment date. Furthermore, the company must pay ₹3.86 crore to LG Electronics Inc. Korea pursuant to secondary adjustment provisions, ensuring compliance with India's transfer pricing laws.

Second Quarter Financial Performance

LG Electronics India reported challenging quarterly results alongside the APA announcement. The company's financial performance for the quarter ended September 2025 showed mixed signals in the consumer durables market.

The company's net profit declined 27.30% year-on-year to ₹389.00 crore, compared with ₹536.00 crore in the same period last year. However, revenue from operations showed resilience with a 1% year-on-year increase to ₹6,174.00 crore, reflecting stable consumer demand across its product portfolio despite challenging market conditions.

Strategic Significance and Market Performance

The successful conclusion of this APA represents a proactive approach to tax compliance and transfer pricing management. By resolving transfer pricing disputes covering nearly a decade of operations, the company has eliminated significant financial uncertainties while establishing a framework for future compliance.

Shares of LG Electronics India Limited ended at ₹1,467.00, down by ₹16.40, or 1.11%, reflecting investor sentiment amid the mixed quarterly results and APA settlement announcement. The agreement demonstrates the company's commitment to maintaining transparent and compliant transfer pricing practices in its operations within India's regulatory framework.

LG Electronics India Limited has received a credit rating reaffirmation from CRISIL Ratings Limited, maintaining its 'AAA/Stable/A1+' rating on bank facilities worth ₹618.27 crore. The rating announcement underscores the company's strong financial position and market leadership in India's consumer durables sector.

Strong Financial Performance Drives Rating Confidence

The reaffirmation reflects LG Electronics India's robust financial metrics and operational excellence. The company demonstrated strong revenue growth of approximately 14% in the reported fiscal year, primarily driven by impressive performance in key product categories.

Exceptional Balance Sheet Strength

LG Electronics India maintains an exceptionally strong financial risk profile, characterized by zero debt and substantial cash reserves. The company's balance sheet demonstrates remarkable stability and liquidity.

By September, the company's cash and cash equivalents further improved to ₹4,284.00 crore, providing superior liquidity for operational requirements and growth investments.

Major Expansion Plans and Market Leadership

The company has announced expansion plans with a ₹5,000.00 crore capital expenditure program over the next 4-5 years. This investment will establish a greenfield manufacturing facility at Sri City, Andhra Pradesh, focusing on air conditioners, AC compressors, washing machines, and refrigerators.

LG Electronics India maintains leading positions across multiple product categories, with market leadership in washing machines and refrigerators, and strong positions in panel TVs and air conditioners.

Credit Rating Structure and Banking Relationships

CRISIL's rating covers diverse banking facilities across multiple financial institutions, reflecting the company's strong banking relationships and creditworthiness.

The company maintains banking relationships with prominent institutions including ICICI Bank, State Bank of India, HDFC Bank, Citibank, Standard Chartered Bank, and international banks like Bank of America and Shinhan Bank.

Market Position and Operational Strengths

CRISIL highlighted several key strengths supporting the rating, including the company's leading position in major product categories, robust financial risk profile, and strong operational capabilities. The company benefits from operational and technological linkages with its parent, LG Electronics Inc (South Korea), which contributes to its competitive advantage in the Indian market.

However, the rating agency noted potential challenges including exposure to intense competition in the consumer durables segment and susceptibility to volatility in raw material prices and foreign exchange rates, with 40-50% of inputs being imported.

The stable outlook indicates CRISIL's expectation that LG Electronics India will maintain its healthy business risk profile and strong financial position, supported by healthy cash accruals, nil debt, and superior liquidity position.