Hyundai India: What to know on India’s Biggest-Ever IPO
Hyundai India: Everything You Need To Know About India's Biggest-Ever IPO

Hyundai India’s IPO is a historic offering, but one that comes with its own set of complexities. As the window for subscription remains open, this IPO is generating a lot of buzz, but is this an investment worth your attention? Here’s a breakdown 

Hyundai’s IPO is all set to be a landmark moment for India's stock markets. It’s been more than two decades since its South Korean parent, Hyundai Motor Company, decided to launch an IPO for its Indian arm, making it a long-anticipated offering—one that's sure to set off an interesting stock market precedent as the public offering goes live tomorrow. 

 

The IPO has a price band set between ₹1,865 and ₹1,960 per share, and the lot size starts at seven shares. The total issue is expected to list on the NSE and BSE on 22nd October, with Hyundai’s IPO slated to be the largest ever public offering in India’s history, with an ambitious target of raising ₹27,856 crore.

 

Why Did Hyundai India Launch An IPO?

 

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(L-R) Wangdo Hur (CFO & Whole-Time Director), Unsoo Kim (MD), Tarun Garg (COO & Whole-Time Director), and Gopalakrishnan CS (Chief Manufacturing Officer & Whole-Time Director) of Hyundai Motor India Limited

 

For the average investor, the big question is why Hyundai has chosen to go public now. As India’s second-largest passenger vehicle manufacturer, Hyundai has a significant footprint in the country, with popular models like the Creta, Venue, and Verna leading its line-up. This IPO marks Hyundai’s next step in solidifying its position in the growing Indian market, particularly as it gears up to expand its electric vehicle (EV) offerings beyond the current 13-strong lineup of vehicles on offer to consumers.

 

Hyundai’s decision to launch its IPO comes as it continues to dominate the Indian automotive landscape, particularly in the highly competitive SUV segment. The company’s strong brand, popular models, and advanced technologies make it a major player in India’s automotive market. In addition, Hyundai is leveraging its position to dive deeper into electric vehicles—a sector set to see substantial growth in the coming years. For the quarter ending June 2024, Hyundai Motor India reported a revenue of Rs 17,344 crore, reflecting a year-on-year (YoY) growth of 4.3% compared to Rs 16,624 crore in the same period last year. Of the total revenue, 76% was derived from the domestic market, while exports accounted for 24%. The company’s net profit for the quarter stood at Rs 1,489.65 crore, marking a YoY growth of 12.1% compared to Rs 1,329.19 crore in the previous year; slower than the post-pandemic jump, but certainly healthy for a car manufacturer. 

 

Beyond India, Hyundai India has already received notable institutional interest, with bids coming in from heavyweights like BlackRock and the Singaporean sovereign wealth fund GIC Pte. Closer to home, investors are likely eyeing HMIL's status as the third largest passenger vehicle (PV-OEM) manufacturer globally as of CY23. HMIL is amongst the top three contributors to Hyundai Motor global sales volumes, with contribution rising from 15.5 per cent in CY18 to 18.2 per cent in CY23.

 

How have Hyundai IPO investors already responded?

 

The company plans to sell up to 14.2 crore equity shares, all of which are being offered for sale by the South Korean parent company. Notably, Hyundai India won’t directly receive any proceeds from the IPO, which might be a consideration for potential investors. In the grey market, Hyundai Motor India’s grey market premium (GMP) has seen a sharp decline. Initially pegged at ₹500, the GMP has now fallen to just ₹45 per share at the time of publishing this article.

 

This drop hints at modest listing gains for investors, potentially around 3% above the upper price band— lower than what was expected. The valuation concerns and market scepticism have contributed to the sliding GMP, giving investors mixed signals regarding the short-term gains from the IPO.

 

Should you invest in Hyundai’s IPO?

 

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2024 marked a historic year for the global Hyundai footprint, as the brand crossed 100 million vehicles manufactured late in September

 

The big question is: should you invest? While the immediate prospects for bumper gains seem limited, brokerages remain optimistic about Hyundai's long-term growth potential. Hyundai’s strong brand recognition, growing portfolio in India, and potential in the EV space all point to a good long-term hold. That said, it’s important to note that this IPO is entirely an offer for sale (OFS) by the promoters. This means that all the proceeds will go back to the parent company, Hyundai Motor, in South Korea, and not to the Indian business itself.

 

Another important consideration is the price-to-earnings (P/E) ratio. Hyundai Motor India’s P/E ratio is above the industry average of 24.41x and far higher than its parent company Hyundai Motor Global’s P/E of 5x. For comparison, the P/E ratio of Tata Motors Ltd is 10.1, while Maruti Suzuki India has a P/E ratio of 34.6 (as of October 2024). Mahindra & Mahindra Ltd (M&M) has a current P/E ratio of 35.30. This indicates that Hyundai's IPO is priced on the higher side compared to some of its peers, which may impact investor sentiment, particularly those looking for more value-based investments.

 

A report from IIFL Securities said that the company's valuations are attractive, relative to other listed OEMs in India. "Hyundai has several facets of operational superiority compared to its peers, but believes that the MPV segment is a portfolio gap, which may be addressed soon. However, a potential weakness in the PV industry in FY25 is a major concern," said the brokerage firm. Analysts believe that while the short-term listing gains might be underwhelming, the long-term potential looks promising. The ‘Subscribe for long term’ ratings from brokerages like ICICI Direct, SBI Securities, and Arihant Capital further support the idea that this is a play for those with patience.

 

Another factor to consider is the market sentiment. The broader market has experienced some volatility, and liquidity concerns have kept investors on edge, especially with rising geopolitical tensions reflecting in a 6-day Sensex drop early in October. Nevertheless, Hyundai’s established reputation and the promise of double-digit portfolio returns over the medium to long term may offer reassurance to those willing to ride out short-term turbulence. Hyundai's EV prospects have also been strong, with COO Tarun Garg recently announcing that Hyundai India will add four new EV models to its stables by the end of 2025, with the ever-popular Creta to undergo an all-electric makeover.

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