IPO-bound Hyundai Motor India bets on capacity addition, Creta EV to drive growth

Hyundai Motor India, set to launch India’s biggest initial public offering (IPO) next week, is counting on more valuable exports, a bigger domestic presence and the launch of its first “high-volume EV (electric vehicle)” in 2025 to beat a moderation in passenger vehicle sales in India.

Despite higher royalty payments and reduced cash balances due to a special dividend to South Korean parent Hyundai Motor Co., the automaker is confident of a strong financial outlook as its operating margins hold steady after the implementation of the new policy.

Hyundai Motor India will list at a price-to-earnings (P/E) ratio of 26.28 at the upper end of its price band of ₹1,960 per share, comparable to a P/E of 27.3 for listed rival Maruti Suzuki India Ltd as on 11 October.

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In FY24, Hyundai achieved revenues of close to ₹70,000 crore, supported by robust profitability with a 13% Ebitda margin. (Ebitda is earnings before interest, taxes, depreciation and amortization). Hyundai has lost some market share since 2019, but its high capacity utilization of 97% has given it the ability to neither ship excess stock to dealers in a tough market nor cut prices to liquidate inventory. Its premium positioning and focus on SUVs, which account for nearly 70% of its sales now, has given it a competitive edge in the market.

Passenger vehicle registrations in India rose at a modest 1% in the first half of fiscal year 2025 over a year earlier as demand slowed after the post-pandemic boom.

“India is not easy for global automotive OEMs (original equipment makers), but Hyundai has been able to really successfully do it (crack the market). We have consistently held a high double-digit market share and been the second largest player in passenger vehicles in India,” said Tarun Garg, chief operating officer, Hyundai Motor India. “The value proposition Hyundai has always offered because of our strong parentage of the Hyundai Motor Company, and our strong connect with Indian customers put us in a very strong position to continue to do well.”

In the second half of fiscal year 2026, Hyundai Motor India will be able to enhance its annual capacity by 30% or 250,000 units with a new factory in Talegaon. That will allow it to enhance exports, which are already the highest for a passenger vehicle OEM in India on a cumulative basis, Garg said.

Hyundai is also hoping to significantly ramp up its EV offerings from a meagre 0.08% contribution to its total sales as it launches the Creta EV next year.

“In 2025, the first high-volume EV is coming from the Hyundai stable—the Creta EV. Creta has been a very strong brand since the time it was launched in 2015,” Garg said. “A lot of effort has gone around building a good ecosystem around EVs, around localization and charging infrastructure. An EV from the Hyundai stable will really give customers the indication that EVs are the way to go.”

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After a new agreement with its parent, Hyundai Motor India has been paying a royalty at the rate of 3.50% of its passenger vehicle sales revenue since April 2024. Hyundai Motor India chief financial officer Wangdo Hur said the arrangement will continue for a “long period”, unless the Organisation for Economic Co-operation and Development rules change.

“Our dividend this year was a bit higher compared to the previous years because we didn't pay a dividend to our parent in the Covid-19 years,” Hur said. “After the IPO, we will try to make a new dividend policy. We will consider various factors, such as future capex plans and cash flow. Nevertheless, we will try to benchmark industry best practices."