Hyundai Motor India IPO: India's largest initial public offering (IPO) is set to open on Tuesday, October 15, as Hyundai Motor is gearing up for its grand stock market debut beyond South Korea.
Hyundai Motor India plans to raise around $3.3 billion, or over ₹27,000 crore, through an offer for sale. The price band for the Hyundai Motor India IPO is set at ₹1,865 to ₹1,960 per share. The issue will remain open for subscription until Thursday, October 17.
As Mint reported earlier, Hyundai Motor India aims to reclaim market share from domestic rivals by expanding its SUV lineup. It also plans to launch its first India-made electric vehicle (EV) early next year and introduce at least two gasoline-powered models starting in 2026.
According to market sources, the last grey market premium (GMP) of Hyundai Motor India IPO was ₹168.
Considering the upper price band of the IPO at ₹1,960 and the current grey market premium, the expected listing price of Hyundai Motor India shares is ₹2,128 apiece, a premium of 8.6 per cent with respect to the issue price.
Notably, the GMP of Hyundai Motor India has significantly declined from the highest GMP recorded at ₹570.
Hyundai Motor India IPO opens for subscription on Tuesday, October 15 and closes on October 17, 2024. The allotment of shares is expected to be finalised on Friday, October 18.
Successful bidders may expect shares to be credited into their demat accounts on Monday, October 21, while those who fail to get the allotment may get the refund on the same day. Shares of Hyundai Motor India may be listed on the BSE and the NSE on Tuesday, October 22.
Industry experts indicate that the world's third-largest auto original equipment manufacturer (OEM) aims to raise approximately $3.3 billion (over ₹27,000 crore) through this offering.
The IPO will not be a fresh issue of shares but rather an offer for sale (OFS) of 14.22 crore shares (14,21,94,700 shares), representing a 17.5 per cent stake held by the company's South Korean parent, Hyundai Motor.
Since the issue is entirely an OFS, Hyundai Motor India will not receive any proceeds, and the amount raised will go to the parent company's kitty.
Brokerage firm ICICI Direct has a 'subscribe' rating on the issue, given steady growth prospects amid industry tailwinds, robust financials and a healthy SUV product slate.
"We expect limited listing gains to this IPO; however, expect the company to deliver healthy double-digit portfolio returns over the medium to long term," said ICICI Direct.
Hyundai Motor India is the second-largest passenger vehicle player in the domestic market and one of India's leading exporters in the segment. Its parent, Hyundai Motor Group, is the third-largest auto OEM (original equipment manufacturer) in the world based on passenger vehicle sales in CY2023.
However, intense competition, slowdown in the passenger vehicle industry and volatile commodity prices are the key challenges that the company is dealing with.
Experts point out that the IPO is hitting the market when the domestic automobile industry faces several headwinds, including a slowdown in demand and piling up inventory.
Brokerage firm Sharekhan by BNP Paribas underscored that the domestic PV industry is an oligopolistic market, with few players dominating it.
Maruti Suzuki (MSIL) leads the PV industry in terms of domestic sales volumes, and Hyundai Motor India is number two.
"Hyundai Motor India has strong parentage, relevant product profile, robust market positioning and healthy financial profile. At the upper price band, the IPO is coming with an underlying PE (price-to-earnings) valuation of 26.3 times its FY24 earnings compared to Maruti’s PE valuation at 30.4 times its FY24 earnings," said Sharekhan.
Prashanth Tapse, Senior vice president (Research) at Mehta Equities, underscored that based on annualised FY25E expectations, the issue appears fully priced in, leaving no room for any healthy listing gain.
"Despite contributing only about 6.5 per cent of Hyundai's global revenues and nearly 8 per cent of its profitability, Hyundai’s India is asking for a premium valuation even when compared to its parent entity, which is trading at 5-6 times PE ratio and valued nearly 42 per cent of the South Korean parent's market capitalisation on the listing. Hyundai stands to be expensive in terms of price-to-book value. It justifies its premium ask considering its leadership in SUV sales and world-class brand image, followed by better safety ratings," Tapse observed.
Experts also raise concerns about the industry's growth prospects.
Tapse highlighted that automobile giants have slashed future growth guidance. Few have downgraded their outlook on weak China demand. Similar headwinds exist in India, with high inventory pushing leading players to offer huge discounts to clear the inventory in this festival season.
The Indian auto industry is witnessing a shift in trend, and industry experts observe Indians are increasingly tilting towards the ₹10-12 lakh segment from the sub- ₹5-7 lakh segment.
"Given the trend-shifting dynamics in the Indian auto industry, I believe Indians have shifted from the sub- ₹5-7 lakh segment to the ₹10-12 lakh segment, wherein Hyundai, Tata Motors, along with Mahindra and Mahindra are better placed and have grabbed the market growth better than Maruti. In the last one-year, Maruti has continuously faced the heat of rising competition and witnessed a market share decline, which is benefiting Hyundai Motor India, the second-largest automaker in the country," said Tapse.
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