Large multinationals keen on IPOs in India after Hyundai’s debut: Citi

Large multinational corporations (MNCs) are keen to explore initial public offerings (IPOs) in India after Hyundai Motor India’s public-market debut, according to Rahul Saraf, India head of investment banking at Citi, which counts many such companies among its clients.

“I think they're actually encouraged by the listing of Hyundai rather than discouraged… We feel fantastic about the execution of the transaction and it was very well received by institutional investors,” Saraf said while discussing India's investment banking landscape and outlook at Citi’s virtual media roundtable.

On Tuesday, Hyundai Motor India listed at ₹1,934 on the National Stock Exchange (NSE), a discount to its IPO price of ₹1,960. The company’s ₹27,870-crore offering is the country’s largest IPO ever, exceeding state-run Life Insurance Corp. of India’s (LIC) initial share sale of ₹21,000 crore in 2022. Citi was an advisor to the transaction.

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The offering comprised 142.19 million equity shares, with Hyundai Motor Co, the promoter, selling a portion of its stake in the Indian subsidiary. The IPO of Hyundai Motor India, the second-largest automaker in India’s passenger-vehicle market, drew strong interest from institutional investors but the retail portion was only 50% subscribed.

‘We feel very confident'

Arvind Vashistha, India head of equity capital markets at Citi, said only time would tell how well the stock performs but said he felt confident, given the interest level in “the best-ever anchor book in many years” and “some very large market investors” coming on board.

“We feel very confident about the success of the transaction. We have seen significant support from foreign institutional investors… There are some very meaningful investors who participated in the main book of the transaction as well,” he said.

“After the transaction, we've seen that interest has only gone up, and we are working on a select few transactions, which we hope to announce over the next few weeks,” Vashishta added.

Also read | Hyundai’s IPO: What kept retail investors away?

On the new-age market, Vashistha said the pipeline for that business has grown. “The ecosystem has evolved well and from a broader, country-level perspective, that is very additive, because it allows capital formation in that sector and allows more innovative businesses to tap market-based capital, both on the private side and public side.”

“In terms of the pipeline, lots of conversations are happening all year round. People are choosing India as it [offers an alternative to] markets such as Singapore. But the most important element that we see is that the underlying growth of those businesses has been moving,” he added.

‘Overseas acquisitions will pick up next year’

Saraf said the number of Indian corporations looking to acquire assets overseas will increase next year as valuations are rich right now, and there's more than enough capital available for them to raise publicly and privately.

“We've seen the first wave of investing more in India, which is playing out and will continue. At the same time, we'll get the second wave of Indian outbound acquisition as well,” he added. Talking about sectors that could drive this, Saraf said, “In the recent past, we've seen the auto, chemicals and pharma space make some big acquisitions.”

Also read: Hyundai Motor India IPO a success for its parent. What about local shareholders?

“A mix of these spaces, as well as others where there's a need for a partnership to access a market or to get a technology that is not present in India. The third great opportunity is where there could be some offshoring of manufacturing,” he added.