Hyundai IHyundai Motor India is set to launch its highly anticipated initial public offering (IPO) worth ₹27,870.16 crore on Tuesday, October 15. This IPO will be India's largest to date, surpassing the previous record held by Life Insurance Corporation of India (LIC).
Since FY09, Hyundai Motor India has maintained its position as the second-largest passenger vehicle manufacturer in the country. The Hyundai Motor India IPO is entirely an offer for sale (OFS) of 14.22 crore equity shares by its South Korean parent, Hyundai Motor Company. The price band for the shares has been set between ₹1,865 and ₹1,960.
In addition to being India’s largest IPO, this offering will also mark the first IPO by a car manufacturer in the country since Maruti Suzuki India’s IPO in 2003. However, the initial market enthusiasm seems to be waning, with the Hyundai Motor IPO GMP, or grey market premium, showing signs of decline.
Historically, many of India’s largest IPOs have struggled to deliver meaningful returns to investors. Major offerings, including Paytm, Reliance Power, General Insurance Corporation of India, and New India Assurance, have resulted in losses for investors. In contrast, only a few large IPOs—such as Coal India, Zomato, and HDFC Life Insurance—have generated positive returns, with their shares trading above the issue price.
Market analysts attribute the underperformance of large IPOs to aggressive pricing strategies and the significant proportion of shares offered through the OFS route. This pattern may also impact the post-listing performance of Hyundai Motor India’s IPO.
Here’s a look at the five biggest IPOs in India so far and their performance:
The ₹21,008 crore LIC IPO remains India's largest IPO to date. LIC shares debuted in May 2022 at ₹904 per share, a discount to the issue price of ₹948. As of October 14, LIC's stock is trading around ₹960, offering a modest 1.2% return since its listing.
One97 Communications, the parent company of fintech giant Paytm, launched its ₹18,300 crore IPO in November 2021 with an issue price of ₹2,150 per share. However, Paytm's stock has significantly underperformed, trading at around ₹724 per share, reflecting a decline of over 66% from its issue price.
Coal India stands out as one of the few IPO success stories. Its ₹15,200 crore IPO in November 2010, priced at ₹245 per share, has delivered exceptional returns. Coal India stock price is currently trading at approximately ₹500 per share, representing gains of over 104%, making it a multibagger for investors.
Reliance Power, an Anil Ambani Group company, was listed in February 2008 following its ₹11,560 crore IPO at an issue price of ₹281 per share. Reliance Power stock has since experienced a steep decline, trading more than 84% below its issue price.
General Insurance Corporation (GIC) IPO was launched in October 2017 with an issue price of ₹912 per share. Despite issuing a 1:1 bonus in 2018, the stock remains down approximately 14%, even after the adjustment for the bonus issue.
Hyundai Motor India is set to break the record with its ₹27,870.16 crore IPO opening from October 15 to 17. Hyundai Motor IPO price band has been set at ₹1,865 to ₹1,960 per share.
At the upper price band of ₹1,960, Hyundai Motor India IPO issue is priced at a P/E of 26.3x post issue based on the FY24 EPS of ₹74.58.
While most analysts have recommended subscribing to the issue for the long-term, certain analysts expect a muted share listing and have raised concerns over high valuations and the IPO being fully an OFS.
“Most of these large IPOs so far had a major portion of OFS. Hyundai IPO is 100% OFS , giving exit to prior investors. The IPO will have zero impact on the company’s balance sheet. The prior investors are just cashing in the market hype with the IPO and no proceeds will go to the company,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.
He believes high valuation and the 100% OFS component to be the key negatives for Hyundai Motor India IPO.
On the financial performance front, Hyundai Motor India posted a consolidated total income and net profit of ₹71,302.33 crore and ₹6,060.04 crore for FY24. For Q1 of FY25 ended on June 30, 2024, the company earned a net profit of ₹1,489.65 crore on a total income of ₹17,567.98 crore.
For Q1FY25, sales volume reached 192,055 units, up 4.72% from 183,403 units in Q1FY24. Full-year sales volume grew 7.96% YoY in FY24 to 777,876 units.
“The issue is priced at a P/BV of 13.11 based on its NAV of ₹149.52 as of June 30, 2024, as well as post-IPO equity capital since this is a secondary issue. If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid up equity capital, then the asking price is at a P/E of 26.73, and based on FY24 earnings, the P/E stands at 26.28. The issue relatively appears fully priced, but the company is poised for bright prospects post completion of its ongoing expansions,” said Bajaj Broking.
It recommends ‘Subscribe’ to the issue for the long term.
SMIFS also recommends subscribing to the issue as the company with its industry leading market share in SUV segment, premiumization of cars which will help in growth of ASP, increase in production capacity and foray into EV segment will boost future prospects positively.
“We recommend subscribing to the issue as a good long term investment as a pure play PV segment company with industry leading market share in SUV segment, premiumization and launch of new EV models aiding revenue and margin improvement, though the valuations seem to be in sync with other listed peers,” SMIFS said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
