Hyundai IPO: A Rs 27856 Crore Mega-Offer Opens on Tuesday

IPO performance lackluster

Hyundai Motor India’s initial public offering (IPO) is set to begin on Tuesday, October 17, with the Rs 27,856 crore issue marking the largest primary offering in Indian stock market history. The shares, priced between Rs 1,865 and Rs 1,960, will be available for bidding until Thursday, October 19, with a lot size of seven shares.

This will be the first IPO in India’s car market since Maruti Suzuki’s in 2003. Hyundai’s South Korean parent company took over two decades to launch the offering, which is entirely an offer for sale of up to 14.22 crore equity shares. The company is expected to have a market capitalization of around Rs 1.6 lakh crore.

However, the IPO’s performance in the grey market has been lackluster, with the premium gradually declining. Currently, Hyundai Motor India is commanding a grey market premium (GMP) of just Rs 65 per share, indicating a modest 3% gain for investors above the upper price band.

The grey market premium (GMP) for Hyundai Motor India’s IPO was over Rs 150 before the weekend, with some reports quoting it as high as Rs 175 on Friday. However, it sharply declined over the weekend, dropping into double digits. At the beginning of the month, the GMP was around Rs 500 and stood at Rs 350-375 when the IPO was officially announced.

Hyundai IPO: A Rs 27856 Crore Mega-Offer Opens Several experts believe Hyundai Motor India’s IPO is fairly priced but could offer solid long-term returns due to its strong performance history. However, the fact that the entire offering is an offer for sale (OFS) by the promoters might lessen its appeal, as all proceeds will go to the South Korean parent company, leaving the Indian entity without any direct benefit. The high valuations and the nature of the issue have made some investors cautious, especially amid recent market volatility. There is also concern that such a large IPO could drain liquidity from Indian markets.

Despite the buzz around liquidity, Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, pointed out that there is no real liquidity shortage in the Indian markets, thanks to record numbers of SIPs and demat accounts fueling equity investments. Bathini also reassured investors that the complete OFS should not be worrisome, as the promoters have been investing for over three decades and are now simply reaping their returns.

He emphasized that the company’s strong track record, financial health, and reputable promoters are likely to ensure a premium valuation, maintaining positive sentiment for the IPO.

Hyundai IPO: A Rs 27856 Crore Mega-Offer Opens A report from IIFL Securities highlighted that Hyundai Motor India’s valuations are appealing compared to other listed original equipment manufacturers (OEMs) in India. The company demonstrates operational strengths in several areas, but the lack of presence in the multi-purpose vehicle (MPV) segment remains a gap, which may be addressed soon. A potential slowdown in the passenger vehicle (PV) industry in FY25 is also a concern, the brokerage firm noted.

According to Nuvama Institutional Equities, Hyundai Motors India has been consistently introducing new products and refreshes, including plans for a Creta EV and three other electric vehicles (EVs). Globally, Hyundai has a broad range of EVs and hybrids, and there is potential to launch these models in India. The company currently offers 13 models in India, compared to over 40 models globally.

Hyundai also aims to reduce its reliance on imports, which currently account for 20% of its cost of goods sold, by localizing production of key components like powertrain parts, automatic transmissions, ADAS parts, and EV batteries. Additionally, Hyundai has acquired General Motors’ Talegaon plant, which will expand its production capacity by 0.17 million units by the second half of FY26 and by 0.08 million units by FY28.

Hyundai IPO: A Rs 27856 Crore Mega-Offer Opens  Sharekhan noted that India’s PV industry is an oligopoly, with a few key players controlling the market. Maruti Suzuki leads in domestic sales, followed by Hyundai Motor India, which holds a 14-15% market share and is a major exporter. Hyundai’s strength comes from the popularity of its SUV models.

The IPO involves the promoter selling a 17.5% stake in the company. Hyundai’s strong parentage, diverse product lineup, solid market position, and healthy financials support its valuation. At the upper price band, the company’s price-to-earnings (P/E) ratio stands at 26.3 times its projected FY24 earnings.