Hyundai IPO: Subscribe Now for Long-Term Gains (Number 1 Choice for Investors)

Hyundai Motor India’s IPO is now open for subscription. Despite a modest grey market premium, analysts recommend this stock for long-term investors due to its strong market position and growth prospects. While short-term gains may be limited, Hyundai’s expansion efforts and strong SUV sales make it a promising investment for those willing to hold for at least a year.

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Hyundai IPO: Subscribe Now for Long-Term Gains (Number 1 Choice for Investors)

Hyundai stock: long-term buy

Hyundai Motor India Ltd (HMIL) holds a 14.6% market share in India’s domestic passenger vehicle (PV) market for Q1FY25, placing it second behind Maruti Suzuki, which leads with a 41% share. However, Hyundai is the top player in the mid-size SUV segment, commanding about 38% of the market as of June 2024. Additionally, Hyundai ranks as the second-largest exporter of PVs in India from April 2021 to June 2024.

We recommend subscribing to this stock for the long term. Priced at ₹1960 per share at the upper band, the stock’s FY24 price-to-earnings ratio is 26.3x, which is attractive when compared to Maruti’s 29.8x. Hyundai’s strong presence in the SUV segment positions it well for growth in the PV market, and its upcoming EV launches further bolster its growth prospects.

Hyundai IPO: Subscribe Now for Long-Term Gains Hyundai Motor India Limited’s (HMIL) initial public offering (IPO) has opened in the Indian primary market today and will remain open for bidding until 17th October 2024. The IPO is an entirely Offer for Sale (OFS), with a price band set between ₹1865 and ₹1960 per share, and aims to raise ₹27,870.16 crore. Since the proceeds will not go to the company, they won’t impact its balance sheet.

As of 11:36 AM on the first day of bidding, the IPO had been subscribed 0.09 times, with the retail portion subscribed 0.15 times and the non-institutional investor (NII) portion subscribed 0.06 times. Shares are currently trading at a ₹65 premium in the grey market.

Bidders can apply in lots of seven shares, with the likely share allotment date being 18th October 2024 and the listing on BSE and NSE expected on 22nd October 2024. KFin Technologies is the IPO’s registrar, and Kotak Mahindra Capital, Citigroup Global Markets, HSBC, J.P. Morgan, and Morgan Stanley are among the lead managers.

Analysts like Gaurav Garg from Lemonn Markets have assigned a ‘subscribe’ rating, noting Hyundai’s strong operational efficiency, high local sourcing, and solid financial performance, with a revenue CAGR of 19.4% from FY21 to FY24 and a RoCE exceeding 50%. Master Capital and other experts also support a long-term investment approach, citing Hyundai’s strategy to grow its passenger vehicle and EV portfolio while expanding its premium offerings. Although the IPO is fully priced, and immediate listing gains may be limited, analysts recommend it as a solid long-term investment.

Hyundai IPO: Subscribe Now for Long-Term Gains Investors considering Hyundai Motor India’s historic IPO should be prepared for a holding period of at least one year to realize significant returns. Analysts predict a modest debut for the country’s second-largest car manufacturer, with grey market trends pointing to a moderate opening.

According to an ET report, as of Monday evening, the grey market premium (GMP) for Hyundai shares was ₹30, or about 1.5% above the upper range of the issue price band, set between ₹1,865 and ₹1,960. On October 4th, the GMP had been as high as ₹370.

The GMP reflects the premium investors are willing to pay in the unofficial market prior to the shares’ official listing, above the IPO price. Hyundai’s ₹27,870 crore IPO opens on Tuesday and closes on Thursday.

Hyundai IPO: Subscribe Now for Long-Term Gains Krishna Appala, senior research analyst at Capitalmind Research, told ET that the grey market premium for Hyundai’s IPO has dropped in recent weeks due to rising market volatility and reduced demand. In the short term, Hyundai may encounter limited growth prospects as increased competition affects its market share.

Analysts have also pointed out that the IPO pricing allows minimal room for a robust listing, similar to recent issues like Bajaj Housing Finance and Ola Electric Mobility. Consequently, the stock is seen as a better option for investors willing to hold it for at least a year.

Hyundai IPO: Subscribe Now for Long-Term Gains Analysts at Bajaj Broking Research noted that while Hyundai’s IPO seems fully priced, the company is well-positioned for significant long-term growth due to its expansion efforts. They advise investors to hold their shares for the long term, ideally 1-3 years, to maximize returns. Shashank Kanodia, Assistant VP of Research at ICICI Direct, believes that if held for over a year, the stock could deliver “double-digit” returns.

He highlighted that Hyundai’s SUV sales made up 63% of its domestic passenger vehicle sales in FY24, outpacing the industry average of 60%, with a strong presence in the mid-SUV segment.

Some analysts have also suggested waiting for the listing day before making a decision. Aniruddha Sarkar, CIO of Quest Investment Advisors, explained that due to the size of the IPO, many sellers may emerge on the listing day, potentially offering shares at lower prices.