Biggest IPO in Indian history? Hyundai India’s Rs 27,870cr listing could shatter records!

Hyundai Motor India is gearing up to launch one of the most anticipated IPOs in recent memory, marking the first public issue by an automaker in India since Maruti Suzuki‘s landmark listing in 2003. The Hyundai India IPO is set to open on October 15 and is expected to fetch up to ₹27,870 crore ($3 billion), making it the largest public offering in India to date, surpassing even the Life Insurance Corporation’s (LIC) 2022 IPO of ₹20,557 crore. The IPO will be open for subscription from October 15 to October 17, with anchor investors getting a head start on October 14.

The price band for Hyundai Motor India’s IPO has been set between ₹1,865 and ₹1,960 per share, valuing the company at between ₹1.5 lakh crore and ₹1.7 lakh crore. Market buzz has also highlighted a significant interest from investors, with Hyundai’s shares commanding a grey market premium (GMP) of ₹280 per share, although this represents a decline from the earlier GMP of ₹370 seen at the end of September. The decline in GMP is attributed to changing market sentiment, driven by fluctuating global economic conditions and investor caution over high valuations. Additionally, recent volatility in the broader equity market has impacted investor confidence, leading to a reduction in the GMP.

Hyundai’s IPO will be a purely Offer for Sale (OFS), where the South Korean parent company, Hyundai Motor Company, will dilute its stake in the Indian arm by offering 142,194,700 equity shares. An Offer for Sale (OFS) means that existing shareholders, in this case, the parent company, are selling their stake to the public. There are no new shares being issued, so the proceeds from the sale go directly to the selling shareholders rather than the company itself. This means that the proceeds from the IPO will not go into Hyundai Motor India’s coffers but will instead benefit its parent entity. Analysts consider this move as part of Hyundai’s broader global strategy to unlock value in its subsidiaries and raise funds for expansion projects, particularly in electric vehicles and connected car technologies.

A Landmark for the Indian Automotive Industry

The launch of Hyundai’s IPO marks a transformative moment for the Indian automotive sector, signaling renewed investor confidence and highlighting the growing potential of the industry. It is a significant milestone for the Indian automotive industry, as it is the first public issue by a major car manufacturer in over two decades.

The launch of Hyundai’s IPO represents a significant milestone for the Indian automotive industry, as it is the first public issue by a major car manufacturer in over two decades. Hyundai Motor India, which ranks as the country’s second-largest automaker after Maruti Suzuki, has played a pivotal role in transforming the Indian car market, particularly with its popular models such as Creta, i20, and the all-electric SUV Ioniq 5.

According to Hyundai’s Draft Red Herring Prospectus (DRHP), which is a preliminary document filed by a company planning to go public, detailing its financials, business operations, and potential risks, Hyundai’s Indian operations contributed nearly 18% of the company’s global sales volume in 2023, up from 14.5-15% four years prior. India remains the third-largest market for Hyundai globally, following South Korea and the United States. Since its entry into India, Hyundai has invested over ₹29,741 crore ($5.04 billion) in building its manufacturing capacity and expanding its network, with major production facilities located in Chennai, Tamil Nadu, and Talegaon, Maharashtra. Hyundai’s consistent investments in infrastructure, technology, and expansion have enabled the company to cater to the growing demands of the Indian automotive market while maintaining high standards of quality and production efficiency. The company’s Chennai plant is one of Hyundai’s largest production hubs globally, equipped with advanced automation and state-of-the-art manufacturing technology to ensure seamless production across multiple models.

Hyundai’s manufacturing strategy also emphasizes localization, with over 90% of its vehicle components sourced domestically. This approach not only supports the local economy but also helps Hyundai maintain competitive pricing in the cost-sensitive Indian market. For instance, localization has enabled Hyundai to reduce import costs significantly, resulting in lower production expenses and allowing the company to offer its vehicles at more attractive price points. This strategy has also contributed to Hyundai’s increased market share in India, as the company can better cater to local demand and preferences. The Talegaon plant, which was recently upgraded, focuses on producing electric vehicles (EVs) and other eco-friendly models, in line with Hyundai’s strategy to expand its EV offerings in India and capitalize on the government’s push for cleaner transportation solutions. Hyundai has also partnered with various state governments to set up EV charging infrastructure, further supporting its electric vehicle ambitions in the country.

Financial Performance and Valuation

Compared to other automakers in India, Hyundai Motor India’s financial performance stands out due to its consistent growth and profitability. While Maruti Suzuki remains the largest automaker by market share, Hyundai’s focus on electric vehicles and innovation has positioned it as a strong contender in the market. In contrast, Tata Motors has been focusing heavily on electric mobility but has faced challenges in maintaining profitability. Hyundai’s ability to generate significant profit, even amid market fluctuations, underscores its strong operational efficiency and strategic market positioning, which is reflected in its valuation.

Hyundai Motor India reported a profit of ₹4,709 crore in FY23, with revenue of ₹60,308 crore. For the first nine months of FY24, the company recorded a profit of ₹4,383 crore, reflecting its continued growth momentum. The IPO is expected to value Hyundai Motor India between ₹1.5 lakh crore and ₹1.7 lakh crore, positioning it as one of the most valuable automotive companies listed in India. The valuation takes into account Hyundai’s consistent growth trajectory, strong market position, and its future potential in the evolving Indian automotive landscape. Additionally, Hyundai’s focus on enhancing its product portfolio with EVs and hybrid models is expected to drive future growth, as consumer preferences shift towards more sustainable mobility solutions.

The timing of Hyundai’s IPO also coincides with increasing investor enthusiasm in India’s automotive sector, driven by rising demand for electric vehicles and government incentives aimed at boosting manufacturing and local sourcing. Specific incentives, such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme and the Production Linked Incentive (PLI) scheme, have provided significant financial support to automakers, encouraging them to expand their electric vehicle offerings and invest in local production capabilities. Experts believe that Hyundai’s established market presence, combined with its strategic focus on EVs, makes this IPO a promising prospect for long-term investors. The government’s Production Linked Incentive (PLI) scheme, which aims to promote local manufacturing of electric and hydrogen fuel cell vehicles, is expected to further benefit Hyundai, as the company is already working on developing advanced technologies to tap into these emerging segments.

Expert Insights: A Game-Changer in Indian Equity Markets?

While many experts are optimistic about Hyundai’s IPO, some caution that the high valuation could present risks, especially in the current macroeconomic environment. Rising interest rates and global economic uncertainties may dampen investor appetite for high-value offerings. Additionally, competition from other established automakers and new entrants into the electric vehicle space could pose challenges for Hyundai’s growth trajectory.

According to market analysts, Hyundai’s IPO is expected to attract strong participation from institutional and retail investors alike. With Hyundai being a household name in India, particularly in urban areas, its brand value is a key selling point. Experts further note that the automotive industry is undergoing a transformation with increasing EV adoption, and Hyundai is well-positioned to leverage its global experience in electric vehicle manufacturing to gain a competitive edge in India.

A financial analyst suggested that Hyundai’s IPO could serve as a bellwether for other automakers considering public listings in India. It was described as a redefinition of investor confidence in the auto sector, which has faced challenges like regulatory changes and fuel price volatility. The analyst believes Hyundai’s IPO could reignite interest in the automotive space.

Another analyst highlighted that Hyundai’s strong supply chain, dealer network, and focus on customer satisfaction are key differentiators from its competitors. The analyst noted that Hyundai’s push into electric mobility, along with its commitment to quality and innovation, positions the company well in an industry moving towards sustainability. Additionally, the IPO could allow Hyundai to explore opportunities in connected car technologies, autonomous driving, and shared mobility, which are expected to drive growth in the coming years.

However, experts also caution that the IPO comes amid fluctuating global economic conditions, which may lead to volatility in investor sentiment. Given the ambitious valuation of up to ₹1.7 lakh crore, market participants are likely to scrutinize Hyundai’s future growth trajectory closely, particularly regarding its EV initiatives and expansion plans. Analysts also point out that while Hyundai has a solid track record in the Indian market, it will need to navigate challenges such as stringent emission regulations, government policies on electric vehicle incentives, and competition from new entrants like Ola Electric and established players like Tata Motors. Additionally, the company must continuously innovate to keep pace with changing consumer preferences and evolving technological advancements in the automotive sector.

Investor Sentiment and Stock Market Impact

Looking ahead, the success of Hyundai’s IPO could set a precedent for future listings in the automotive sector, attracting more investors and potentially reshaping market dynamics. As Hyundai continues to focus on electric vehicles and innovative technologies, its performance post-listing will be closely watched as an indicator of the sector’s growth potential in India.

The announcement of Hyundai’s IPO has already led to increased excitement on Dalal Street. The initial signs are positive, with Hyundai commanding a grey market premium despite the recent dip. Analysts suggest that the IPO’s success could have a ripple effect on other automotive stocks, such as Maruti Suzuki and Tata Motors, which may experience a boost in investor sentiment due to renewed focus on the sector. The strong response from anchor investors, which typically indicates institutional confidence in the issue, is also expected to bode well for Hyundai’s listing prospects.

Hyundai’s listing could further intensify competition among auto stocks in India, and its impact on benchmark indices will be closely watched. The Hyundai IPO is not just an opportunity for investors to participate in a well-established automaker; it also provides insights into how the future of mobility is taking shape in India, particularly with the growing push towards electrification. As more automakers focus on EVs and hybrid vehicles, Hyundai’s successful listing could encourage other manufacturers to consider going public, thereby expanding the investment opportunities available in the Indian automotive sector. Additionally, Hyundai’s plans to introduce new EV models over the next few years, including affordable electric cars aimed at the mass market, are expected to further enhance its growth prospects and strengthen its position as a leader in the transition towards sustainable mobility.