Hyundai Motor India, whose initial public offering is going to be launched on October 15, is seeking a slightly higher premium to Maruti Suzuki India and a lower to Mahindra & Mahindra (M&M) based on the price-to-earnings ratio, while Hyundai stands to be expensive in terms of price-to-book value.
“Hyundai India justifies its premium ask considering its leadership in SUV sales, world-class brand image followed by better safety ratings, multi-segment growth visibility largely been driven by its popular SUVs, particularly the Creta, Exter, and Venue models in the Indian market,” said Prashanth Tapse, senior vice-president (research), Mehta Equities.
The price band of the much-awaited 28,000-crore Hyundai Motor India IPO has been fixed at Rs 1,865-1,960 per share.
“As per my readings post price band release, Hyundai Motor India is seeking slightly higher premium to Maruti and lower to M&M based on price earnings ratio while Hyundai stands to be expensive in terms of price to book value,” Tapse said.
This IPO marks a significant milestone for the Indian auto industry, as it is the first automaker’s initial share sale in over two decades, following Japanese automaker Maruti Suzuki’s listing in 2003.
On valuation perse based on annualised FY25e expectation, the IPO issue appears fully priced in living no room for any healthy listing gain. Hyundai Korea is looking to offload Rs 25,000 Cr worth of shares through the offer for sale (OFS) in the domestic market with asking market cap valuation of Rs Rs 1.59 lakh crore on the higher price band. Despite contributing only 6.5 per cent of Hyundai’s global revenues and 8 per cent of its profitability, Hyundai’s India is asking for premium valuation even when compared to its parent entity which is trading @ 5-6-time Price to earnings ratio and valued 42 per cent of the South Korean parent’s market capitalization on listing, he said.
However, brokerage firm Master Capital Services Ltd in its note said, “Hyundai Motor is the second largest carmaker in India after Maruti Suzuki India. In comparison to Maruti Suzuki, Tata Motors, and other competitors, Hyundai Motor India is thought to be stronger as a result of the listing since it may make financing in the future simpler even though the company is not going to utilize the IPO proceeds directly for the company. The business’s stated RoNW for FY23 was 23.48%, the highest among its peers. This indicates that the company is making good use of the money provided by shareholders to create profits.”
From Fiscal 2019 to 2023, the PV industry saw strong growth, with a healthy 11% CAGR in industry value driven by an 8% CAGR in average vehicle prices and a 3% CAGR in total sales volumes and Hyundai is well positioned to take advantage of this growth due to their diverse offerings within the industry as compared to its peers which exhibit varied financial metrics, highlighting diverse market strengths, it added.
Automobile Industry Outlook & Hyundai Motore India IPO
“The most awaited & largest IPO is hitting the market despite knowing the headwinds that the global and domestic automobile industry is facing slowdown kind of scenario is pushing inventory to one year high,” Tapse said.
Globally, automobile giants have slashed future growth guidance and few have downgraded future outlook on weak China demand, while in India we are witnessing similar headwinds with high inventory pushing leading players to offer huge discounts to clear the inventory in this festival season, While in domestic market the scenario is similar to global trend with lower month on month sales by almost all auto players which is a matter of concern for short term, he added.
Indian 4W buying trend is changing from a low-end segment to mid and high-end segments wherein Maruti is losing market share and Hyundai along with Tata Motors are gaining market share in newer segments especially in SUV & petrol-hybrid space.
“Considering all the parameters, the big billion-dollar question is whether Hyundai surpasses valuations in comparison to Maruti, TATA Motor & M&M. Given the trend shifting dynamics in the Indian auto industry, I believe Indians have shifted from sub Rs 5-7 lac segment to Rs 10-12 lac segment wherein Hyundai, TATA Motor along with M&M are better placed and have clearly grabbed the market growth better than Maruti. In the last one-year Maruti is continuously facing the heat of rising competition and witnessing market share decline, which is benefiting Hyundai Motor India, the second largest automaker in the country,” Tapse said.
Despite global headwinds and domestic inventory/sales pressure, we have an optimistic long-term outlook in the Indian automobile sector and expect the growth to get push from new launches in the H2FY2025, he said.
Hyundai Motor India IPO: Opening Date & Price
The IPO will be opened for public subscription on October 15 and closed on October 17. The IPO will be opened for anchor investors on October 14.
The price band of the IPO has been fixed in the range of Rs 1,865 to Rs 1,960 per share.
Hyundai Motor India IPO Size
The Hyundai Motor India IPO, which is valued at about Rs 27,870 crore, will be the largest in India since the Rs 21,000 crore IPO of Life Insurance Corporation of India (LIC).
Hyundai Motor India’s proposed Rs 28,000-crore IPO is entirely an offer-for-sale (OFS) of 142,194,700 equity shares of the face value of Rs 10 each by promoter Hyundai Motor Company, with no fresh issue component, according to the draft red herring prospectus (DRHP) filed in June.
Hyundai Motor India IPO: GMP Today
According to market observers, unlisted shares of Hyundai Motor India Ltd are trading Rs 165 higher in the grey market than its issue price. The Rs 165 grey market premium or GMP means the grey market is expecting a 8.42 per cent listing gain from the public issue. The GMP is based on market sentiments and keeps changing.
The GMP on October 10 is lower than the Rs 175 recorded on October 9 but higher than the Rs 147 on October 8.
‘Grey market premium’ indicates investors’ readiness to pay more than the issue price.
Hyundai Motor India IPO: Minimum Investment
The minimum investment required by retail investors to bid for one lot of Hyundai Motor IPO is Rs 13,720. The minimum lot size investment for small NII is 15 lots or 105 shares, aggregating up to Rs 205,800, and for big NII, it is 73 lots or 511 shares, aggregating up to Rs 1,001,560.
Hyundai Motor India IPO: More Details
Hyundai Motor India commenced operations in India in 1996 and currently sells 13 models across segments.
In its draft papers, Hyundai Motor India said, “Further, our Company expects that listing of the Equity Shares will enhance our visibility and brand image and provide liquidity and a public market for the Equity Shares in India.”
Hyundai set up its India operations in 1996, starting off with the Santro hatchback, once its most sold car. Hyundai holds India’s no.2 carmaker spot, coming in behind Maruti Suzuki. It currently has a roughly 15% share in the country’s competitive car market. It sold 614,721 cars in India and exported 163,155 units in the year to March 2024.
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